Scotia Capital, 2 December 2010
TD Q4/10 Earnings Miss - Higher Expenses
• TD operating EPS declined 5% to $1.38, below expectations, due to lower-than-expected earnings from Canadian P&C (TDCT) as a result of high operating expenses including non-recurring items.
Implications
• TD recorded strong retail earnings with TDCT earnings up 24% YOY and U.S. P&C up 34%, which were offset by Wealth Management down 3% and a 42% decline in Wholesale. Although Wholesale earnings rebounded 21% from previous quarter.
• ROE, RRWA, and Tier 1 was 12.4%, 2.47%, and 12.2%, respectively.
• Fiscal 2010 operating EPS increased 8% to $5.77 from $5.35 in 2009. Operating ROE in 2010 was 13.7%, RRWA 2.63%.
Recommendation
• Our 2011E EPS is unchanged at $6.50. We are introducing 2012 EPS estimate of $7.20. Our one-year share price target is unchanged at $90.
• Reiterate 1-Sector Outperform rating based on valuation discount, favourable earnings mix, industry high RRWA, and U.S. retail bank earnings leverage.
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TD Q4/10 Earnings Miss - Higher Expenses
• TD operating EPS declined 5% to $1.38, below expectations, due to lower-than-expected earnings from Canadian P&C (TDCT) as a result of high operating expenses including non-recurring items.
Implications
• TD recorded strong retail earnings with TDCT earnings up 24% YOY and U.S. P&C up 34%, which were offset by Wealth Management down 3% and a 42% decline in Wholesale. Although Wholesale earnings rebounded 21% from previous quarter.
• ROE, RRWA, and Tier 1 was 12.4%, 2.47%, and 12.2%, respectively.
• Fiscal 2010 operating EPS increased 8% to $5.77 from $5.35 in 2009. Operating ROE in 2010 was 13.7%, RRWA 2.63%.
Recommendation
• Our 2011E EPS is unchanged at $6.50. We are introducing 2012 EPS estimate of $7.20. Our one-year share price target is unchanged at $90.
• Reiterate 1-Sector Outperform rating based on valuation discount, favourable earnings mix, industry high RRWA, and U.S. retail bank earnings leverage.
