Toronto-Dominion (TD) Stock Down 5.1% Despite Q1 Earnings Rise

Toronto-Dominion Bank’s TD first-quarter fiscal 2021 (ended Jan 21) adjusted net income climbed 10% from the prior-year quarter to C$3.38 billion ($2.63 billion).

Results were supported by higher non-interest income and decline in provisions. However, fall in loan balance and lower net interest income (NII) were headwinds. These were perhaps the reasons why the shares of Toronto-Dominion 5.1% fell on the NYSE following the release late last week.

After considering certain non-recurring items, net income was C$3.28 billion ($2.55 billion), increasing 13% year over year.

Adjusted Revenues & Expenses Increase

Total revenues amounted to C$10.81 billion ($8.4 billion), up 2% on a year-over-year basis.

NII declined 2% year over year to C$6.03 billion ($4.68 billion). However, non-interest income came in at C$4.78 billion ($3.71 billion), up 8%.

Non-interest expenses increased 6% to C$5.74 billion ($4.46 billion).

Efficiency ratio was 53.1% compared with 50.9% on Jan 31, 2020. Rise in efficiency ratio indicates a fall in profitability.

Provision for credit losses plunged 66% year over year to C$313 million ($343.2 million).

Solid Balance Sheet, Capital & Profitability Ratios

Total assets came in at C$1.74 trillion ($1.36 trillion) as of Jan 31, 2021, up 1% from fourth-quarter fiscal 2020. Net loans fell almost 2% on a sequential basis to C$706 billion ($552.4 billion) but deposits grew slightly to C$1.14 trillion ($0.89 trillion).

As of Jan 31, 2021, common equity Tier I capital ratio was 13.6%, up from 11.7% on Jan 31, 2020. Total capital ratio was 17.4% compared with the prior year’s 15.7%.

Return on common equity (on an adjusted basis) came in at 14.7%, up from 14.6% as of Jan 31, 2020.

Our Viewpoint

Toronto-Dominion’s efforts toward improving revenues — both organically and inorganically — are supported by a diverse geographical presence. However, rising operating expenses and lower demand for loans are near-term concerns.

Toronto Dominion Bank The Price, Consensus and EPS Surprise

Toronto Dominion Bank The Price, Consensus and EPS Surprise

Toronto Dominion Bank The price-consensus-eps-surprise-chart | Toronto Dominion Bank The Quote

Toronto-Dominion currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Canadian Banks

The Bank of Nova Scotia BNS reported first-quarter fiscal 2021 (ended Jan 31) adjusted net income of C$2.4 billion ($1.9 billion), up 3.2% year over year. Decline in provisions and expenses were positives. However, decline in revenues was discouraging.

Bank of Montreal’s BMO first-quarter fiscal 2021 (ended Jan 31) adjusted net income came in at C$2.04 billion ($1.58 billion), up 26% year over year. The company recorded improvement in revenues, lower provisions and a decline in expenses, which supported results.

Canadian Imperial Bank of Commerce CM reported first-quarter fiscal 2021 (ended Jan 31) adjusted earnings per share came in at C$3.58, up 10% from the prior-year quarter. Results benefited from rise in revenues and lower provisions. However, a slight rise in costs was the headwind.

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