Author: Consultant

Toronto-Dominion Bank’s second-quarter profit beat analysts’ estimates on a boost in capital markets even as profit fell 22 per cent from the same quarter last year, weighed down by costs related to the U.S. investigation into the lender’s anti-money laundering practices.

TD TD-T -1.60%decrease earned $2.56-billion, or $1.35 per share, in the three months that ended April 30. That compared with $3.31-billion, or $1.69 per share, in the same quarter last year.

Adjusted to exclude certain items, including restructuring costs and a US$450-million provision to cover penalties it’s facing as a result of a lengthy U.S. regulatory and law enforcement investigation, the bank said it earned $2.04 per share. That edged out the $1.85 per share analysts expected, according to S&P Capital IQ.

“We delivered significant positive operating leverage while continuing to invest in our business, including our risk and control infrastructure,” TD chief executive officer Bharat Masrani said in a statement.

TD expects to incur fines or other penalties stemming from probes by the U.S. Department of Justice and other agencies related to its anti-money-laundering practices. The discussions with three U.S. regulators and the Department of Justice are ongoing, and the bank anticipates further penalties.

“The bank has been co-operating with U.S. regulators and authorities in good faith for many months and is working diligently to bring these investigations to resolution so that investors can have more clarity,” TD said in a press release. “A comprehensive overhaul of TD’s U.S. AML program is well underway, and will strengthen our program globally.”

Separately, The Globe reported Wednesday that Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, identified deficiencies with TD’s regulatory compliance management program during a recent assessment.

Scotiabank analyst Meny Grauman said that TD’s second-quarter results were a “a big beat with a big asterisk.”

The results that beat analyst expectations by a wide margin “sounds like a very positive result for any bank let alone one that has underperformed the peer group so dramatically over the past few months,” Mr. Grauman said in a note to clients. “And yet we label this quarter as mixed given both the source of the beat, and of course the elephant in the room which remains TD’s ongoing AML issues in the US – on which we got no new information (as we had expected).”

TD is the first major Canadian bank to report earnings for the second quarter. The rest of the Big Six banks release financial results next week.

The bank maintained its quarterly dividend at $1.02 per share.

In the quarter, TD set aside $1.07-billion in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and included $870-million against loans that the bank believes will not be repaid, based on models that use economic forecasting to predict future losses. Those provisions for impaired loans jumped 58 per cent from the same quarter last year, particularly in unsecured loans including credit cards and auto debt.

In the same quarter last year, TD set aside $599-million in provisions.

As Canadians adjust to higher borrowing costs, more borrowers are defaulting on debt, prompting banks to set aside more money for loans that are more likely to default.

“The increase in impaired is as expected in this cycle. If you look at last year, impaired was still low, comparatively speaking,” TD chief financial officer Kelvin Tran said in an interview. “We expect that to continue to put some pressure in in the second half of the year.”

Total revenue rose 11 per cent in the quarter to $13.82-billion, bolstered by the bank’s Canadian personal and commercial unit, wealth management and capital markets.

But expenses surged 24 per cent to $8.4-billion, which the bank said was driven by the provision for investigations related to the bank’s anti-money laundering program, higher employee-related expenses, restructuring charges and investments in its risk and control infrastructure.

Late last year, Canada’s largest lenders embarked on restructuring programs to trim mounting expenses, largely by reducing salary, technology and real estate costs.

In the second quarter, TD booked a $122-million after-tax restructuring charge, and said that it expects another $50-million cost next quarter to complete the program. TD expects $400-million pre-tax in savings for this fiscal year.

The bank has reduced its workforce by 3 per cent while reinvesting in hiring to remediate weaknesses in its risk and control infrastructure. Since the fall, TD has brought on several senior leaders with experience in compliance and anti-money laundering at U.S. banks to lead its turnaround plan.

“This is a continued build that we need to do,” Mr. Tran said. “You have subject matter experts, process experts, technology experts. We continue to look at that and prioritize the best and optimal way to sequence that spending.”

Canadian personal and commercial banking profit was $1.74-billion, up 7 per cent from a year earlier, as higher revenue offset rising provisions for credit losses and expenses. Loan balances rose 7 per cent year over year.

Profit from the bank’s U.S. arm slumped 59 per cent to $580-million, weighed down by expenses related to the U.S. regulatory and law enforcement investigation, as well as lingering charges related to the terminated deal to acquire Tennessee-based First Horizon Corp.

The wealth management and insurance division generated $621-million of profit, up 19 per cent from the same quarter last year. And capital markets profit jumped 141 per cent to $361-million as TD integrates its acquisition of New York investment bank Cowen Inc., and benefited from higher trading-related revenue, underwriting fees and lending revenue.

“The acquisition of TD Cowen added capabilities that are very important to TD,” Mr. Tran said. “If you look at our revenues, it’s a record a quarter of $1.9-billion. And if you compare that to an average quarter of a full year prior to the TD Cowen acquisition – so that’ll be 2022 – revenue is up 50 per cent. So that talks about the power of the combined franchise in a more constructive market.”

Nvidia Corp. NVDA-Q -0.46%decrease on Wednesday overshot Wall Street estimates as its profit skyrocketed, bolstered by the chip-making dominance that has made the company an icon of the artificial-intelligence boom.

Its net income rose more than sevenfold compared with a year earlier, jumping to US$14.88-billion in its first quarter that ended April 28 from US$2.04-billion a year earlier. Revenue more than tripled, rising to US$26.04-billion from US$7.19-billion in the previous year.

The company reported earnings per share adjusted to exclude one-time items of US$6.12, well above the US$5.60 Wall Street analysts had expected, according to FactSet. It also announced a 10-for-1 stock split, a move that it noted will make its shares more accessible to employees and investors.

And it increased its dividend to 10 U.S. cents a share from four U.S. cents.

Shares in Nvidia rose more than 4 per cent in after-hours trading to US$991.85. The stock has risen more than 200 per cent in the past year.

The company, based in Santa Clara, Calif., carved out an early lead in the hardware and software needed to tailor its technology to AI applications, partly because founder and chief executive officer Jensen Huang began to nudge the company into what was then seen as a still half-baked technology more than a decade ago. It also makes chips for gaming and cars.

The company now boasts the third-highest market value on Wall Street, behind only Microsoft and Apple.

“Nvidia defies gravity again,” Jacob Bourne, an analyst with Emarketer, said of the quarterly report. While many tech companies are eager to reduce their dependence on Nvidia, which has achieved a level of hardware dominance in AI rivalling that of earlier computing pioneers such as Intel Corp., “they’re not quite there yet,” he added.

Demand for generative AI systems that can compose documents, make images and serve as increasingly lifelike personal assistants has fuelled astronomical sales of Nvidia’s specialized AI chips over the past year. Tech giants Amazon, Google, Meta and Microsoft have all signalled they will need to spend more in coming months on the chips and data centres needed to train and operate their AI systems.

Five things to watch for in Canadian business, week of May 20 (msn.com)

Monday

Canadian markets closed (Victoria Day)

Earnings include: Palo Alto Networks Inc.; Zoom Video Communications Inc.

Tuesday

Euro zone trade surplus

Germany PPI

(8:30 a.m. ET) Canadian CPI for April. The Street expects an increase of 0.5 per cent from March and up 2.7 per cent year-over-year.

Earnings include: Lowe’s Companies Inc.; Macy’s Inc.

Wednesday

Japan core machine orders and trade balance

(10 a.m. ET) U.S. existing home sales for April. Consensus is a decline of 1.1 per cent on an annualized rate basis.

(2 p.m. ET) U.S. Fed minutes from April 30-May 1 meeting are released.

Earnings include: Analog Devices Inc.; Computer Modelling Group Ltd.; Nvidia Corp.; Target Corp.; TJX Companies Inc.

Thursday

Japan PMI and machine tool orders

Euro zone PMI and consumer confidence

(8:30 a.m. ET) Canada’s new housing price index for April. Estimate is a decline of 0.2 per cent frpom April and down 0.2 per cent year-over-year.

(8:30 a.m. ET) U.S. initial jobless claims for week of May 18. Estimate is 222,000, down 2,000 from the previous week.

(9:45 a.m. ET) U.S. S&P Global PMIs for May.

(10 a.m. ET) U.S. new home sales for April. Consensus is an annualized rate decline of 2.6 per cent.

Earnings include: Dollar Tree Inc.; Intuit Inc.; Ralph Lauren Corp.; Silvercorp Metals Inc.; Toronto-Dominion Bank; Workday Inc.

Friday

Japan CPI

Germany GDP

G7 finance ministers and central bank governors meet in Stresa, Italy (through Saturday)

(8:30 a.m. ET) Canadian retail sales for March. Estimate is a decline of 0.3 per cent from February.

(8:30 a.m. ET) Canadian manufacturing sales for April.

(8:30 a.m. ET) U.S. durable and core orders for April. The Street expects a decline of 0.8 per cent and rise of 0.1 per cent from March, respectively.

(10 a.m. ET) U.S. University of Michigan consumer sentiment for May.

Earnings include: CAE Inc.

Total revenue of $230.2 million grew 25% year-over-year and annual revenue exceeded previously-established outlook

Net loss and Adjusted EBITDA¹ improved to ($32.5) million and $4.4 million, respectively

Read more at newswire.ca

HALIFAX, Nova Scotia, May 13, 2024–(BUSINESS WIRE)–Today Emera (TSX: EMA) reported 2024 first quarter financial results.

Summary

• Quarterly adjusted earnings per share (“EPS”) ⁽¹⁾ of $0.76 decreased $0.23 or 23% compared to $0.99 in Q1 2023. The primary drivers of this change are:
  • the impact of milder weather at Tampa Electric during the quarter;
  • lower contributions from New Mexico Gas Company’s (“NMGC”) asset management agreements, which were very strong in Q1 last year;
  • lower earnings at Nova Scotia Power (“NSPI”) due to an increase in OM&G costs focused on reliability and customer experience, as well as a one-time regulatory disallowance;
  • lower contributions from marketing and trading at Emera Energy Services (“EES”), which had a very strong Q1 last year;
  • higher corporate costs due to mark-to-market losses related to long-term compensation-related hedges;
  • partially offset by higher contributions from Peoples Gas (“PGS”), which benefited from new rates and strong customer growth – delivering its highest quarterly earnings ever.
    
• Quarterly reported net income decreased by $353 million to $207 million compared to $560 million in Q1 2023 and quarterly reported EPS decreased by $1.34 to $0.73 from $2.07 in Q1 2023. Both decreases were primarily due to mark-to-market (“MTM”) gains at EES in 2023.

“While weather and an unusually strong prior-year quarter contributed to lower comparative adjusted earnings for the quarter, our core utilities remain on track to deliver solid earnings results for the full year,” said Scott Balfour, President and CEO of Emera Inc. “We remain confident in the underlying forward-looking growth profile of our business, driven in large part by our two operations in Florida. Peoples Gas is on track to become our second largest earnings contributor in 2024, behind Tampa Electric. Together, our Florida businesses have delivered significant growth in earnings over the last five years, and we expect the drivers of this growth to continue.”

China’s consumer prices rose for a third straight month in April, while producer prices extended declines, signalling an improvement in domestic demand, as Beijing navigates challenges in its bid to shore up a shaky economy.

The closely watched numbers follow better-than-expected imports data for April, suggesting a flurry of policy support measures over the past several months may be helping consumer confidence.

Consumer prices edged up 0.3 per cent in April from a year earlier, data from the National Bureau of Statistics showed on Saturday, versus a rise of 0.1 per cent in March and a Reuters poll forecast for an increase of 0.2 per cent.

“Strip out food and energy prices, and the consumer inflation data suggests a comeback in demand, especially in services,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.

Core inflation, excluding volatile food and fuel prices, grew 0.7 per cent in April, up from 0.6 per cent in March.

Overall the consumer price index (CPI) rose 0.1 per cent from the previous month, beating a forecast fall of 0.1 per cent in the poll and reversing a drop of 1 per cent in March.

Most China watchers say Beijing still has its work cut out, though, and the momentum might prove unsustainable, as official surveys show cooling factory and services activity, while a lengthy housing crisis shows no sign of easing, boosting the case for more policy support.

“Price hikes by utility companies is another potential driver,” Xu added.

“The fiscal strains some local governments are facing affect the subsidies they receive, which could be forcing them to pass the extra cost on to households to make ends meet.”

Officials are grappling with municipal debt of $13-trillion, and the State Council, or cabinet, has told heavily indebted local governments to delay or halt some state-funded infrastructure projects.

“The prices data suggests that domestic demand is recovering, supply and demand continues to improve and the outlook for domestic demand and price recovery is optimistic,” said Zhou Maohua, a macroeconomic researcher at China Everbright Bank.

“However, consumer prices remain low and the industrial manufacturing sector is still under pressure, reflecting insufficient effective demand and that recovery in the sector is still not sufficiently balanced.”

The producer price index (PPI) dropped 2.5 per cent in April from a year earlier, easing from a slide of 2.8 per cent the previous month but extending a 1-1/2-year-long stretch of declines.

On Friday, China’s central bank said it would make monetary policy flexible, precise and effective and promote a moderate recovery in consumer prices to consolidate economic recovery.

The comments in a quarterly monetary policy report follow remarks in April by the Politburo, a top-decision making body of the ruling Communist Party, that China will use policy tools, such as banks’ reserve requirement ratio (RRR) and interest rates, to prop up growth.

“Considering the judgment of the Politburo meeting that ‘effective demand is still insufficient …’ the policy support should take advantage of the momentum, by strengthening expectation management and creating more consumption scenarios,” said Bruce Pang, chief economist China at Jones Lang LaSalle.

Many analysts say China’s economic growth target of about 5 per cent in 2024 will be a challenge to achieve without further policy support.

Premium Brands Holdings Corp. PBH-T +4.54%increase reported a first-quarter profit of $6.3-million, up from $5.9-million in the same quarter last year.

The specialty food company says the profit amounted to 14 cents per diluted share for the 13-week period ended March 31, up from 13 cents per diluted share a year earlier.

Revenue for the quarter totalled $1.46-billion, up from $1.43-billion in the first quarter of 2023.

The increase came as specialty food revenue rose to $987.4-million, up from $948.8-million a year ago, while premium food distribution revenue totalled $474.4-million, down from $481.7-million a year earlier.

On an adjusted basis, Premium Brands says it earned 54 cents per share in its latest quarter, down from an adjusted profit of 64 cents per share in the same quarter last year.

Premium Brands owns a range of specialty food brands as well as food distribution businesses across Canada and the United States.

Exploring a potential purchase of the Trans Mountain oil pipeline is not a major priority right now for Pembina Pipeline Corp. PPL-T +0.46%increase, the Calgary-based company said.

On a conference call with analysts to discuss first-quarter financial results, Pembina’s chief financial officer Cameron Goldade acknowledged the recent completion of the $34 billion Trans Mountain expansion, which marked its official opening last week.

But he reiterated Pembina’s previously stated stance that there are still too many questions surrounding the pipeline to support pursuing a purchase at this point.

“From our perspective, there still exists a tremendous amount of uncertainty around that asset. And so you know, frankly, nothing has changed from our prior messaging in terms of that as an investment opportunity,” Mr. Goldade said on Friday.

“It’s not something we’re spending a great deal of time on right now.”

Pembina formed a partnership in 2021 with Western Indigenous Pipeline Group for the purpose of pursuing an Indigenous-led equity stake in Trans Mountain.

The pipeline is currently owned by the federal government, which bought it in 2018 to get the expansion project over the finish line.

But the government has said it does not wish to be the long-term owner and has already launched the first of what is expected to be a two-phase divestment process.

Pembina is not eligible to participate in this first phase, which involves talks with more than 120 Indigenous nations located along the Trans Mountain route to see if any of them are interested in an equity stake.

The second phase, for which the timing is unclear, will involve the consideration of commercial offers.

Some analysts have suggested Pembina would be the most logical buyer for the 890,000-barrel-a-day pipeline, which opens up new global export markets for Canadian oil companies.

But during the course of the four years it took to construct the megaproject, the pipeline expansion ran into multiple regulatory snags, delays and budget overruns.

And even though the project is complete, the Crown corporation that built it is still locked in a dispute with oil companies over the tolls it wishes to charge to use the pipeline.

Tolls are the way a pipeline earns revenue, so the final tolling structure for Trans Mountain will directly affect the pipeline’s value as well as the price a prospective buyer is willing to pay.

Trans Mountain is looking to charge higher tolls to offset some of the project’s budget overruns, but oil companies don’t want to be held responsible for construction-related challenges.

The Canada Energy Regulator has approved Trans Mountain’s proposed higher tolls on an interim basis to ensure a tolling structure was in place for the start-up of the pipeline, but it has yet to make a final decision.

Pembina’s comments on Trans Mountain came one day after the company announced it earned $439-million in the first quarter, up from $369-million a year earlier.

Pembina said its revenue for the quarter ended March 31 was $1.54-billion, down from $1.62-billion during the same quarter last year.

Diluted earnings per common share were 73 cents, up from 61 cents.

During the quarter, Pembina entered into long-term agreements with Dow Chemical to supply and transport up to 50,000 barrels a day of ethane to support the recently announced construction of Dow’s new integrated ethylene cracker and derivatives facility in Fort Saskatchewan, Alta.

Pembina and its project partner, the Haisla Nation of B.C., also announced recently that they have achieved a number of positive milestones on Cedar LNG, a proposed floating liquefied natural gas facility to be built near Kitimat.

Pembina said a final investment decision on Cedar LNG will be made by June, 2024.