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Monday, May 27, 2024

TD shares fall on high deposit costs impacting earnings

Toronto-Dominion (TD) Bank grapples with the impact of pricier deposits, leading to narrower margins and its weakest US business profitability in over a year. Earnings from US retail banking declined by 6% to C$1.38 billion ($1.02 billion) on an adjusted basis in the fiscal third quarter compared to the previous year.

The bank’s net interest margin in the US, a key indicator of lending profitability, fell to 3%, while a larger provision for loan losses compounded the challenge.

These factors, along with increased staff expenses, contributed to adjusted earnings per share of C$1.99 for the quarter, falling short of analysts’ predictions of C$2.04. TD’s shares dropped by as much as 2.7% in Toronto.

The bank, which operates around 1,200 branches in the US, experienced slowed growth in US personal loans, expanding by only 1.6% from the previous quarter.

Rising expenses and credit loss provisions further weighed down earnings, with the bank setting aside C$766 million for troubled loans in the quarter, surpassing analysts’ projections by about 4%.

TD’s aborted acquisition deal with First Horizon Corp left it with a stronger capital cushion than its peers.

Despite these challenges, TD plans to repurchase up to 90 million shares, about 5% of its stock, subject to regulatory approval, which is expected to mitigate the market’s response to the earnings downturn.

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