TD Bank Joins Canadian Peers With Earnings Beat -- 2nd Update

By Vipal Monga and Cara Lombardo Features Dow Jones Newswires

Toronto-Dominion Bank earnings surged during its fiscal third quarter, aided by a booming Canadian economy.

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TD, Canada's second-largest bank, reported earnings growth of 17% from a year ago as revenue grew, customer credit improved and insurance claims dropped.

Shortly after the earnings were made public, Statistics Canada reported that the country's gross domestic product rose at a 4.5% annualized rate in the second quarter, much higher than expected. The surge in growth comes after several quarters of a lackluster economy that suffered as oil prices fell.

"The economy has improved more quickly than expected," said Riaz Ahmed, TD's finance chief, in an interview.

The bank's Canadian retail business earnings increased 14% to C$1.7 billion in its latest quarter. Overall, the company reported income of 2.8 billion Canadian dollars ($2.2 billion) in its third quarter ended July 31, up from C$2.4 billion a year earlier. TD's earnings per share, adjusted to exclude nonrecurring items, rose to C$1.51 from C$1.27. Total revenue rose about 7% to C$9.3 billion.

Analysts polled by Thomson Reuters had expected adjusted earnings per share of C$1.33 and revenue of C$8.74 billion.

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Investors cheered the report and pushed TD's stock up more than 5% to $53.96 on the New York Stock Exchange.

Gabriel Dechaine, an analyst with the National Bank of Canada, called it "one of the best quarters TD has reported in recent memory."

But Mr. Ahmed said he expects Canada's growth to experience "some moderation" during the rest of the year as housing activity slows, a strong Canadian dollar curbs exports and uncertainty clouds the outcome of Nafta negotiations.

Canadian banks have been benefiting amid economic growth and better-than-expected housing demand. Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada and Bank of Montreal all beat the mean earnings estimates from Thomson Reuters in their recently reported quarters, and a handful increased dividends. Still, total returns across the Canadian banking industry are lagging.

TD Bank, like its peers, has been expanding its business outside of Canada and now has more locations in the U.S. than Canada. U.S. retail earnings also increased 14%, to C$901 million.

Mr. Ahmed said there have been "some signs of softening" in the U.S., as economic uncertainty keeps borrowers in check.

The bank's U.S. retail segment doesn't include its investment in TD Ameritrade. Earnings from TD Ameritrade dropped 6% to C$118 million in its third quarter.

The bank's fee-based income rose 6% as net interest income rose 7%. Higher employee-related expenses and investments in technology sent the company's noninterest expenses up 5% as its loan-loss provision fell 10% amid credit improvements.

The bank also said it has repurchased 15 million of its shares since March 21. It is seeking regulatory approval to repurchase an additional 20 million shares. The combined amount would be 1.9% of the company's outstanding stock.

Write to Vipal Monga at vipal.monga@wsj.com

(END) Dow Jones Newswires

August 31, 2017 17:29 ET (21:29 GMT)