Thursday, February 23, 2006

BMO NB's Note on TD Bank Q1 2006 Earnings

BMO Nesbitt Burns, 23 February 2006

For the first quarter, TD Bank reported Cash EPS of $1.15 compared to our estimate of $1.11. Variations were across the businesses with surprisingly strong results from wholesale and excellent wealth management performance, offset by somewhat elevated corporate expenses. Simply put, this result is better than the street’s forecast of $1.09, but much of the variation is due to wholesale (due to excellent trading). Overall, this may disappoint some investors, as the market generally values retail higher than wholesale. The dividend was increased from $0.42 to $0.44 (we had expected $0.45) and the bank’s capital position is even better than expected (Tier 1 of 11.8%). Although some will quibble on the strong wholesale, we like these results. Wholesale results will moderate, but the beginning of leverage in retail is there. Wealth management was very strong, and the retail bank seemed to accrue expenses at a higher than normal rate. We believe the outlook for all of 2006 is very good.