TD cutting jobs as profit down by 57%, missing forecasts amid rising expenses

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Toronto-Dominion Bank TD-T reported lower fourth-quarter profit that missed analysts’ estimates as it announced job cuts in an attempt to rein in climbing expenses.

TD earned $2.9-billion, or $1.49 per share, down 57 per cent in the three months that ended Oct. 31. Adjusted to exclude certain items, the bank said it earned $1.83 per share. That fell below the $1.91 per share analysts expected, according to Refinitiv.

“In a complex operating environment, we continued to adapt, invest in new capabilities and take important steps to deliver efficiencies and drive growth across the bank,” TD chief executive officer Bharat Masrani said in a statement.

TD posted $266-million in after-tax restructuring charges, joining Royal Bank of Canada, Bank of Montreal and Bank of Nova Scotia in cutting expenses through measures including job cuts and real estate reductions. The lender expects to book savings of about $400-million pre-tax in 2024.

The bank said that it will reduce its work force by 3 per cent. In the fourth quarter, the bank shed more than 500 jobs, representing a 0.5 per cent decline in its employee base. Chief financial officer Kelvin Tran said that the restructuring charges also include plans to accelerate the bank’s transition to new platforms and reduce its corporate and branch real estate premises.

“When you look at the economy, we saw the opportunity to undertake a restructuring program to streamline and deliver efficiencies that enabled us to create capacity to invest for future growth,” chief financial officer Kelvin Tran said in an interview.

TD is the fourth major Canadian bank to report earnings for the fiscal fourth quarter. Canadian Imperial Bank of Commerce CM-T and Royal Bank of Canada RY-T also released financial results early Thursday. On Tuesday, Bank of Nova Scotia BNS-T posted lower profit that missed analyst expectations. Bank of Montreal BMO-T and National Bank of Canada NA-T will release results on Friday.

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Since terminating its acquisition of Tennessee-based First Horizon Corp. investors are waiting for further details on the expected fines or other penalties stemming from probes by regulators and law-enforcement agencies, including the United States Department of Justice, related to its anti-money-laundering practices.

The lender said Thursday that it does not yet know the outcomes of the inquiries and investigations, but it expects monetary and non-monetary penalties. It expects that the actions will not have a material impact on the bank’s financial condition, but that it may impact the bank’s results during a particular quarter. Some analyst estimates on the potential penalty range between US$500-million and $1-billion.

“Notwithstanding the progress we have made in our U.S. business, it was disappointing that some shortcomings in our anti-money laundering control environment were identified during the year, which we are working hard to address, and I am confident that in time we will,” Mr. Masrani said in fourth quarter filings. “As announced earlier in the year, given the uncertainty of the approval timeline, we mutually agreed with First Horizon to terminate the previously announced transaction. Although this was a difficult decision – and one not taken lightly – it was the right one for the bank under the circumstances.”

In the quarter, TD set aside $878-million in provisions for credit losses - the funds banks set aside to cover loans that may default. That was lower than analysts anticipated, and included $159-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses.

Total revenue fell 16 per cent in the quarter, to $13.1-billion. But expenses increase 20 per cent to $7.9-billion, which the bank said was driven by higher employee costs, restructuring charges and acquisition-related costs.

Canadian personal and commercial banking profit was $1.7-billion, down 1 per cent from a year earlier, as provisions and higher expenses offset an increase in revenue.

Profit from the bank’s U.S. arm was down 17 per cent, at $1.3-billion, as lower earnings from TD’s investment in Charles Schwab Corp. weighed on results.

The wealth management and insurance division generated $501-million, down 3 per cent as higher insurance claims and expenses offset higher revenues.

And capital markets profit fell 93 per cent to $17-million as acquisition and integration costs offset higher revenues from TD’s takeover of New York-based investment bank Cowen Inc.

Editor’s note: A previous version of this article incorrectly stated the fourth-quarter profit from TD's U.S. arm. It was $1.3-billion. This version has been updated.