Friday, February 17, 2006

ML Downgrades TD Bank to Neutral

The Globe and Mail, Roma Luciw, 17 February 2006

Merrill Lynch Canada Inc. downgraded Toronto-Dominion Bank Friday, extending its increasingly bearish view to all but one of the biggest Bay Street banks.

Analyst André-Philippe Hardy said he expects the TD's per-share profit growth to slow to 10 per cent in 2006 from 12 per cent in 2005. Continued growth in retail volumes will be partially offset by higher provisions for credit losses, lower securities gains and the stronger Canadian dollar.

He also noted that TD stock has risen 4.2 per cent in the last month and 27.9 per cent in the last 12 months to a share price that already reflects its proper value. “We believe that stock performance in 2006 will be muted, as the stock now trades at 14.1 times 2006 estimated earnings per share, which is in line with the multiple of its Canadian peers, and ahead of many of its global peers...,” Mr. Hardy said.

National Bank of Canada is now the sole Merrill Lynch buy-rated stock among the big six Canadian banks.

“Our current, more muted, view of the sector is a reflection of its relative valuation versus historical averages...” Mr. Hardy said.