TD Bank Q4 profit rises to $1.62 billion, adjusted earnings up but miss estimate

TORONTO – Toronto-Dominion Bank (TSX:TD) chief executive Ed Clark said challenges in its insurance and wholesale business this year led to underwhelming results, as earnings climbed a meagre one per cent.

The bank capped the fourth quarter with a profit of $1.62 billion, or $1.68 per common share compared with a profit of $1.6 billion or $1.66 per share a year ago.

Analysts were looking for $1.99 per share of adjusted earnings, which was nine cents higher than the $1.90 a share the bank delivered, according to data compiled by Thomson Reuters.

But it was the entire year that fell short of Clark’s expectations.

TD Bank’s full-year adjusted profits were $7.16 billion compared to $7.08 billion in 2012.

Total revenue increased to $27.26 billion from $25.55 billion.

“These headline numbers are not what we would hope for,” Clark told analysts during the company’s earnings results conference call, wrapping up the financial year.

Most of TD’s major units showed increases during the quarter, but net income from wholesale banking fell by 61 per cent to $122 million from a year earlier, due to lower security gains and higher non-interest expenses.

TD’s main Canadian banking arm had $914 million of net income in the quarter, up from $806 million a year earlier, while adjusted net income was $948 million — up 14 per cent from a year earlier.

The increase in adjusted earnings at the Canadian banking unit was driven by loan and deposit volume growth, favourable credit performance, and effective cost management, the bank said.

In the U.S., retail and commercial banking rose 17 per cent to $369 million.

Wealth management operations climbed by 38 per cent to $405 million, though the results were helped by the recent acquisition of Epoch Investment Partners.

TD Bank also booked $129 million in restructuring charges that were related to initiatives that were designed to lower the cost of its branches.

Executives were cagey over exactly what the bank was doing to “optimize” its branch network and “streamline other operations,” as chief financial officer Colleen Johnston put it.

“We have fine tuned the network a bit on both sides of the border,” she said. “We are, in fact, continuing to … open new branches.”

TD also announced it will issue a one-for-one stock dividend to common shareholders on Jan. 31. The quarterly cash dividend will also rise by one cent to shareholders of record as of Jan. 6. The new shares issued in the stock split won’t be eligible for the January payment, which will be 86 cents per share.

Shares of the bank ended the session $1.35 lower to $94.40 on the Toronto Stock Exchange.