TD Bank Financial Group, comprised of Toronto-Dominion Bank (TD,TD.TO) and its subsidiaries, on Thursday reported a decline in third-quarter profit, hurt by several charges. Excluding items, profit increased from the previous year, on higher earnings contributions from the wholesale banking and Canadian personal and commercial banking segments. Looking ahead, the company said it continues to expect a tough 2010.
The company reported third-quarter net income of C$912 million, compared to C$997 million in the year ago quarter. Net income available to common shareholders for the quarter was C$863 million or C$1.01 per share, compared to C$980 million or C$1.21 per share, in the year-ago quarter.
Results of the latest period were impacted by several items. These include amortization of intangibles amounting to C$0.15 per share, a loss of $0.05 per share due to the change in fair value of derivatives hedging, restructuring and integration charges of C$0.08 per share, a loss of C$0.09 per share due to the change in fair value of credit default swaps hedging and a special assessment charge of C$0.04 per share from the Federal Deposit Insurance Corp.
In the previous year, results included items relating to amortization of intangibles of C$0.13 per share, restructuring and integration charges of C$0.02 per share and a gain of C$0.03 per share related to fair value of credit default swaps hedging.
Adjusted net income available to common shareholders for the quarter was C$1.254 billion, compared to C$1.098 billion last year. Adjusted earnings per share rose to C$1.47 from C$1.35 in the year-ago quarter.
At Canadian Personal and Commercial Banking segment, earnings rose 7% to C$677 million. The company noted that the impact of strong volume growth in personal and commercial lending and improving efficiency more than offset higher provision for credit losses.
At Wealth Management segment, net income dropped 19% to C$163 million, as strong transactional volumes in online brokerage operations were more than offset by the impact of market declines in the mutual fund and advice-based businesses.
U.S. Personal and Commercial Banking division generated C$172 million in reported net income. Excluding restructuring and integration charges, the segment earned C$242 million, down 11% from the same period last year due to higher loan losses.
Wholesale Banking earned net income of C$327 million for the quarter, up $290 million from the same period last year. According to the company, strong trading and capital market fee revenues led to robust results across the business, as credit markets improved and market activity increased. These results more than outweighed realized net security losses related to the exit from the public equity investment portfolio, the company added.
Total revenues for the quarter increased to C$4.667 billion from C$4.037 billion generated in the prior year quarter. Net interest income increased to C$2.833 billion from C$2.437 billion, as interest expense was lower in the most recent quarter, although interest income dropped from the previous year period.
Non-interest income advanced to C$1.834 billion from C$1.60 billion in the previous year, helped by trading income of C$338 million, compared to a trading loss of C$196 million in the previous year.
Provision for credit losses increased to C$557 million from C$288 million. Non-interest expenses rose to C$3.045 billion from C$2.701 billion, owing mainly to higher salaries and employee benefits as well as a special assessment charge of C$55 million and another charge related to the settlement of TD Banknorth shareholder litigation.
Among peers, Bank of Montreal (BMO,BMO.TO) said Wednesday that profit rose 6.9% for the third quarter, reflecting lower provision for credit losses as well as 8.4% revenue growth. The company reported net income of C$557 million or C$0.97 per share for the third quarter, compared to C$521 million or C$0.98 per share in the prior-year quarter. Total revenue for the quarter rose to C$2.98 billion from C$2.75 billion in the same quarter last year.
For the second quarter, TD Bank Financial's net income available to common shareholders was C$577 million, or C$0.68 per share, down from C$841 million, or C$1.12 per share, in the year-ago quarter. Total revenues for the quarter were C$4.33 billion, up 27.7% from C$3.39 billion in the prior-year quarter.
For the first nine months of the year, net income available to common shareholders for TD Bank Financial declined to C$2.123 billion or C$2.51 per share from C$2.783 billion or C$3.65 per share in the previous year period. Total revenue increased to C$13.142 billion from C$11.029 billion.
Further, Toronto-Dominion Bank announced a dividend of C$0.69 per fully paid common share in the capital stock of the Bank for the quarter ending October 31. It is payable on and after October 31 to shareholders of record at the close of business on October 5.
Looking ahead, Ed Clark, President and Chief Executive Officer of the company, said, "While the recession is turning out to be less severe than we expected, looking forward we remain cautious and continue to expect a tough 2010. But this quarter's results show that strong businesses can perform even in tough economic conditions."
Canadian banks have largely managed to evade the global slump that has slapped the U.S. financial firms. Canada is the only nation in the group of seven industrialized nations that has not bailed out its banks since the onset of the financial crisis. Strict capital requirements, conservative lending policies and periodic regulatory reviews have contributed to the stability of Canada's financial system.
TD is currently trading at $62.34, up $1.79 or 2.96%, on 736,334 shares.
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