Toronto-Dominion Bank’s focus on retail banking in Canada and the US paid off last quarter as rising interest rates made lending to consumers more profitable.
(Bloomberg) — Toronto-Dominion Bank’s focus on retail banking in Canada and the US paid off last quarter as rising interest rates made lending to consumers more profitable.
Net interest margin in the bank’s US business — the difference between what the bank earns on loans and what it pays for deposits — expanded to 3.29% in the quarter ended Jan. 31, up from 3.13% in the previous three months, the Toronto-based bank said Thursday. Overall profit topped analysts’ estimates in the fiscal first quarter.
Toronto-Dominion’s large personal and commercial banking operations on both sides of the US-Canadian border are benefiting from rising interest rates that let it charge more for loans as well as a sizable base of deposits that’s holding its funding costs down. The lending margin in its Canadian personal and commercial banking business also expanded, helping total net interest income rise 23% to C$7.73 billion ($5.68 billion) last quarter from a year earlier.
“Toronto-Dominion has shown top or near-top NIM expansion in recent quarters, and this should continue for the next one to two quarters,” Paul Holden, an analyst at Canadian Imperial Bank of Commerce, said in a research note before the results were released.
Toronto-Dominion is looking to expand its presence in the US with the $13.4 billion acquisition of First Horizon Corp., which would fill in its footprint in the US Southeast. First Horizon was told by Toronto-Dominion that it doesn’t expect to receive the necessary regulatory approvals by May 27 — as projected in early February — and that it can’t provide a new expected closing date, according to a regulatory filing Wednesday.
However, the bank’s $1.3 billion acquisition of Cowen Inc. — poised to bolster the bank’s capital-markets franchise in the US — received all its necessary regulatory approvals, and the takeover was completed Wednesday.
In a negative turn of events, the bank said earlier this week that it agreed to pay more than $1.2 billion to settle a lawsuit by investors claiming it aided R. Allen Stanford’s $7 billion Ponzi scheme more than a decade ago. The bank denies wrongdoing in the matter.
Toronto-Dominion shares have gained 3.4% this year, compared with a 5.7% increase for the S&P/TSX Commercial Banks Index.
Also in the results:
- Net income fell 58% to C$1.58 billion, or 82 cents a share.
- Excluding some items, profit was C$2.23 a share. Analysts estimated C$2.20.
- The bank set aside C$690 million in provisions for credit losses. Analysts estimated C$597.4 million.
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