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Toronto-Dominion (TD) Q4 Earnings Decline on Higher Provisions
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Toronto-Dominion Bank (TD - Free Report) reported fiscal fourth-quarter (ended Oct 31) and 2023 results. Quarterly adjusted net income of C$3.51 billion ($2.58 billion) decreased 13.8% from the prior-year quarter.
Results were adversely impacted by higher expenses and a rise in provision for credit losses. Nonetheless, a rise in adjusted revenues and a strong balance sheet position acted as tailwinds during the quarter.
Net income of C$2.89 billion ($2.13 billion) decreased 56.7% year over year.
Adjusted Revenues & Expenses Rise
Quarterly adjusted revenues came in at C$13.19 billion ($9.71 billion), increasing 7.7% on a year-over-year basis.
Net interest income (NII) declined 1.8% year over year to C$7.49 billion ($5.52 billion). Non-interest income of C$5.63 billion ($4.14 billion) decreased 29.1% year over year.
Adjusted non-interest expenses rose 12.6% year over year to C$7.24 billion ($5.33 billion).
The adjusted efficiency ratio was 54.9% as of Oct 31, 2023, up from 52.5% recorded in the prior-year period.
In the reported quarter, Toronto-Dominion recorded a provision of credit losses of C$878 million ($646.6 million) compared with C$617 million recorded in the year-ago quarter.
Balance Sheet Solid
Total assets were C$1.96 trillion ($1.41 trillion) as of Oct 31, 2023, rising 3.7% from the end of the third quarter of fiscal 2023. Net loans rose 3.2% on a sequential basis to C$895.9 billion ($646.68 billion) and deposits increased 3.3% to C$1.20 trillion ($0.86 trillion).
Capital Ratios & Profitability Ratio Weaken
As of Oct 31, 2023, the common equity Tier I capital ratio was 14.4%, down from 16.2% as of Oct 31, 2022. The total capital ratio was 18.1% compared with the prior-year quarter's 20.7%.
Toronto-Dominion’s return on common equity (on an adjusted basis) was 13%, down from 16% a year ago.
Concurrent with the earnings release, TD announced a cash dividend of C$1.02 per share, indicating a sequential rise of 6.3%. The dividend will be paid out on Jan 31, 2024, to shareholders of record as of Jan 10, 2024.
Also, in a move to reduce its cost base and achieve greater efficiency, the bank undertook certain measures in the fourth quarter of fiscal 2023. As a result of these measures, it incurred C$363 million of restructuring charges, which primarily relate to employee severance and other personnel-related costs, real estate optimization and asset impairments. In addition, TD is also axing 3% of its full-time equivalent workforce.
Management expects to incur additional restructuring charges in the first half of 2024.
Our Take
Supported by a diverse geographical presence, Toronto-Dominion’s efforts toward improving revenues and market share, both organically and inorganically, seem impressive. Also, high interest rates will support the company’s financials.
Toronto Dominion Bank (The) Price, Consensus and EPS Surprise
The Bank of Nova Scotia (BNS - Free Report) reported fiscal fourth-quarter (ended Oct 31) and fiscal 2023 results. Adjusted net income was C$1.67 billion ($1.23 billion), which declined 36% year over year. Results excluded certain one-time items.
A rise in expenses, a significant surge in provisions for credit losses and a lower loan balance hurt the results. However, higher non-interest income, net interest income and solid capital ratios were tailwinds.
Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits attributable to owners of the parent for the first half of fiscal 2024 (ended Sep 30) of ¥927.3 billion ($6.42 billion), up significantly year over year.
Increased gross profits, a rise in net fees and commissions and net trading profits acted as tailwinds. Also, a rise in loan and deposit balances was positive. On the flip side, a decline in NII was a dampener.
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Toronto-Dominion (TD) Q4 Earnings Decline on Higher Provisions
Toronto-Dominion Bank (TD - Free Report) reported fiscal fourth-quarter (ended Oct 31) and 2023 results. Quarterly adjusted net income of C$3.51 billion ($2.58 billion) decreased 13.8% from the prior-year quarter.
Results were adversely impacted by higher expenses and a rise in provision for credit losses. Nonetheless, a rise in adjusted revenues and a strong balance sheet position acted as tailwinds during the quarter.
Net income of C$2.89 billion ($2.13 billion) decreased 56.7% year over year.
Adjusted Revenues & Expenses Rise
Quarterly adjusted revenues came in at C$13.19 billion ($9.71 billion), increasing 7.7% on a year-over-year basis.
Net interest income (NII) declined 1.8% year over year to C$7.49 billion ($5.52 billion). Non-interest income of C$5.63 billion ($4.14 billion) decreased 29.1% year over year.
Adjusted non-interest expenses rose 12.6% year over year to C$7.24 billion ($5.33 billion).
The adjusted efficiency ratio was 54.9% as of Oct 31, 2023, up from 52.5% recorded in the prior-year period.
In the reported quarter, Toronto-Dominion recorded a provision of credit losses of C$878 million ($646.6 million) compared with C$617 million recorded in the year-ago quarter.
Balance Sheet Solid
Total assets were C$1.96 trillion ($1.41 trillion) as of Oct 31, 2023, rising 3.7% from the end of the third quarter of fiscal 2023. Net loans rose 3.2% on a sequential basis to C$895.9 billion ($646.68 billion) and deposits increased 3.3% to C$1.20 trillion ($0.86 trillion).
Capital Ratios & Profitability Ratio Weaken
As of Oct 31, 2023, the common equity Tier I capital ratio was 14.4%, down from 16.2% as of Oct 31, 2022. The total capital ratio was 18.1% compared with the prior-year quarter's 20.7%.
Toronto-Dominion’s return on common equity (on an adjusted basis) was 13%, down from 16% a year ago.
Concurrent with the earnings release, TD announced a cash dividend of C$1.02 per share, indicating a sequential rise of 6.3%. The dividend will be paid out on Jan 31, 2024, to shareholders of record as of Jan 10, 2024.
Also, in a move to reduce its cost base and achieve greater efficiency, the bank undertook certain measures in the fourth quarter of fiscal 2023. As a result of these measures, it incurred C$363 million of restructuring charges, which primarily relate to employee severance and other personnel-related costs, real estate optimization and asset impairments. In addition, TD is also axing 3% of its full-time equivalent workforce.
Management expects to incur additional restructuring charges in the first half of 2024.
Our Take
Supported by a diverse geographical presence, Toronto-Dominion’s efforts toward improving revenues and market share, both organically and inorganically, seem impressive. Also, high interest rates will support the company’s financials.
Toronto Dominion Bank (The) Price, Consensus and EPS Surprise
Toronto Dominion Bank (The) price-consensus-eps-surprise-chart | Toronto Dominion Bank (The) Quote
TD currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
The Bank of Nova Scotia (BNS - Free Report) reported fiscal fourth-quarter (ended Oct 31) and fiscal 2023 results. Adjusted net income was C$1.67 billion ($1.23 billion), which declined 36% year over year. Results excluded certain one-time items.
A rise in expenses, a significant surge in provisions for credit losses and a lower loan balance hurt the results. However, higher non-interest income, net interest income and solid capital ratios were tailwinds.
Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits attributable to owners of the parent for the first half of fiscal 2024 (ended Sep 30) of ¥927.3 billion ($6.42 billion), up significantly year over year.
Increased gross profits, a rise in net fees and commissions and net trading profits acted as tailwinds. Also, a rise in loan and deposit balances was positive. On the flip side, a decline in NII was a dampener.