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A TD Canada Trust location in Toronto

Deborah Baic/The Globe and Mail

Toronto-Dominion Bank's strong earnings momentum cooled in the fourth quarter, with profit ​falling short of analyst expectations, but the lender ​still beat the previous year's results.

TD made $1.7-billion, up 8 per cent over the same period in 2013. After stripping out one-time items, the bank made 98 cents per share, short of the $1.05 estimate from analysts.

The bank's full-year profit amounted to $7.9-billion, a big 19-per-cent jump over 2013's earnings. However, the previous year's profit was weighed down by one-time charges, particularly in the insurance division.

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​​ All three of TD's major business units – Canadian retail, U.S. retail and wholesale banking – reported better profits in the fourth quarter over the year prior, yet they were all weaker relative to the bank's blockbuster third quarter.

Canadian retail, which includes wealth management, reported a 5 per cent earnings bump over the year prior, rising to $1.3-billion, which TD attributed to everything from loan growth to better fees from managing money.

U.S. retail earnings climbed 6 per cent to $509-million during the quarter, but showed signs of cooling – something that will likely worry investors. TD has hoped for better growth from its U.S. retail operations, but its latest quarterly report noted that margins are falling south of the border. Looking forward, chief financial officer Colleen Johnston said in an interview that "a number of the macro challenges will remain into 2015," including low interest rates and stiff regulation that has increased compliance costs.

Wholesale banking reported a $160-million profit, its lowest of the year, but still 31 per cent higher than the fourth quarter of 2013, which was abnormally weak. The division's results were affected by a one-time $65-million charge to revalue TD's derivatives portfolio in line with new global regulations. Most Canadian banks incurred similar charges in the fourth quarter.

TD's strong 2014 results surprised even its own executives. At the start of the year, former chief executive officer Ed Clark, who retired in October, worried about the effects of a tough banking market, largely created by low interest rates.

By May, Mr. Clark and his successor, Bharat Masrani, couldn't help but sound more optimistic. In the third quarter, TD's profit topped $2.1-billion and set a new record, even though interest rates remain low and Canadian personal and commercial lending is slowing.

Should the U.S. economy continue to gather steam, TD is one of the best-positioned Canadian banks because of big investments to grow its retail business south of the border.

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However, there have been hopes for years that this unit would deliver big results yet the recovery keeps taking longer than expected.

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