TD Bank boosting dividend following strong Q1 growth in most major businesses

TORONTO – TD Bank Group (TSX:TD) is raising its quarterly dividend by five per cent following unexpectedly strong growth in the first quarter at most of its major divisions and adjusted earnings that beat analyst estimates.

The bank reported $1.79 billion of net income before adjustments, about $300 million higher than the same time last year.

TD’s adjusted net income was $1.92 billion, up from $1.76 billion in the first quarter of its 2012 financial year. Adjusted earnings were $2 per share, eight cents above a consensus estimate compiled by Thomson Reuters.

Analysts had estimated the bank would have adjusted earnings of $1.92 per share and revenue of $6.01 billion, according to a consensus compiled by Thomson Reuters.

Total revenue was $5.97 billion, up from $5.6 billion a year earlier while TD’s provision for credit losses was reduced to $385 million from $404 million in the first quarter of 2012 and from $565 million in the fourth quarter of 2012.

“This was a very strong start to the year,” Ed Clark, TD’s president and chief executive officer, said in the earnings announcement.

“Adjusted earnings for the quarter were $1.9 billion, up nine per cent from a year ago, demonstrating the earnings power of our franchise-driven model. The results exceeded our expectations and were particularly impressive when you consider the challenging operating and economic environment.”

The bank joined Bank of Montreal (TSX:BMO) and Royal Bank (TSX:RY) in announcing increases to its quarterly dividend. TD’s will rise by four cents to 81 cents per share, starting in April.

TD’s Canadian personal and commercial banking division reported $920 million of net income for the quarter, or $944 million on an adjusted basis.

There was similar growth in adjusted net income at its U.S. personal and commercial banking division, which rose 12 per cent to US$387 million.

TD’s wealth and insurance business had a smaller overall increase, although the contribution from its stake in TD Ameritrade was down.

There was also an 18 per cent decrease in net income from wholesale banking, which fell to $159 million.

TD Bank is one of North America’s largest retail banks, with operations across Canada and in several parts of New England and the U.S. northeastern and mid-Atlantic states.

Last fall, the bank announced it was acquiring the U.S. credit card portfolio of Target Corp. under a seven-year agreement. The portfolio has about five million active accounts under both Visa and private-label brands.

The move comes as the U.S. retailer prepares to enter the Canadian marketplace next year. Target (NYSE:TGT), which is based in Minneapolis, plans to open 124 stores across Canada starting in March.