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To: Johnny Canuck who wrote (37044)	5/17/2002 4:11:13 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69801

TD Bank's Q2 profit sinks to $132M amid telecom writedowns, weak markets PAULA ARAB Canadian Press Thursday, May 16, 2002 (CP/Andrew Vaughan) Charles Baillie, chairman of the Toronto-Dominion Bank, addresses the company's annual general meeting in Halifax last month. (CP/Andrew Vaughan) ADVERTISEMENT TORONTO (CP) - Bad loans in the telecom sector hurt Toronto Dominion Bank's bottom line Thursday as the bank reported that profits plunged during what was likely a challenging second quarter for all big banks. Weak capital markets, a huge increase in unexpected charges related to insolvent Teleglobe Inc., writeoffs for other bad telecom investments and exposure in Argentina all contributed to the weak performance. The bank said provisions to cover bad loans will likely increase again, especially because of further losses at Teleglobe, a BCE Inc. (TSX:BCE) subsidiary. The bank had previously estimated its total loan-loss provision for the year at between $1.1 billion to $1.3 billion, up from a previous forecast of up to $1.2 billion. TD, a major telecom lender, isn't likely to recover any of its $78.83 million US loan, since the global long-distance service provider obtained bankruptcy protection this week. Overall net income, after payment of preferred dividends, fell to $132 million, down from $359 million in the same quarter last year. On a per-share basis, earnings in the three months ended April 30 fell to 20 cents from 56 cents, as return on equity - a key measure of profitability - plummeted to 4.4 per cent from 12.8 per cent. "This quarter's earnings fell significantly short of expectations," said Charlie Baillie, chief executive of TD Bank. "The credit cycle continues to be difficult and, as a result, the operating environment continues to present significant challenges," he told investors during a conference call. "While our earnings were not what we had hoped for, I continue to believe that we are well-positioned over the long term to build the leading Canadian-based North American financial services company." To further that goal, Baillie announced a shuffle among senior executives effective next month. "It's a tough quarter, it's a tough market out there," said one analyst, who asked to remain anonymous. "The fact that they (TD) were first doesn't necessarily mean they're the worst. I think everyone is going to experience these forces, it's just a question to what degree." The bank's greatest weakness was in its TD Securities wholesale bank division, which saw operating profits plunge to $35 million in the quarter, compared with $227 million a year earlier. That division bore the greatest brunt of $275 million in unexpected charges for the quarter, announced several weeks ago. The charges included a $100-million provision to account for Teleglobe losses and a writedown of $115 million mainly for soured telecom investments made by its merchant banking business in the securities division. The bank also increased its writeoff in Argentina to $60 million in light of further instability in the volatile South American country. At the end of the quarter, the bank increased its three-month provision for credit losses to $400 million, most of it to reflect deterioration in credit portfolios at TD Securities. The rest was to cover personal and commercial loans. "I think it's fair to say we did not anticipate Teleglobe to become an impaired loan," said Tom Spencer, head of risk management. The Teleglobe provision was for an expected loss of 80 per cent of the bank's loan to the troubled telecom, which has since said creditors aren't likely to get paid under a plan approved in court Wednesday. "Based on information received more recently, it would appear the loss in this file might exceed the 80 per cent and will likely increase our provision against that loan during the current quarter - although I would not regard that as being a material adjustment in the overall context of our guidance," said Spencer. TD also said that effective in November it will report executive stock options as a compensation expense. That's expected to cost three to five cents per share in fiscal 2003, executives told analysts. Despite difficult markets, the bank's wealth management division increased its profits year over year. But the TD Waterhouse discount brokerage, now included in wealth management, saw profits drop to $4 million from $6 million a year earlier. Executives said that's largely due to increased marketing expenses to gain new accounts as part of a major national campaign announced earlier this year. On the Toronto stock market Thursday, TD Bank shares (TSX:TD) slipped 49 cents to $40. canada.com{DF5A7906-4210-4124-A95D-80B0A0332B88}