Toronto-Dominion Bank TD-T -0.51%decrease reported higher third-quarter profit that beat analysts’ estimates as the lender reins in expenses and plans to open new retail branches in the United States, where it is fixing gaps in its anti-money laundering processes.
Canada’s second-largest lender posted stronger than expected results across its businesses. TD’s net income rose 38 per cent to $4.62-billion, or $2.74 per share, in the three months that ended July 31.
Adjusted to exclude certain items, the bank said it earned $2.77 per share, edging out the $2.47 per share analysts expected, according to data by S&P Capital IQ.
“With a focus on disciplined execution, [return on equity] was up significantly and we generated positive operating leverage while continuing to invest in front-line talent, AI and innovation to deepen client relationships and grow the bank,” TD chief executive officer Raymond Chun said in a statement.
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The bank said it intends to open 100 new branches in the U.S. by the end of 2028, pending regulatory approval.
TD’s chief financial officer Kelvin Tran said the new sites will be located in the bank’s existing footprint along the country’s east coast.
“Our focus is driving organic growth, and building new branches to acquire new customers is part of that strategy,” Mr. Tran said in an interview.
U.S. regulators and law enforcement levied a cap on assets of US$434-billion that limits TD’s ability to grow its retail operations in the country. To continue growing the business and create space under the asset cap, the lender shrunk its U.S. balance sheet by exiting less profitable portfolios.
TD has previously said it expects expense growth to land in the mid-single-digit range this year.
“It speaks volume about the effectiveness of our structural cost reduction program, so as those savings come through, and on top of that, moderation of some governance and control costs, that gives us room to reinvest in the business,” Mr. Tran said.
“Whether that is reinvesting in new branches or reinvesting in frontline talent, or in our technology, those are very important for us as we look to grow the U.S. business over time.”
TD is the final major Canadian bank to report earnings for the fiscal third quarter. Earlier in the week, Bank of Montreal, Bank of Nova Scotia and National Bank of Canada released results that beat analysts’ estimates. On Thursday, Canadian Imperial Bank of Commerce and Royal Bank of Canada also post earnings that topped analysts’ expectations.
In the quarter, TD set aside $917-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 $865-million against loans that the bank believes may not be repaid, based on models that use economic forecasting to predict future losses.
Total revenue rose 10 per cent in the quarter to $16.89-billion, while expenses fell slightly by 1 per cent to $8.48-billion.
The bank is betting on its Canadian division and streamlining its businesses to drive its growth strategy
Canadian personal and commercial banking profit was $2.1-billion, up 7 per cent from a year earlier, as revenue was driven by deposit and loan volume growth
Profit from the bank’s U.S. arm was up 41 per cent at $1.07-billion, as loans grew in middle market commercial lending and credit cards.
Capital markets profit climbed 87 per cent to $743-million on higher revenue and lower provisions. The wealth management and insurance division generated $841-million in profit, up 20 per cent.
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