Scotia Capital, 2 December 2011
• TD operating EPS increased 28% YOY to $1.77 from $1.38 a year earlier, beating expectations due to strong results across all segments and high security gains.
• Operating ROE: 14.9%, RRWA: 2.95%, CET1: 6.2%E (incl. IFRS).
• Fiscal 2011 operating EPS increased 18% to $6.82 from $5.77 in 2010.
Implications
• Canadian P&C (TDCT) had strong earnings up 17% YOY to $905M, with U.S. P&C up 16% YOY to $328M. Wealth Management earnings were also strong increasing 28% YOY. Wholesale Banking earnings rebounded to $288M ($151 million before security gains) from $108M in Q3/11. Trading revenue was $286M versus a dreadful $109M in Q3/11. Trading revenue in the quarter was driven by very strong FX and equities with interest rate and credit recovering modestly.
Recommendation
• Our 2012E and 2013E EPS are unchanged at $7.10 and $7.80, respectively. Our 1-year price target remains $93. Maintain 1-SO based on an industry high capital generation rate (RRWA), low balance sheet risk, competitive positioning and no P/E premium to the bank group.
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• TD operating EPS increased 28% YOY to $1.77 from $1.38 a year earlier, beating expectations due to strong results across all segments and high security gains.
• Operating ROE: 14.9%, RRWA: 2.95%, CET1: 6.2%E (incl. IFRS).
• Fiscal 2011 operating EPS increased 18% to $6.82 from $5.77 in 2010.
Implications
• Canadian P&C (TDCT) had strong earnings up 17% YOY to $905M, with U.S. P&C up 16% YOY to $328M. Wealth Management earnings were also strong increasing 28% YOY. Wholesale Banking earnings rebounded to $288M ($151 million before security gains) from $108M in Q3/11. Trading revenue was $286M versus a dreadful $109M in Q3/11. Trading revenue in the quarter was driven by very strong FX and equities with interest rate and credit recovering modestly.
Recommendation
• Our 2012E and 2013E EPS are unchanged at $7.10 and $7.80, respectively. Our 1-year price target remains $93. Maintain 1-SO based on an industry high capital generation rate (RRWA), low balance sheet risk, competitive positioning and no P/E premium to the bank group.
