TD Bank Misses Estimates on Job Cuts and Credit Provisions
Toronto-Dominion Bank, Canada’s second-largest lender, missed analysts’ estimates for quarterly profit as it took a charge for job cuts and set aside more money to cover bad loans.
Net Income Drops
Net income fell to C$2.5 billion ($1.9 billion) in the fourth quarter ended Oct. 31, from C$2.9 billion a year earlier, the Toronto-based bank said in a statement Wednesday. That missed the C$2.7 billion average estimate of seven analysts surveyed by Bloomberg.
Job Cuts and Credit Provisions
TD took a C$213 million charge for job cuts and other restructuring costs, and set aside C$1.2 billion to cover bad loans, up from C$945 million a year earlier. The bank said it’s taking a “cautious approach” to credit provisions as the economic recovery from the pandemic is “uneven.”
Revenue Declines
Revenue fell to C$10.7 billion from C$11.2 billion a year earlier, missing the C$10.9 billion average estimate of seven analysts surveyed by Bloomberg.
Retail Banking
Retail banking revenue fell to C$4.3 billion from C$4.5 billion a year earlier, while wholesale banking revenue dropped to C$3.3 billion from C$3.7 billion.
Wealth Management
Wealth management revenue rose to C$1.3 billion from C$1.2 billion a year earlier.
TD Ameritrade
TD Ameritrade Holding Corp., the U.S. brokerage TD acquired in October, reported a net loss of $9 million in the fourth quarter, compared with a profit of $1.3 billion a year earlier.
Dividend Increase
TD increased its quarterly dividend by 4.2% to C$0.90 a share.
Outlook
TD said it expects “modest” loan growth in 2021, with credit losses remaining elevated. The bank also said it expects to incur additional restructuring costs in 2021.
Cost-Cutting Measures
TD has been cutting costs and selling assets to boost profitability. The bank said it has achieved C$1.2 billion in annualized cost savings since the start of 2020, and expects to reach C$1.6 billion by the end of 2021.
Asset Sales
TD has sold or announced plans to sell its U.S. credit card business, a stake in a U.S. asset manager, and a Canadian wealth management business.
Share Performance
TD’s shares have gained about 6% this year, compared with a 5.5% increase in the S&P/TSX Composite Index.
Analysts’ Views
Analysts at National Bank Financial Inc. said TD’s results were “solid” and that the bank’s cost-cutting efforts are “bearing fruit.”
“We believe TD’s focus on cost control and capital return will remain a key theme in 2021,” the analysts wrote in a note to clients.
CEO’s Comments
“We are pleased with our performance in the fourth quarter,” Chief Executive Officer Bharat Masrani said in the statement. “We remain focused on executing our strategy and delivering long-term value for our shareholders.”
Conclusion
TD Bank missed analysts’ estimates for quarterly profit due to a charge for job cuts and higher credit provisions. The bank has been cutting costs and selling assets to boost profitability, and has achieved C$1.2 billion in annualized cost savings since the start of 2020. Analysts at National Bank Financial Inc. said TD’s results were “solid” and that the bank’s cost-cutting efforts are “bearing fruit.” CEO Bharat Masrani said the bank remains focused on executing its strategy and delivering long-term value for its shareholders.