Toronto-Dominion Bank TD-T reported Thursday that it brought in more than $1-billion in profit in the fourth quarter, defying analysts' expectations in the wake of the financial crisis.
While its profit of $1.01-billion was a tiny slide from $1.1014-billion a year ago, after adjusting for unusual or one-time items it amounted to $1.307-billion, compared to just $665-million this time in 2008.
A number of one-time items ate into the bank's results in its most recent quarter, including a mark-to-market loss on derivatives, restructuring costs related to its purchase of New Jersey-based Commerce Bancorp, and the declining value of some credit default swaps it uses to hedge its corporate loans.
On the flip side, in the fourth-quarter of last year TD decided to release $477-million (pretax) that it had previously set aside to deal with the potential outcome of a class-action suit launched by former shareholders of Enron, making its results in that period look better.
(The bank had retained a litigation reserve of $20-million to deal with that lawsuit. On Wednesday, the Houston judge overseeing the class-action suit dismissed the remaining defendants, including TD, meaning the bank will now be able to release that $20-million).
Once adjusted for the unusual items, TD's earnings per share of $1.46 easily topped analysts' estimates and compare to profits per share of 79 cents a year ago.
The quarter's results were carried by wholesale or investment banking, which brought in record profits of $372-million, compared to a loss of $228-million a year ago. The performance was buoyed by the bank's trading business.
Canadian personal and business banking earned $622-million this quarter, up 4 per cent from a year ago, despite setting aside more money for troubled loans, smaller profit margins, and significantly higher insurance claims.
But TD's wealth management division and U.S. personal and business banking both earned significantly less than a year ago. Wealth management was hurt by low interest rates (which decrease profit margins), and lower fees because clients have less assets as a result of the financial crisis.
U.S. banking, a key focus for TD since its blockbuster acquisition of New Jersey-based Commerce Bancorp (which left it calling itself the first truly North American bank, with roughly as many branches in the U.S. as it has in Canada), brought in $122-million, down 51 per cent from a year ago. Profit margins shrunk due to low interest rates, and the amount of loans that customers are struggling to pay back increased.
More to come
