[Note: This post is a summary of the report of TD Bank Financial Group. To read the complete contents of the release, including charts, click here.]
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This quarterly earnings release should be read in conjunction with our Third Quarter 2010 Report to Shareholders for the three and nine months ended July 31, 2010, which is available on our website at http://www.td.com/investor/qr_2010.jsp. Unless otherwise indicated, all amounts are expressed in Canadian dollars, and have been primarily derived from the Bank’s annual or interim Consolidated Financial Statements prepared in accordance with Canadian generally accepted accounting principles (GAAP). Certain comparative amounts have been reclassified to conform with the presentation adopted in the current period. Additional information relating to the Bank is available on the Bank’s website http://www.td.com/, as well as on SEDAR at http://www.sedar.com/ and on the U.S. Securities and Exchange Commission’s (SEC’s) website at http://www.sec.gov/ (EDGAR filers section).
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THIRD QUARTER FINANCIAL HIGHLIGHTS, compared with the third quarter a year ago:
– Reported diluted earnings per share were $1.29, compared with $1.01.
– Adjusted diluted earnings per share were $1.43, compared with $1.47.
– Reported net income was $1,177 million, compared with $912 million.
– Adjusted net income was $1,304 million, compared with $1,303 million.
YEAR-TO-DATE FINANCIAL HIGHLIGHTS, nine months ended July 31, 2010, compared with the corresponding period a year ago:
– Reported diluted earnings per share were $4.03, compared with $2.35.
– Adjusted diluted earnings per share were $4.40, compared with $3.88.
– Reported net income was $3,650 million, compared with $2,110 million.
– Adjusted net income was $3,968 million, compared with $3,409 million.
Adjusted measures are non-GAAP. Refer to the “How the Bank Reports” section of the Management’s Discussion and Analysis for an explanation of reported and adjusted results.
Certain comparative amounts have been reclassified to conform to the current period’s presentation.
Certain comparative amounts are presented after adjustments resulting from adoption of the 2009 financial instruments amendments, as described in Note 1 to the Interim Consolidated Financial Statements.
THIRD QUARTER ADJUSTMENTS (ITEMS OF NOTE)
The third quarter reported earnings figures included the following items of note:
– Amortization of intangibles of $117 million after tax (12 cents per share), compared with $122 million after tax (15 cents per share) in the third quarter last year.
– A loss of $14 million after tax (2 cents per share), due to the change in fair value of derivatives hedging the reclassified available-for-sale debt securities portfolio, compared with a loss of $43 million after tax (5 cents per share) in the third quarter last year.
– Integration and restructuring charges of $5 million after tax (1 cent per share), relating to U.S. Personal and Commercial Banking acquisitions, compared with $70 million after tax (8 cents per share) in the third quarter last year.
– A gain of $9 million after tax (1 cent per share), due to the change in fair value of credit default swaps hedging the corporate loan book, net of provision for credit losses (PCL), compared with a loss of $75 million after tax (9 cents per share) in the third quarter last year.
TD Bank Financial Group (TDBFG) today announced its financial results for the third quarter ended July 31, 2010. Overall results for the quarter reflected very strong retail earnings growth.
“Our third quarter results really tell the growth story of our retail businesses on both sides of the border, with our total adjusted retail earnings hitting a new high of $1.3 billion, up 21% from last year. Canadian Personal and Commercial banking posted another record quarter – its third in a row – and our U.S. Personal and Commercial Banking operations also reported the highest level of adjusted earnings since we entered this market,” said Ed Clark, President and Chief Executive Officer, TDBFG. “Wholesale Banking earnings continued to normalize, performing in line with expectations despite tougher markets in the quarter. We also saw the best credit quality and lowest credit losses in seven quarters across all of our businesses.”
Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking posted earnings of $841 million in the third quarter, up 24% from the same period last year. Revenue grew 8% while PCL declined by 19%. TD Canada Trust (TDCT) reported strong volume growth across most banking products, in particular real estate secured lending and business deposits. Also during the quarter, TDCT was ranked highest in Canadian banking customer satisfaction for the fifth year in a row by J.D. Power and Associates. In August, TDCT also received the Synovate award for excellence in customer service for the sixth year in a row.
“Canadian Personal and Commercial Banking delivered its third consecutive record quarter as we continue to invest in our people and stay focused on our commitment to providing the best possible service and convenience to our customers,” said Tim Hockey, Chief Executive Officer, TDCT. “We expect continued strong earnings growth, but not at the rate we’ve seen this year, as the Canadian housing market cools and a competitive environment continues to put pressure on margins.”
Wealth Management
Global Wealth net income, which excludes TDBFG’s reported investment in TD Ameritrade, was $117 million in the quarter, up 23% from the same period last year, largely driven by fee revenue from higher client assets and improved net interest margin. TD Ameritrade contributed $62 million in earnings to the segment, down 9% from the same period last year, due to the impact of a stronger Canadian dollar which was partially offset by higher earnings.
“This was a solid quarter for the Wealth business. Our profit improved for the sixth quarter in a row and we continued to invest in our operations to ensure future growth,” said Bill Hatanaka, Chief Executive Officer, TD Waterhouse. “However, we are cautious about the next several quarters, given the potential impact of a slowing U.S. economy on the equity markets.”
U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking generated US$271 million in reported net income for the quarter. On an adjusted basis, the segment earned US$276 million, up 30% from the third quarter of last year. Revenue grew 17% from the same period last year, driven by broad gains across the business, including deposit and loan growth, supported by an increase in retail fees. Total PCL dropped to US$126 million, down 23% compared with the same period last year.
During the quarter, TD Bank, America’s Most Convenient Bank, announced an offer to purchase The South Financial Group, Inc. The transaction remains subject to approval by South Financial shareholders and certain regulators. The shareholders’ meeting will be held on September 28, 2010, and assuming the necessary approvals are in place, the transaction is expected to close shortly thereafter.
“TD Bank had a very good quarter despite the uncertainty that continues to linger in the U.S. economy,” said Bharat Masrani, Chief Executive Officer, TD Bank, America’s Most Convenient Bank. “We remain pleased with the pace of our organic growth as we continue to lend to our customers. In fact, since the downturn started in 2007, we’ve grown our lending by 20%. We’re also pleased with the performance of the three FDIC-assisted acquisitions in Florida that we completed in the second quarter.”
Wholesale Banking
Wholesale Banking reported net income of $179 million, down 45% from the same period last year. Last year’s very strong results reflected the broad-based market rebound following the financial crisis. In addition, the current quarter was negatively impacted by the sovereign debt crisis in Europe and the significant equity market disruption in early May. This resulted in lower fixed income, credit, and currency trading, and lower underwriting fees, partially offset by improved equity trading and investment portfolio gains.
“Our wholesale bank had a solid quarter, particularly given the difficult operating environment,” said Bob Dorrance, Chief Executive Officer, TD Securities. “This quarter’s challenging markets were a clear contrast to the very favourable conditions of a year ago. We expect markets to remain challenging in the short term while we continue to build our franchises and strengthen our platforms for future success.”
Corporate
The Corporate segment, which includes the Bank’s other activities, had an adjusted net loss of $182 million ($304 million on a reported basis), up $76 million from the adjusted results in the same period last year. The higher loss was largely attributable to unfavourable tax-related items and losses associated with hedging and treasury activities, partially offset by lower net corporate expenses.
Capital
TDBFG’s Tier 1 capital ratio hit another high, at 12.5%, up 50 basis points from last quarter while risk-weighted assets remained stable. Capital quality remained very high, with tangible common equity comprising about 75% of Tier 1 capital.
“We’ll have to wait to see the full scope and impact of proposed capital reforms,” Clark said. “However, we hope that by the first quarter of fiscal 2011, we’ll be in a position, in the context of the Board’s outlook on earnings and the Bank’s dividend policy, to provide some guidance.”
Conclusion
“We’re very pleased with the strong results and organic growth that we delivered in the third quarter. Our retail businesses continue to perform very well and leave us positioned to deliver a good year,” Clark said. “We’re confident that our excellent capital levels, recent acquisitions and the investments we’ve made in the business will help ensure that we continue to grow despite the continuing economic challenges.”
The foregoing contains forward-looking statements. Please see the “Caution Regarding Forward-Looking Statements” on page 3.
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Caution Regarding Forward-Looking Statements
From time to time, the Bank makes written and oral forward-looking statements, including in this earnings news release, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, and in other communications. In addition, representatives of the Bank may make forward-looking statements orally to analysts, investors, the media and others. All such statements are made pursuant to the “safe harbour” provisions of applicable Canadian and U.S. securities legislation, including the U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, among others, statements made in this earnings news release in the “Business Outlook” section for each segment and in other statements regarding the Bank’s objectives and priorities for 2010 and beyond and strategies to achieve them, and the Bank’s anticipated financial performance. Forward-looking statements are typically identified by words such as “will”, “should”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “plan”, “may” and “could”.
By their very nature, these statements require the Bank to make assumptions and are subject to inherent risks and uncertainties, general and specific. Especially in light of the current uncertainty related to the financial, economic and regulatory environments, such risks and uncertainties – many of which are beyond the Bank’s control and the effects of which can be difficult to predict – may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Risk factors that could cause such differences include: credit, market (including equity, commodity, foreign exchange and interest rate), liquidity, operational, reputational, insurance, strategic, regulatory, legal and other risks, all of which are discussed in the Management’s Discussion and Analysis (MD&A) in the Bank’s 2009 Annual Report. Additional risk factors include the impact of recent U.S. legislative developments, as discussed under “Significant Events in 2010” in the “How We Performed” section of this earnings news release; changes to and new interpretations of risk-based capital guidelines and reporting instructions; increased funding costs for credit due to market illiquidity and competition for funding; the failure of third parties to comply with their obligations to the Bank or its affiliates relating to the care and control of information; and the use of new technologies in unprecedented ways to defraud the Bank or its customers and the organized efforts of increasingly sophisticated parties who direct their attempts to defraud the Bank or its customers through many channels. We caution that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank’s results. For more detailed information, please see the Risk Factors and Management section of the MD&A, starting on page 65 of the Bank’s 2009 Annual Report. All such factors should be considered carefully, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements, when making decisions with respect to the Bank and undue reliance should not be placed on the Bank’s forward-looking statements.
Material economic assumptions underlying the forward-looking statements contained in this document are set out in the Bank’s 2009 Annual Report under the heading “Economic Summary and Outlook”, as updated in the Third Quarter 2010 Report to Shareholders; and for each of the business segments, under the headings “Business Outlook and Focus for 2010”, as updated in this earnings news release under the headings “Business Outlook”; and for the Corporate segment in the report under the heading “Outlook”.
Any forward-looking statements contained in this document represent the views of management only as of the date hereof and are presented for the purpose of assisting the Bank’s shareholders and analysts in understanding the Bank’s financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf, except as required under applicable securities legislation.
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About TD Bank Financial Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Financial Group (TDBFG or the Bank). TDBFG is the sixth largest bank in North America by branches and serves more than 18 million customers in four key businesses operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust and TD Insurance; Wealth Management, including TD Waterhouse and an investment in TD Ameritrade; U.S. Personal and Commercial Banking, including TD Bank, America’s Most Convenient Bank; and Wholesale Banking, including TD Securities. TDBFG also ranks among the world’s leading online financial services firms, with more than 6 million online customers. TDBFG had $603 billion in assets on July 31, 2010. The Toronto-Dominion Bank trades under the symbol “TD” on the Toronto and New York Stock Exchanges.
For further information: Rudy Sankovic, Senior Vice President, Investor Relations, 416-308-9030; Wojtek Dabrowski, Manager, Media Relations, 416-307-8149
