They released earnings today, and it looks good:
04:09 PM ET 02/18/99
FOCUS-TD Bank's first quarter beats expectations
(Adds corporate quotes and context in paras 12 to 20 and stock
price in para 21)
By Scott Anderson
TORONTO, Feb 18 (Reuters) - Toronto-Dominion Bank
released first-quarter earnings on Thursday that topped
analysts' expectations, buoyed by a strong performance in its
wealth management division.
Canada's fifth-largest bank reported profits of C$312
million, or C$1.01 per common share, for the quarter ended
January 31, up from C$293 million, or C$0.95 a share for the
same period a year earlier.
The bank said it realized an exceptional one-time capital
gain and used this with other securities gains to increase its
general allowance for credit losses by C$100 million.
TD increased its estimated provision for credit losses for
1999 to C$300 million from C$250 million in 1998 "to reflect
the possible impact of slower economic growth, the continuation
of low commodity prices, and its desire to increase further its
general allowance."
The bank's return on common equity was 15.5 percent,
compared with 16.3 percent for the same period last year. On a
cash basis ROE was 17.8 percent, compared with 20.2 percent
last year. As of this quarter the bank is altering its ROE
strategy and will now report on a cash basis.
The per share results topped analysts expectations by an
impressive C$0.08. Six analysts polled by investment research
network First Call on average estimated the bank would record
earnings per share of C$0.93.
"Certainly it's a strong quarter. It exceeds all
expectations," said Mark Maxwell, an analyst at CIBC Wood
Gundy, who was calling for earnings per share of C$0.95.
As a result, Maxwell said he is planning to revise his
earnings estimate upward for the year to C$4.00 a share from
C$3.85.
The strong earnings represented a turnaround from a dismal
fourth quarter the banks suffered due to the downturn in the
global markets brought on by the Asian flu.
In the fourth quarter ended October 31, TD reported profits
of C$234 million, or C$0.74 per common share, down from C$289
million, or C$0.95 a share for the same period a year earlier.
Prior to the downturn, the country's biggest banks had
enjoyed a robust year.
"This is a recontinuation of the previous trend. The fourth
quarter was an anomaly. A terrible anomaly. We didn't really
expect the anomaly to go away so fast, but it did," Dan
Marinangeli, senior vice-president, Group Finance, at
Toronto-Dominion, told Reuters.
"For all the bad things to happen in the fourth quarter,
they turned into good things in the first quarter."
Marinangeli credited "extremely good wealth management
results" driven by its U.S.-based discount brokerage Waterhouse
Investor Services and good returns from its investment banking
divisions for the strong results.
TD said net income from its wealth management services,
which includes its discount brokerage, mutual funds and TD
Evergreen division, jumped 100 percent to C$49 million. This
included record earnings of C$0.08 a share in the quarter, up
from C$0.03 for the same period a year earlier.
Net income in its corporate and investment banking groups
climbed 23 percent to C$215 million.
"All in all it was an outstanding quarter. It just all came
together," Duncan Gibson, vice-chairman of wealth management at
TD, said in an analyst conference call.
TD is expecting its brokerage division to continue to
contribute to its strong growth. Earlier this year it confirmed
plans to spin off a portion of its discount brokerage in a
limited public offering. It expects to complete a review of
this plan during the second quarter before making a final
decision.
Marinangeli said the bank, encouraged by the unexpectedly
strong showing, is hoping to build on the strength of the good
quarter throughout the year.
"I don't have a crystal ball, but when you get off to a
good start, you hope it will continue," Marinangeli said. "We
were off to a good start last year and things were looking
great until the third quarter when we fell out of bed. I hope
that doesn't happen this year and we're not forecasting it to
happen, but we didn't forecast it to happen last year."
The street reacted positively to the results. TD jumped
C$1.00 at the start of trading to C$66.25, before settling back
to C$65.90 at noon.
($1=$1.49 Canadian)
((Scott Anderson, Reuters Toronto Newsroom, 416 941-8106,
toronto.newsroom@reuters.com)) |
