RBC Capital Markets, 30 November 2007
Domestic retail bank earnings growing faster than peers who have reported so far
Domestic retail banking net income was 5% below our expectations, but was still up 14% from Q4/06. Revenues were up a strong 10% but expenses rose more than we expected primarily because of costs related to preparing for longer branch hours that started on November 1st.
• Volume growth was a key driver of revenue growth, with real-estate secured loans growing 11%, consumer loans growing 8%, and business loans up 9%.
• Market share slipped in real-estate secured loans and personal deposits, although the bank claims that the personal deposit share losses have come in the less profitable term segment.
• Net interest income margins were down 4 basis points to 3.03% sequentially and versus Q4/06. We believe this is a very good achievement given the compressed Prime/BA spread in the quarter, competitive pricing conditions in deposits and rising wholesale funding costs (which would affect TD's retail business less than others' since it is fully funded by retail deposits).
• Efficiency improvements are unlikely to be as strong in 2008. Revenue growth is likely to remain strong in upcoming quarters, but expense growth is likely to increase as the bank extends opening hours and continues opening branches (500 new people were added in Q4/07, mostly in branches and call centers).
• The loan loss increase of $44 million versus Q4/06 to $176 million was higher than we expected.
• Unsecured lending volume growth is responsible for part of the increase, and pains typical of introducing new scoring methodologies as well as rapid growth are also affecting TD.
• We believe that loan losses will rise in central Canada in commercial lending given the high Canadian dollar and energy prices, and a potentially weaker U.S. consumer.
US retail banking earnings ahead of our expectations
TD Banknorth's earnings were 8% higher than we expected due to good expense control, in spite of the challenging environment in the U.S. banking industry.
• Loan loss provisions were in line with Q3/07 and Q2/07, and up $20 million from Q4/06 due to higher impaired loans, which is mostly due to a slowdown in the residential real-estate construction market.
• The loan losses are vulnerable to further weakening in the economy, in our view.
• Revenues were up 7% versus Q4/06 in U.S. dollars on higher fees and a stable net interest income margin (although interest recoveries probably masked underlying margin pressure).
• Expenses were down from US$263 million in Q4/06 to US$253 million, and efficiency improved from 61.5% to 55.4%.
• Staff reductions related to improved business processes and branch closings led to the improvement.
Other highlights
• Wholesale earnings were up 8% versus Q4/06, and decreased 38% from the exceptionally strong Q3/07.
• The division was not hit by large writeoffs as was the case for many peers, but it nonetheless was negatively impacted by the turbulence in credit markets as trading revenues of $219 million were well down from $308 million in Q3/07.
• New disclosure on financial assets was provided. Level 3 assets represent only 4% of common equity, a very low figure compared to U.S. financial institutions that have reported so far. This validates management's claims that it has focused its trading strategies on transparent businesses.
• TD Ameritrade's earnings contribution of $75 million net of $10 million in adjustments that are included in the corporate segment were in line with the pre-released amount, up 42% versus Q4/06.
• We believe that the announcement of a cash infusion into E*TRADE Financial Corp by Citadel Investment Group lessens the likelihood of a transaction between TD Ameritrade and E*TRADE in the near term.
• TD noted that its brokerage customer acquisitions in both Canada and the U.S. benefited from E*TRADE's well publicized banking struggles.
• Wealth management earnings of $119 million were close to our estimates, and up 25% versus Q4/06. Equity markets are an important driver of future revenue growth, as are continued strong mutual fund net sales and increases in financial advisors.
• Impaired loans were slightly below Q2/07 and Q3/07 levels, on both a gross and net basis.
• There was no new information on the proposed acquisition of Commerce Bancorp, other than the transaction may close slightly earlier than anticipated. The proxy statement and prospectus should be mailed to Commerce shareholders in December, and management hopes the transaction will close in February or March 2008, subject to Commerce shareholders' approval, and approvals from U.S. and Canadian regulators.
Valuation
Our 12-month price target of $82 is a combination of our sum of the parts and price to book methodologies. It implies an approximate forward multiple of 12.2x earnings, compared to the 5-year average forward multiple of 12.2x. Our P/B target of 2.2x in 12 months is at the low end of the bank sector given a lower ROE. Our sum of the parts target of 14.3x 2008E earnings is higher than our target industry average, reflecting a superior domestic retail franchise and lower exposure to low multiple wholesale businesses.
Domestic retail bank earnings growing faster than peers who have reported so far
Domestic retail banking net income was 5% below our expectations, but was still up 14% from Q4/06. Revenues were up a strong 10% but expenses rose more than we expected primarily because of costs related to preparing for longer branch hours that started on November 1st.
• Volume growth was a key driver of revenue growth, with real-estate secured loans growing 11%, consumer loans growing 8%, and business loans up 9%.
• Market share slipped in real-estate secured loans and personal deposits, although the bank claims that the personal deposit share losses have come in the less profitable term segment.
• Net interest income margins were down 4 basis points to 3.03% sequentially and versus Q4/06. We believe this is a very good achievement given the compressed Prime/BA spread in the quarter, competitive pricing conditions in deposits and rising wholesale funding costs (which would affect TD's retail business less than others' since it is fully funded by retail deposits).
• Efficiency improvements are unlikely to be as strong in 2008. Revenue growth is likely to remain strong in upcoming quarters, but expense growth is likely to increase as the bank extends opening hours and continues opening branches (500 new people were added in Q4/07, mostly in branches and call centers).
• The loan loss increase of $44 million versus Q4/06 to $176 million was higher than we expected.
• Unsecured lending volume growth is responsible for part of the increase, and pains typical of introducing new scoring methodologies as well as rapid growth are also affecting TD.
• We believe that loan losses will rise in central Canada in commercial lending given the high Canadian dollar and energy prices, and a potentially weaker U.S. consumer.
US retail banking earnings ahead of our expectations
TD Banknorth's earnings were 8% higher than we expected due to good expense control, in spite of the challenging environment in the U.S. banking industry.
• Loan loss provisions were in line with Q3/07 and Q2/07, and up $20 million from Q4/06 due to higher impaired loans, which is mostly due to a slowdown in the residential real-estate construction market.
• The loan losses are vulnerable to further weakening in the economy, in our view.
• Revenues were up 7% versus Q4/06 in U.S. dollars on higher fees and a stable net interest income margin (although interest recoveries probably masked underlying margin pressure).
• Expenses were down from US$263 million in Q4/06 to US$253 million, and efficiency improved from 61.5% to 55.4%.
• Staff reductions related to improved business processes and branch closings led to the improvement.
Other highlights
• Wholesale earnings were up 8% versus Q4/06, and decreased 38% from the exceptionally strong Q3/07.
• The division was not hit by large writeoffs as was the case for many peers, but it nonetheless was negatively impacted by the turbulence in credit markets as trading revenues of $219 million were well down from $308 million in Q3/07.
• New disclosure on financial assets was provided. Level 3 assets represent only 4% of common equity, a very low figure compared to U.S. financial institutions that have reported so far. This validates management's claims that it has focused its trading strategies on transparent businesses.
• TD Ameritrade's earnings contribution of $75 million net of $10 million in adjustments that are included in the corporate segment were in line with the pre-released amount, up 42% versus Q4/06.
• We believe that the announcement of a cash infusion into E*TRADE Financial Corp by Citadel Investment Group lessens the likelihood of a transaction between TD Ameritrade and E*TRADE in the near term.
• TD noted that its brokerage customer acquisitions in both Canada and the U.S. benefited from E*TRADE's well publicized banking struggles.
• Wealth management earnings of $119 million were close to our estimates, and up 25% versus Q4/06. Equity markets are an important driver of future revenue growth, as are continued strong mutual fund net sales and increases in financial advisors.
• Impaired loans were slightly below Q2/07 and Q3/07 levels, on both a gross and net basis.
• There was no new information on the proposed acquisition of Commerce Bancorp, other than the transaction may close slightly earlier than anticipated. The proxy statement and prospectus should be mailed to Commerce shareholders in December, and management hopes the transaction will close in February or March 2008, subject to Commerce shareholders' approval, and approvals from U.S. and Canadian regulators.
Valuation
Our 12-month price target of $82 is a combination of our sum of the parts and price to book methodologies. It implies an approximate forward multiple of 12.2x earnings, compared to the 5-year average forward multiple of 12.2x. Our P/B target of 2.2x in 12 months is at the low end of the bank sector given a lower ROE. Our sum of the parts target of 14.3x 2008E earnings is higher than our target industry average, reflecting a superior domestic retail franchise and lower exposure to low multiple wholesale businesses.
__________________________________________________________
Scotia Capital, 30 November 2007
Q4/07 Earnings Increase 17% - High Quality
• Toronto-Dominion Bank (TD) reported a 17% increase in operating earnings to $1.40 per share versus $1.20 a year earlier, in line with expectations.
• Fourth quarter earnings were high quality with lower reliance on security gains aided by large unrealized surplus and the lowest net impaired formations in five quarters. Cash ROE was 19.4% versus 18.1% a year earlier. Return on RWA was 2.65%.
• Earnings were driven by strong results from TDCT and Wealth Management and sequential improvement from TD Banknorth and solid results from Wholesale Banking.
• For TD to be able to generate the level of earnings and profitability in the difficult capital market environment clearly differentiates the bank's balance sheet and operating platforms.
• Reported earnings were $1.50 per share which included $0.19 per share gain from the VISA restructuring, $0.05 per share general loan loss provision release and $0.13 per share amortization of intangibles.
• Fiscal 2007 earnings increased 23% to $5.74 per share from $4.65 per share a year earlier. Return on equity for fiscal 2007 was very strong at 20.6% with RRWA of 2.84%.
Low Balance Sheet Risk
• Balance sheet risk is the lowest of the Canadian banks with no direct exposure to sub-prime, no Non Bank ABCP, no bank sponsored SIV and nominal LBO exposure.
Strong Results From All Business Lines
• Earnings growth was led by wealth management at 31%, domestic wealth up 24% and TD Ameritrade up 42%. TDCT earnings growth remained strong at 14% with wholesale earnings growth very solid at 8% despite a difficult capital market environment.
Impressive Operating Leverage - Revenue Growth 7%
• TD’s operating leverage was impressive in Q4 at 5%, with revenue growth of 7% and expense growth of 2%.
TDCT Earnings Up 14%
• TD Canada Trust (TDCT) earnings increased 14% to $572 million, primarily due to volume growth in real estate secured lending, credit cards, and deposits.
• Canadian retail net interest margin (NIM) declined 4 basis points (bp) sequentially and 4 bp YOY.
• Market share in personal deposits and personal loans declined 56 bp and 10 bp respectively over the past year.
• Loan securitization revenue declined slightly to $80 million from $97 million a year earlier and $86 million in the previous quarter. Insurance revenue increased to $243 million from $214 million a year earlier. Card service revenue was relatively flat at $120 million versus $119 million in the previous quarter and $113 million a year earlier.
• Operating leverage was very strong at 6.2% with revenues increasing 10.5% and expenses increasing 4.3%.
• The efficiency ratio was 51.8% versus 50.0% in the previous quarter and 54.8% a year earlier.
• Loan loss provisions increased to $176 million from $151 million in the previous quarter and from $132 million a year earlier, due to VISA and higher loan growth.
Total Wealth Management Earnings Up 31%
• Wealth Management earnings, including TD Ameritrade, increased 31% YOY to $194 million.
• Domestic Wealth Management increased 25% YOY. TD Ameritrade earnings contribution increased 42% to $75 million or $0.10 per share representing 7% of TD earnings.
• Operating leverage in Q4 was strong at 3.6%, with revenue increasing 15.3% and expenses increasing 11.8%.
• Mutual fund revenue increased 25% to $225 million from $180 million a year earlier.
• Mutual fund assets under management (IFIC, includes PI C assets) increased 15% to $60.1 billion.
• Wealth Management earnings for fiscal 2007 increased 29% to $762 million from $590 million in 2006.
TD Ameritrade – Earnings Increase 42%
• TD Ameritrade contributed $75 million or $0.10 per share to earnings in the quarter versus $59 million or $0.08 per share in the previous quarter and $53 million or $0.07 per share a year earlier. TD Ameritrade’s contribution represented 7.3% of total bank earnings. TD Banknorth Earnings Improve Sequentially
• TD Banknorth earnings increased 14% sequentially to $124 million or $0.17 per share, representing 12% of TD earnings. This compares to an earnings contribution of C$63 million or $0.09 per share a year earlier before the privatization.
• Net interest margin at TD Banknorth increased 14 bp from the previous quarter but declined 1 bp from a year earlier to 4.00%. The flat yield curve and strong competitive pressure continues to put pressure on the margin.
U.S. Platform Total Earnings - 19% of Bank
• TD Ameritrade and TD Banknorth contributed 7% and 12% of bank earnings in the quarter for a total of 19%.
Wholesale Banking Earnings Increase 8%
• Wholesale banking earnings increased 8% to $157 million from $146 million a year earlier although a decline from the $253 million record high in Q3/07.
• Revenue growth was solid at 6.5%, with expenses declining 6.5%. Operating leverage was strong at 13%.
• Wholesale Banking earnings in fiscal 2007 increased 24% to $824 million from $664 million a year earlier.
Capital Markets Revenue Solid
• Capital markets revenue was $349 million versus $398 million in the previous quarter and $335 million a year earlier.
• Trading revenue was solid at $219 million versus $308 million in the previous quarter and $174 million a year earlier.
• Trading revenue was driven by equity and equity derivatives which increased to $187 million from $75 million a year earlier. Trading revenue in foreign exchange products improved to $101 million from $54 million a year earlier. Interest rate and credit portfolios’ trading revenue was a loss of $69 million versus a gain of $77 million in the previous quarter and $45 million a year earlier.
• Fiscal 2007 trading revenue increased 10% to $1,146 million versus $1,042 million in 2006.
Lower Security Gains
• Security gains declined to $60 million or $0.05 per share (excluding VISA gain) from $98 million or $0.08 per share in the previous quarter and $87 million or $0.08 per share a year earlier.
Unrealized Surplus - $1.2 Billion
• Unrealized security surplus increased 22% to $1,236 million from $1,010 million from the previous quarter due to gains in the merchant banking portfolio.
Loan Loss Provisions
• Specific loan loss provisions increased to $199 million or 0.43% of loans (excluding $60 million in general loan loss provision release) versus $171 million or 0.37% of loans in the previous quarter and $142 million or 0.33% of loans a year earlier.
• Loan loss provisions for fiscal 2007 were $705 million or 0.38% of loans versus $424 million or 0.25% of loans in fiscal 2006.
• We are increasing our 2008 LLP estimate to $850 million or 0.44% of loans from $750 million or 0.40% of loans to reflect the Commerce Bancorp acquisition and higher loan volume growth. We are introducing our 2009 LLP estimate at $1 billion or 0.50% of loans.
Net Loan Formations Lowest in Five Quarters
• New gross impaired loan formations were stable at $387 million versus $375 million in the previous quarter and $326 million a year earlier.
• Net impaired loan formations declined to $199 million, the lowest level in five quarters, versus $209 million in the previous quarter but decreased from $233 million a year earlier.
• In fiscal 2007 net impaired loan formations increased to $954 million from $710 million in 2006. Gross impaired loan formations increased to $1,592 million in 2007 versus $1,082 million in 2006.
Securitization Activity Moderate
• During the quarter, TD securitized $1.5 billion in assets versus $2.2 billion in Q3 and $4.9 billion a year earlier. At year-end, TD had $28.3 billion in securitized assets outstanding.
• The economic impact before tax of securitization this quarter was $4 million versus a loss of $4 million in the previous quarter and a gain of $25 million a year earlier.
Tier 1 Capital High at 10.3%
• Tier 1 capital ratio increased to 10.3% from 10.2% in the previous quarter but declined from 12.0% a year earlier, primarily due to the privatization of TD Banknorth.
• Risk-weighted assets increased 7.5% from a year earlier to $152.5 billion, with market at risk declining 2.7% to $3.0 billion.
Exposure to High Risk Assets
• TD has no exposure to U.S. sub-prime mortgages, third party asset-backed commercial paper or TD Sponsored SIVs and nominal LBO exposure. Level three securities account for less than 1% of assets. The bank has no direct lending exposure to hedge funds and nominal trading exposure.
Recent Events
• On October 2, 2007, TD announced its intention to acquire Commerce Bancorp for US$8.5 billion or US$42 per share, a modest 5.7% premium from the previous day’s close. The transaction will be 75% stock and 25% cash for a fixed exchange ratio of 0.4142 TD shares and US$10.50 per share. According to TD management, the transaction price represents 22.5x 2008E earnings, 2.96x tangible book value, and a 13.5% core deposit premium. TD anticipates US$310 million pre-tax in synergies, representing a post-synergy multiple of 13.8x 2008E earnings. The transaction is expected to close in March or April 2008.
Recommendation
• Our 2008 earnings estimate remains unchanged at $6.30 per share. We are introducing our 2009 earnings estimated at $7.00 per share.
• We are increasing our 12-month share price target to $100 from $90 based on continued expected relative P/E multiple expansion based on balance sheet, business mix and growth prospects.
• We reiterate our 1-Sector Outperform rating of shares of TD based on strong high-quality earnings momentum, high relative profitability, growth potential from TD Banknorth and TD Ameritrade, and attractive valuation (slight P/E discount to the bank group versus our expected 10% to 15% premium).
Q4/07 Earnings Increase 17% - High Quality
• Toronto-Dominion Bank (TD) reported a 17% increase in operating earnings to $1.40 per share versus $1.20 a year earlier, in line with expectations.
• Fourth quarter earnings were high quality with lower reliance on security gains aided by large unrealized surplus and the lowest net impaired formations in five quarters. Cash ROE was 19.4% versus 18.1% a year earlier. Return on RWA was 2.65%.
• Earnings were driven by strong results from TDCT and Wealth Management and sequential improvement from TD Banknorth and solid results from Wholesale Banking.
• For TD to be able to generate the level of earnings and profitability in the difficult capital market environment clearly differentiates the bank's balance sheet and operating platforms.
• Reported earnings were $1.50 per share which included $0.19 per share gain from the VISA restructuring, $0.05 per share general loan loss provision release and $0.13 per share amortization of intangibles.
• Fiscal 2007 earnings increased 23% to $5.74 per share from $4.65 per share a year earlier. Return on equity for fiscal 2007 was very strong at 20.6% with RRWA of 2.84%.
Low Balance Sheet Risk
• Balance sheet risk is the lowest of the Canadian banks with no direct exposure to sub-prime, no Non Bank ABCP, no bank sponsored SIV and nominal LBO exposure.
Strong Results From All Business Lines
• Earnings growth was led by wealth management at 31%, domestic wealth up 24% and TD Ameritrade up 42%. TDCT earnings growth remained strong at 14% with wholesale earnings growth very solid at 8% despite a difficult capital market environment.
Impressive Operating Leverage - Revenue Growth 7%
• TD’s operating leverage was impressive in Q4 at 5%, with revenue growth of 7% and expense growth of 2%.
TDCT Earnings Up 14%
• TD Canada Trust (TDCT) earnings increased 14% to $572 million, primarily due to volume growth in real estate secured lending, credit cards, and deposits.
• Canadian retail net interest margin (NIM) declined 4 basis points (bp) sequentially and 4 bp YOY.
• Market share in personal deposits and personal loans declined 56 bp and 10 bp respectively over the past year.
• Loan securitization revenue declined slightly to $80 million from $97 million a year earlier and $86 million in the previous quarter. Insurance revenue increased to $243 million from $214 million a year earlier. Card service revenue was relatively flat at $120 million versus $119 million in the previous quarter and $113 million a year earlier.
• Operating leverage was very strong at 6.2% with revenues increasing 10.5% and expenses increasing 4.3%.
• The efficiency ratio was 51.8% versus 50.0% in the previous quarter and 54.8% a year earlier.
• Loan loss provisions increased to $176 million from $151 million in the previous quarter and from $132 million a year earlier, due to VISA and higher loan growth.
Total Wealth Management Earnings Up 31%
• Wealth Management earnings, including TD Ameritrade, increased 31% YOY to $194 million.
• Domestic Wealth Management increased 25% YOY. TD Ameritrade earnings contribution increased 42% to $75 million or $0.10 per share representing 7% of TD earnings.
• Operating leverage in Q4 was strong at 3.6%, with revenue increasing 15.3% and expenses increasing 11.8%.
• Mutual fund revenue increased 25% to $225 million from $180 million a year earlier.
• Mutual fund assets under management (IFIC, includes PI C assets) increased 15% to $60.1 billion.
• Wealth Management earnings for fiscal 2007 increased 29% to $762 million from $590 million in 2006.
TD Ameritrade – Earnings Increase 42%
• TD Ameritrade contributed $75 million or $0.10 per share to earnings in the quarter versus $59 million or $0.08 per share in the previous quarter and $53 million or $0.07 per share a year earlier. TD Ameritrade’s contribution represented 7.3% of total bank earnings. TD Banknorth Earnings Improve Sequentially
• TD Banknorth earnings increased 14% sequentially to $124 million or $0.17 per share, representing 12% of TD earnings. This compares to an earnings contribution of C$63 million or $0.09 per share a year earlier before the privatization.
• Net interest margin at TD Banknorth increased 14 bp from the previous quarter but declined 1 bp from a year earlier to 4.00%. The flat yield curve and strong competitive pressure continues to put pressure on the margin.
U.S. Platform Total Earnings - 19% of Bank
• TD Ameritrade and TD Banknorth contributed 7% and 12% of bank earnings in the quarter for a total of 19%.
Wholesale Banking Earnings Increase 8%
• Wholesale banking earnings increased 8% to $157 million from $146 million a year earlier although a decline from the $253 million record high in Q3/07.
• Revenue growth was solid at 6.5%, with expenses declining 6.5%. Operating leverage was strong at 13%.
• Wholesale Banking earnings in fiscal 2007 increased 24% to $824 million from $664 million a year earlier.
Capital Markets Revenue Solid
• Capital markets revenue was $349 million versus $398 million in the previous quarter and $335 million a year earlier.
• Trading revenue was solid at $219 million versus $308 million in the previous quarter and $174 million a year earlier.
• Trading revenue was driven by equity and equity derivatives which increased to $187 million from $75 million a year earlier. Trading revenue in foreign exchange products improved to $101 million from $54 million a year earlier. Interest rate and credit portfolios’ trading revenue was a loss of $69 million versus a gain of $77 million in the previous quarter and $45 million a year earlier.
• Fiscal 2007 trading revenue increased 10% to $1,146 million versus $1,042 million in 2006.
Lower Security Gains
• Security gains declined to $60 million or $0.05 per share (excluding VISA gain) from $98 million or $0.08 per share in the previous quarter and $87 million or $0.08 per share a year earlier.
Unrealized Surplus - $1.2 Billion
• Unrealized security surplus increased 22% to $1,236 million from $1,010 million from the previous quarter due to gains in the merchant banking portfolio.
Loan Loss Provisions
• Specific loan loss provisions increased to $199 million or 0.43% of loans (excluding $60 million in general loan loss provision release) versus $171 million or 0.37% of loans in the previous quarter and $142 million or 0.33% of loans a year earlier.
• Loan loss provisions for fiscal 2007 were $705 million or 0.38% of loans versus $424 million or 0.25% of loans in fiscal 2006.
• We are increasing our 2008 LLP estimate to $850 million or 0.44% of loans from $750 million or 0.40% of loans to reflect the Commerce Bancorp acquisition and higher loan volume growth. We are introducing our 2009 LLP estimate at $1 billion or 0.50% of loans.
Net Loan Formations Lowest in Five Quarters
• New gross impaired loan formations were stable at $387 million versus $375 million in the previous quarter and $326 million a year earlier.
• Net impaired loan formations declined to $199 million, the lowest level in five quarters, versus $209 million in the previous quarter but decreased from $233 million a year earlier.
• In fiscal 2007 net impaired loan formations increased to $954 million from $710 million in 2006. Gross impaired loan formations increased to $1,592 million in 2007 versus $1,082 million in 2006.
Securitization Activity Moderate
• During the quarter, TD securitized $1.5 billion in assets versus $2.2 billion in Q3 and $4.9 billion a year earlier. At year-end, TD had $28.3 billion in securitized assets outstanding.
• The economic impact before tax of securitization this quarter was $4 million versus a loss of $4 million in the previous quarter and a gain of $25 million a year earlier.
Tier 1 Capital High at 10.3%
• Tier 1 capital ratio increased to 10.3% from 10.2% in the previous quarter but declined from 12.0% a year earlier, primarily due to the privatization of TD Banknorth.
• Risk-weighted assets increased 7.5% from a year earlier to $152.5 billion, with market at risk declining 2.7% to $3.0 billion.
Exposure to High Risk Assets
• TD has no exposure to U.S. sub-prime mortgages, third party asset-backed commercial paper or TD Sponsored SIVs and nominal LBO exposure. Level three securities account for less than 1% of assets. The bank has no direct lending exposure to hedge funds and nominal trading exposure.
Recent Events
• On October 2, 2007, TD announced its intention to acquire Commerce Bancorp for US$8.5 billion or US$42 per share, a modest 5.7% premium from the previous day’s close. The transaction will be 75% stock and 25% cash for a fixed exchange ratio of 0.4142 TD shares and US$10.50 per share. According to TD management, the transaction price represents 22.5x 2008E earnings, 2.96x tangible book value, and a 13.5% core deposit premium. TD anticipates US$310 million pre-tax in synergies, representing a post-synergy multiple of 13.8x 2008E earnings. The transaction is expected to close in March or April 2008.
Recommendation
• Our 2008 earnings estimate remains unchanged at $6.30 per share. We are introducing our 2009 earnings estimated at $7.00 per share.
• We are increasing our 12-month share price target to $100 from $90 based on continued expected relative P/E multiple expansion based on balance sheet, business mix and growth prospects.
• We reiterate our 1-Sector Outperform rating of shares of TD based on strong high-quality earnings momentum, high relative profitability, growth potential from TD Banknorth and TD Ameritrade, and attractive valuation (slight P/E discount to the bank group versus our expected 10% to 15% premium).
__________________________________________________________
Financial Post, Jonathan Ratner, 30 November 2007
Even after their recent gains, the 3.7% yield on Canadian bank stocks is the highest since 1996, according to UBS strategist George Vasic. Even more impressive is the fact that their dividend yields are approaching the long bond yield for the first time since the late 1950s.
“Are prospects that bleak or are banks poised for a further bounce?” he asked clients in a note. For Mr. Vasic, the answer is clear. He thinks investors should boost their exposure to the banks, even if they are from the more pessimistic camp.
Yes, bank yields have been higher in the past, peaking at roughly 10% in the early 1980s. But relative to bond yields, they were not as attractive as they are now, the strategist said.
Even after their recent gains, the 3.7% yield on Canadian bank stocks is the highest since 1996, according to UBS strategist George Vasic. Even more impressive is the fact that their dividend yields are approaching the long bond yield for the first time since the late 1950s.
“Are prospects that bleak or are banks poised for a further bounce?” he asked clients in a note. For Mr. Vasic, the answer is clear. He thinks investors should boost their exposure to the banks, even if they are from the more pessimistic camp.
Yes, bank yields have been higher in the past, peaking at roughly 10% in the early 1980s. But relative to bond yields, they were not as attractive as they are now, the strategist said.
__________________________________________________________
The Globe and Mail, Andrew Willis, 29 November 2007
It appears Ed Clark has been watching Goldman Sachs’s approach to investment banking, and likes what he sees.
Buried in a set of terrific financial results from Toronto-Dominion Bank Thursday, including a 24 per cent jump in TD Securities’ profit to $824-million, was a line about where the CEO is pointing the bank in the coming year.
TD Securities, said Mr. Clark, is expected to remain a top-three player in the domestic market. That’s been the mission statement for some time. But there was also the following line: The dealer is “seeking opportunities to grow proprietary trading in scalable and liquid markets.”
That’s the Goldman Sachs approach. The most profitable dealer on Wall Street obtained that status in part by being deft with its own capital, playing credit and equity markets as a principal, not just as an agent for its customers.
TD Securities has been heading down this same road for some time. In John O’Sullivan and his team, the dealer has one of the best proprietary equity desks on the Street. However, a decision to expand these operations would have interesting implications for TD Bank’s stock.
Goldman Sachs makes its biggest scores in derivative and fixed income markets, and that’s where TD Securities would be forced to bulk up if the dealer adopts the mantra of pushing into “scalable and liquid markets.”
However, for all the money that Goldman Sachs makes, and all the bonuses that its employees take home, the market takes a dim view of the quality of the dealer’s earnings. Goldman Sachs boasts a relatively weak price to earnings multiple, because investors think there’s a risk that the profits can’t be maintained. TD, on the other hand, commands a premium multiple because the bulk of its profits come off dependable retail banking operations.
The fearless prediction here is that Mr. Clark will welcome every additional dollar of profit that TD Securities can squeeze out of proprietary trading. The dealer is going to be a fun place to work, as it will expand its trading operations.
But Mr. Clark is not going to start risking big chunks of TD capital behind the dealer, or start showing trading earnings that overshadow the incredible stream of cash pouring out that of the branch network, which posted a $2.6-billion profit in 2007 on both sides of the border.
The head of TD Bank is also a major shareholder. He’s going to do everything in his power to ensure the bank continues to command a premium valuation.
It appears Ed Clark has been watching Goldman Sachs’s approach to investment banking, and likes what he sees.
Buried in a set of terrific financial results from Toronto-Dominion Bank Thursday, including a 24 per cent jump in TD Securities’ profit to $824-million, was a line about where the CEO is pointing the bank in the coming year.
TD Securities, said Mr. Clark, is expected to remain a top-three player in the domestic market. That’s been the mission statement for some time. But there was also the following line: The dealer is “seeking opportunities to grow proprietary trading in scalable and liquid markets.”
That’s the Goldman Sachs approach. The most profitable dealer on Wall Street obtained that status in part by being deft with its own capital, playing credit and equity markets as a principal, not just as an agent for its customers.
TD Securities has been heading down this same road for some time. In John O’Sullivan and his team, the dealer has one of the best proprietary equity desks on the Street. However, a decision to expand these operations would have interesting implications for TD Bank’s stock.
Goldman Sachs makes its biggest scores in derivative and fixed income markets, and that’s where TD Securities would be forced to bulk up if the dealer adopts the mantra of pushing into “scalable and liquid markets.”
However, for all the money that Goldman Sachs makes, and all the bonuses that its employees take home, the market takes a dim view of the quality of the dealer’s earnings. Goldman Sachs boasts a relatively weak price to earnings multiple, because investors think there’s a risk that the profits can’t be maintained. TD, on the other hand, commands a premium multiple because the bulk of its profits come off dependable retail banking operations.
The fearless prediction here is that Mr. Clark will welcome every additional dollar of profit that TD Securities can squeeze out of proprietary trading. The dealer is going to be a fun place to work, as it will expand its trading operations.
But Mr. Clark is not going to start risking big chunks of TD capital behind the dealer, or start showing trading earnings that overshadow the incredible stream of cash pouring out that of the branch network, which posted a $2.6-billion profit in 2007 on both sides of the border.
The head of TD Bank is also a major shareholder. He’s going to do everything in his power to ensure the bank continues to command a premium valuation.
__________________________________________________________
The Globe and Mail, Tara Perkins, 29 November 2007
Toronto-Dominion Bank reported fourth quarter profit of $1.094-billion on Thursday, up from $762-million a year ago, and managed to churn out rising earnings in its investment banking division despite the credit crunch.
TD's earnings per share came in at $1.40 for the three months ended Oct. 31, up 17 per cent from the same period a year earlier, and on par with what analysts had been expecting for this quarter.
TD was the only big Canadian bank not to pre-announce any writedowns related to the credit crunch. It did previously announce that it would book a $135-million after tax gain on its shares in Visa, which is preparing to go public.
“A strong fourth quarter financial performance wrapped up a tremendous 2007,” stated chief executive Ed Clark, who wasn't shy about noting that TD managed to avoid many of the pitfalls that caught its peers as the credit crunch unfolded.
“In a year of turbulent markets, clearly the successful altering of our risk-reward profile was a significant advantage for us,” he stated.
“This year was also defined by the investments we made to expand our U.S. platform, and we're excited about growing as a leading North American financial institution,” he added. Last month, TD unveiled plans for an $8.5-billion (U.S) takeover of New Jersey's Commerce Bancorp which Mr. Clark has said will make TD “the first North American bank.”
The deal will double TD's U.S. banking business, and result in the bank having about 2,000 branches in North America.
“The success of our Canadian franchise has had a lot to do with our ability to pursue U.S. expansion,” Mr. Clark stated.
“We're tremendously excited about how this acquisition is set to transform our organization into a North American powerhouse.”
TD Canada Trust, the bank's core Canadian consumer banking division, saw earnings rise 14 per cent from a year ago to $572-million, as it opened 38 new branches across the country. Volumes grew in real-estate secured lending, credit cards and deposits, it said.
TD suggested that stiff competition in the Canadian market is crimping bank profits, as many banks attempt to lure customers by bumping up the rates they offer on savings accounts. “Escalating competition in high-yield saving deposit accounts continued to put pressure on margins,” the bank said.
It added that “the outlook for revenue growth is expected to moderate in 2008 as volume growth slows in the credit cards business and margins continue to be vulnerable to volatility in the credit markets.” Volatility in credit markets since August has impacted margins on banking products that are based on the prime rate.
Meanwhile, TD's U.S. bank, TD Banknorth, saw its profits rise 97 per cent to $124-million in the fourth quarter thanks to the privatization of the division which TD completed in April.
“TD Banknorth's results exceeded expectations in the quarter despite the strengthening of the Canadian dollar,” Mr. Clark stated. “While we expect the U.S. operating environment to remain challenging next year, we're pleased with TD Banknorth's steady progress towards meeting its organic growth objectives.”
TD's wholesale or investment banking division managed to squeeze out profit gains of eight per cent for the quarter, despite the credit crunch. The division earned $157-million as foreign exchange, fixed income and equity trading businesses contributed earnings that more than offset weak credit trading results, the bank said.
“Although trading results were mixed in the fourth quarter, our transparent risk-reward oriented business helped TD avoid the major pitfalls of recent market turmoil,” Mr. Clark stated.
The bank said that “increased volatility and reduced liquidity in the capital markets experienced in the fourth quarter is expected to continue into 2008 and may result in reduced levels of capital markets activity, but it may also present additional trading opportunities.”
Finally, TD's wealth management division, which includes its stake in online brokerage TD Ameritrade, saw earnings rise 31 per cent from a year ago to $194-million.
Toronto-Dominion Bank reported fourth quarter profit of $1.094-billion on Thursday, up from $762-million a year ago, and managed to churn out rising earnings in its investment banking division despite the credit crunch.
TD's earnings per share came in at $1.40 for the three months ended Oct. 31, up 17 per cent from the same period a year earlier, and on par with what analysts had been expecting for this quarter.
TD was the only big Canadian bank not to pre-announce any writedowns related to the credit crunch. It did previously announce that it would book a $135-million after tax gain on its shares in Visa, which is preparing to go public.
“A strong fourth quarter financial performance wrapped up a tremendous 2007,” stated chief executive Ed Clark, who wasn't shy about noting that TD managed to avoid many of the pitfalls that caught its peers as the credit crunch unfolded.
“In a year of turbulent markets, clearly the successful altering of our risk-reward profile was a significant advantage for us,” he stated.
“This year was also defined by the investments we made to expand our U.S. platform, and we're excited about growing as a leading North American financial institution,” he added. Last month, TD unveiled plans for an $8.5-billion (U.S) takeover of New Jersey's Commerce Bancorp which Mr. Clark has said will make TD “the first North American bank.”
The deal will double TD's U.S. banking business, and result in the bank having about 2,000 branches in North America.
“The success of our Canadian franchise has had a lot to do with our ability to pursue U.S. expansion,” Mr. Clark stated.
“We're tremendously excited about how this acquisition is set to transform our organization into a North American powerhouse.”
TD Canada Trust, the bank's core Canadian consumer banking division, saw earnings rise 14 per cent from a year ago to $572-million, as it opened 38 new branches across the country. Volumes grew in real-estate secured lending, credit cards and deposits, it said.
TD suggested that stiff competition in the Canadian market is crimping bank profits, as many banks attempt to lure customers by bumping up the rates they offer on savings accounts. “Escalating competition in high-yield saving deposit accounts continued to put pressure on margins,” the bank said.
It added that “the outlook for revenue growth is expected to moderate in 2008 as volume growth slows in the credit cards business and margins continue to be vulnerable to volatility in the credit markets.” Volatility in credit markets since August has impacted margins on banking products that are based on the prime rate.
Meanwhile, TD's U.S. bank, TD Banknorth, saw its profits rise 97 per cent to $124-million in the fourth quarter thanks to the privatization of the division which TD completed in April.
“TD Banknorth's results exceeded expectations in the quarter despite the strengthening of the Canadian dollar,” Mr. Clark stated. “While we expect the U.S. operating environment to remain challenging next year, we're pleased with TD Banknorth's steady progress towards meeting its organic growth objectives.”
TD's wholesale or investment banking division managed to squeeze out profit gains of eight per cent for the quarter, despite the credit crunch. The division earned $157-million as foreign exchange, fixed income and equity trading businesses contributed earnings that more than offset weak credit trading results, the bank said.
“Although trading results were mixed in the fourth quarter, our transparent risk-reward oriented business helped TD avoid the major pitfalls of recent market turmoil,” Mr. Clark stated.
The bank said that “increased volatility and reduced liquidity in the capital markets experienced in the fourth quarter is expected to continue into 2008 and may result in reduced levels of capital markets activity, but it may also present additional trading opportunities.”
Finally, TD's wealth management division, which includes its stake in online brokerage TD Ameritrade, saw earnings rise 31 per cent from a year ago to $194-million.
__________________________________________________________
Financial Post, Duncan Mavin, 29 November 2007
Toronto-Dominion Bank chief executive Ed Clark trumpeted his bank's avoidance of credit-crunch write-downs on Thursday and also delivered a statement of intent about the bank's U.S. growth plans.
TD is the only one of Canada's big six banks that has not announced a big credit-market write-down. The other banks have announced combined charges of about $2-billion.
Mr. Clark -- who announced the bank's profits in the fourth quarter were $1.1-billion, up 44% from $762-million last year -- said the bank was benefiting from a decision to stay away from the types of business that have been the source of the write-downs elsewhere.
"Our outperformance did not happen by accident," Mr. Clark said.
"Our philosophy guided us to avoid third-party asset-backed paper, to ensure we have no exposure to U.S. subprime lending and to exit the structured-product business. These decisions cost us income at the time. But as a result we have no write-downs this quarter."
Mr. Clark also said the bank's 2007 was "defined" by investments in U.S. retail banking, stressing TD's plans to grow throughout North America.
The TD chief started 2007 saying the bank would consolidate, not expand its U.S. operations. But TD increased its stake in Portland, Me.-based TD Banknorth from 57% to 100% for $3.2-billion in April. Then in October, TD announced it had agreed to buy New Jersey-based Commerce Bancorp for US$8.5-billion, an acquisition that executives say gives the bank "critical mass" in the United States.
Profits at TD's U.S. retail-banking platform almost doubled in the fourth quarter, up 97% to $124-million, largely reflecting the Banknorth privatization.
TD Ameritrade -- the U.S. discount broker in which TD owns an approximate 40% stake -- has also been the focus of speculation about a possible merger deal with rival broker E*Trade in recent months. Joe Moglia, Ameritrade CEO, says his company has held talks with other firms about a transaction.
Questions about a deal cropped up again yesterday when E*Trade disclosed it is getting a US$2.5-billion capital infusion from a group led by Citadel Investment Group.
E*Trade also said its CEO, Mitchell Caplan, has stepped down and revealed Citadel is buying E-Trade's entire US$3-billion asset-backed securities portfolio for the bargain-basement price of $800-million in cash. Some observers have said E*Trade's exposure to the credit crunch, partly through its holdings of ABCP, was an obstacle to getting TD's Mr. Clark on side for a merger of Ameritrade and E*Trade.
Robert Ellis, senior analyst with Boston-based consultancy Celent LLC, said ruling out a quick sale of E*Trade forced by Citadel would be foolish, though he also said an E*Trade deal with Charles Schwab or Bank of America might be more likely than a deal with Ameritrade.
On the TD earnings call, Mr. Clark anticipated questions about Citadel's investment in E*Trade, saying, "Obviously I'm not going to comment on another company's business decisions, but we have backed TD Ameritrade's consistent position that it will make acquisitions that make sense for shareholders."
"Ameritrade has no need to do an acquisition but it does remain open to opportunities," he said.
Elsewhere, TD's domestic retail-banking operations produced earnings of $572-million in the fourth quarter, up from $501-million in 2006.
"Fat profit margins and above-average returns on equity are generated on a consistent basis," said Morningstar analyst Chris Blumas in a note before the bank announced its results. "TD's domestic banking operation is a gold mine."
Revenue at the domestic retail bank jumped $204-million, or 10%, compared with last year, mainly due to volume growth, particularly in real-estate secured lending, credit cards and deposits, the bank said.
The bank also benefited from a pre-tax gain of $163-million relating to its part in the restructuring of Visa Inc.
Mr. Clark sounded a note of caution, however, saying that a slowdown in the Canadian and U.S. economies could limit growth next year.
Toronto-Dominion Bank chief executive Ed Clark trumpeted his bank's avoidance of credit-crunch write-downs on Thursday and also delivered a statement of intent about the bank's U.S. growth plans.
TD is the only one of Canada's big six banks that has not announced a big credit-market write-down. The other banks have announced combined charges of about $2-billion.
Mr. Clark -- who announced the bank's profits in the fourth quarter were $1.1-billion, up 44% from $762-million last year -- said the bank was benefiting from a decision to stay away from the types of business that have been the source of the write-downs elsewhere.
"Our outperformance did not happen by accident," Mr. Clark said.
"Our philosophy guided us to avoid third-party asset-backed paper, to ensure we have no exposure to U.S. subprime lending and to exit the structured-product business. These decisions cost us income at the time. But as a result we have no write-downs this quarter."
Mr. Clark also said the bank's 2007 was "defined" by investments in U.S. retail banking, stressing TD's plans to grow throughout North America.
The TD chief started 2007 saying the bank would consolidate, not expand its U.S. operations. But TD increased its stake in Portland, Me.-based TD Banknorth from 57% to 100% for $3.2-billion in April. Then in October, TD announced it had agreed to buy New Jersey-based Commerce Bancorp for US$8.5-billion, an acquisition that executives say gives the bank "critical mass" in the United States.
Profits at TD's U.S. retail-banking platform almost doubled in the fourth quarter, up 97% to $124-million, largely reflecting the Banknorth privatization.
TD Ameritrade -- the U.S. discount broker in which TD owns an approximate 40% stake -- has also been the focus of speculation about a possible merger deal with rival broker E*Trade in recent months. Joe Moglia, Ameritrade CEO, says his company has held talks with other firms about a transaction.
Questions about a deal cropped up again yesterday when E*Trade disclosed it is getting a US$2.5-billion capital infusion from a group led by Citadel Investment Group.
E*Trade also said its CEO, Mitchell Caplan, has stepped down and revealed Citadel is buying E-Trade's entire US$3-billion asset-backed securities portfolio for the bargain-basement price of $800-million in cash. Some observers have said E*Trade's exposure to the credit crunch, partly through its holdings of ABCP, was an obstacle to getting TD's Mr. Clark on side for a merger of Ameritrade and E*Trade.
Robert Ellis, senior analyst with Boston-based consultancy Celent LLC, said ruling out a quick sale of E*Trade forced by Citadel would be foolish, though he also said an E*Trade deal with Charles Schwab or Bank of America might be more likely than a deal with Ameritrade.
On the TD earnings call, Mr. Clark anticipated questions about Citadel's investment in E*Trade, saying, "Obviously I'm not going to comment on another company's business decisions, but we have backed TD Ameritrade's consistent position that it will make acquisitions that make sense for shareholders."
"Ameritrade has no need to do an acquisition but it does remain open to opportunities," he said.
Elsewhere, TD's domestic retail-banking operations produced earnings of $572-million in the fourth quarter, up from $501-million in 2006.
"Fat profit margins and above-average returns on equity are generated on a consistent basis," said Morningstar analyst Chris Blumas in a note before the bank announced its results. "TD's domestic banking operation is a gold mine."
Revenue at the domestic retail bank jumped $204-million, or 10%, compared with last year, mainly due to volume growth, particularly in real-estate secured lending, credit cards and deposits, the bank said.
The bank also benefited from a pre-tax gain of $163-million relating to its part in the restructuring of Visa Inc.
Mr. Clark sounded a note of caution, however, saying that a slowdown in the Canadian and U.S. economies could limit growth next year.
__________________________________________________________
Bloomberg, Sean B. Pasternak and Doug Alexander, 29 November 2007
Toronto-Dominion Bank said fourth quarter profit topped analysts' estimates on gains from its U.S. consumer bank.
Toronto-Dominion, Canada's third-largest bank, said profit for the period ended Oct. 31 rose 44 percent to C$1.09 billion ($1.09 billion), or C$1.50 a share.
Unlike National Bank and other Canadian lenders, Toronto-Dominion has avoided writedowns by eschewing investments in asset-backed securities.
``TD is not too involved in risky lending; National is further up on the risk curve,'' said John Stephenson, who helps manage the equivalent of about $1.62 billion as a portfolio manager at First Asset Investment Management Inc. in Toronto, including Toronto-Dominion shares.
Shares of Toronto-Dominion climbed C$1.42, or 2 percent, to C$71.80 at 4:10 p.m. on the Toronto Stock Exchange, capping the biggest three-day gain in five years.
Toronto-Dominion posted its biggest profit increase in five quarters as earnings from its Portland, Maine-based TD Banknorth unit almost doubled to C$124 million. Toronto-Dominion bought the 41 percent stake it didn't already own in TD Banknorth in April.
Toronto-Dominion in October agreed to buy Cherry Hill, New Jersey-based Commerce Bancorp Inc. for about $8.5 billion, which will double its U.S. business, adding almost 460 outlets and $48 billion in assets across nine states. The deal, expected to close in April, marks the biggest foreign takeover by a Canadian bank.
``They are paying a lot for the acquisition, but it looks like a growth bank and it looks like its assets-per-branch are superior to the industry average,'' said Jackee Pratt, who helps manage about $712 million at Mavrix Fund Management in Toronto, including Toronto-Dominion shares.
The bank expects to earn about C$1 billion from its U.S. consumer and brokerage businesses next year, Chief Executive Edmund Clark told investors today on a conference call. He reiterated a previous forecast of 7 percent to 10 percent overall earnings growth for 2008.
Toronto-Dominion's fourth-quarter results were also boosted by a C$135 million gain tied to the restructuring of Visa Inc. Excluding one-time items, the bank earned C$1.40 a share.
The bank was expected to earn C$1.36 a share excluding one- time items, according to the median estimate of six analysts surveyed by Bloomberg News. Brad Smith, an analyst at Blackmont Capital Inc., was expecting C$1.23 a share, according to a Nov. 26 research note.
Toronto-Dominion's profit from Canadian consumer banking climbed 14 percent to C$572 million, bolstered by real-estate lending, credit cards and deposits. Asset management, which includes the bank's stake in TD Ameritrade Holding Corp., climbed 31 percent to C$194 million, as trading volume offset a decline in discount brokerage commissions.
Investment-banking profit increased 8 percent to C$157 million because of an increase in equity and foreign exchange trading services.
The bank's TD Securities unit is ``not built on short-term gains or risky strategies that paid off,'' Clark said, referring to writedowns at other Canadian banks this quarter.
Toronto-Dominion's business ``is continually shifting more to a retail, lower-risk defensive type of earnings mix, which in my mind is a positive especially given the circumstances that we're in right now,'' said Craig Fehr, an analyst at Edward Jones & Co. in St. Louis, who rates Toronto-Dominion a ``buy'' and doesn't own the stock.
Toronto-Dominion Bank said fourth quarter profit topped analysts' estimates on gains from its U.S. consumer bank.
Toronto-Dominion, Canada's third-largest bank, said profit for the period ended Oct. 31 rose 44 percent to C$1.09 billion ($1.09 billion), or C$1.50 a share.
Unlike National Bank and other Canadian lenders, Toronto-Dominion has avoided writedowns by eschewing investments in asset-backed securities.
``TD is not too involved in risky lending; National is further up on the risk curve,'' said John Stephenson, who helps manage the equivalent of about $1.62 billion as a portfolio manager at First Asset Investment Management Inc. in Toronto, including Toronto-Dominion shares.
Shares of Toronto-Dominion climbed C$1.42, or 2 percent, to C$71.80 at 4:10 p.m. on the Toronto Stock Exchange, capping the biggest three-day gain in five years.
Toronto-Dominion posted its biggest profit increase in five quarters as earnings from its Portland, Maine-based TD Banknorth unit almost doubled to C$124 million. Toronto-Dominion bought the 41 percent stake it didn't already own in TD Banknorth in April.
Toronto-Dominion in October agreed to buy Cherry Hill, New Jersey-based Commerce Bancorp Inc. for about $8.5 billion, which will double its U.S. business, adding almost 460 outlets and $48 billion in assets across nine states. The deal, expected to close in April, marks the biggest foreign takeover by a Canadian bank.
``They are paying a lot for the acquisition, but it looks like a growth bank and it looks like its assets-per-branch are superior to the industry average,'' said Jackee Pratt, who helps manage about $712 million at Mavrix Fund Management in Toronto, including Toronto-Dominion shares.
The bank expects to earn about C$1 billion from its U.S. consumer and brokerage businesses next year, Chief Executive Edmund Clark told investors today on a conference call. He reiterated a previous forecast of 7 percent to 10 percent overall earnings growth for 2008.
Toronto-Dominion's fourth-quarter results were also boosted by a C$135 million gain tied to the restructuring of Visa Inc. Excluding one-time items, the bank earned C$1.40 a share.
The bank was expected to earn C$1.36 a share excluding one- time items, according to the median estimate of six analysts surveyed by Bloomberg News. Brad Smith, an analyst at Blackmont Capital Inc., was expecting C$1.23 a share, according to a Nov. 26 research note.
Toronto-Dominion's profit from Canadian consumer banking climbed 14 percent to C$572 million, bolstered by real-estate lending, credit cards and deposits. Asset management, which includes the bank's stake in TD Ameritrade Holding Corp., climbed 31 percent to C$194 million, as trading volume offset a decline in discount brokerage commissions.
Investment-banking profit increased 8 percent to C$157 million because of an increase in equity and foreign exchange trading services.
The bank's TD Securities unit is ``not built on short-term gains or risky strategies that paid off,'' Clark said, referring to writedowns at other Canadian banks this quarter.
Toronto-Dominion's business ``is continually shifting more to a retail, lower-risk defensive type of earnings mix, which in my mind is a positive especially given the circumstances that we're in right now,'' said Craig Fehr, an analyst at Edward Jones & Co. in St. Louis, who rates Toronto-Dominion a ``buy'' and doesn't own the stock.
__________________________________________________________
Financial Post, 29 November 2007
Fourth quarter operating earnings of $1.40 per share at Toronto-Dominion Bank compared to $1.20 in the same period a year earlier. The results beat Blackmont Capital’s forecast by 5¢ and the consensus by 2¢. Revenue of $3.6-billion meanwhile, was in line with the firm’s estimate.
Analyst Brad Smith, who maintained his “hold” recommendation and $77 price target on TD shares following the news, said the bank’s domestic result were steady (earnings up 14% year-over-year) and revenue growth came in at 10%.
“Market share in domestic personal loans and deposits continued to erode as did small business lending share,” Mr. Smith told clients in a note.
;
Fourth quarter operating earnings of $1.40 per share at Toronto-Dominion Bank compared to $1.20 in the same period a year earlier. The results beat Blackmont Capital’s forecast by 5¢ and the consensus by 2¢. Revenue of $3.6-billion meanwhile, was in line with the firm’s estimate.
Analyst Brad Smith, who maintained his “hold” recommendation and $77 price target on TD shares following the news, said the bank’s domestic result were steady (earnings up 14% year-over-year) and revenue growth came in at 10%.
“Market share in domestic personal loans and deposits continued to erode as did small business lending share,” Mr. Smith told clients in a note.
