In a move that should please both shareholders and politicians, Toronto-Dominion Bank reported a strong $912-million profit at the same time it boosted lending to its clients.
TD handily beat expectations with cash earnings of $1.47 per share in the third quarter, as analysts expected the bank to earn $1.23. The bank's profit rose 48 per cent compared to the previous quarter, but was down 9 per cent year over year.
TD set aside $557-million for loan losses, down 15 per cent from the previous quarter, but up 93 per cent from the same period in 2008. The bank expanded its retail and commercial banking market share and overall loan portfolio, in part because weaker rivals are in retreat.
"Last quarter we said this may be a recession in which we actually grow lending through the downturn," said TD chief executive officer Ed Clark. "This has been proven out, as our very strong capital position has allowed us to provide access to credit, filling the gaps left by those who have exited the lending market."
Finance Minister Jim Flaherty has been publicly pushing Canadian banks to ramp up consumer and business lending in order to fuel economic growth during the recession.
The engine driving TD's profit continues to be its Canadian branch network, as domestic retail and commercial banking delivered record earnings of $677-million, up 5 per cent from the same period last year.
TD's expansion into the U.S. northeast faces recessionary headwinds. The division posted a $172-million profit. Excluding restructuring and integration charges, the U.S. branch network earned $242-million, down 11 per cent from the same period in 2008, due to higher loan losses "While credit losses are certainly higher than last year, we continue to see good relative credit performance," Mr. Clark said.
TD declared a 61 cent common share dividend, the same payout it handed to shareholders in the last quarter. To date, all of the Canadian banks have maintained their dividend payments. Insurer Manulife Financial recently shocked investors by cutting its common share dividend in half.
Royal Bank of Canada also announced strong earnings on Thursday, well above analysts' expectations, on the back of lower-than-expected credit losses. Earlier this week, Bank of Montreal announced relatively low loan losses, but CIBC surprised the market with provisions for bad loans that exceeded expectations.