TD reports modest first-quarter profit miss, raises dividend

Thu Feb 25, 2016 10:28am EST
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TORONTO (Reuters) - Toronto Dominion Bank (TD.TO: Quote) reported a first-quarter profit that slightly missed analyst expectations Thursday as provisions for credit losses soared and expenses increased, but the Canadian lender still raised its quarterly dividend.

Provisions for credit losses, the amount set aside to cover bad loans, jumped about 77 percent to C$642 million, and non-interest expenses rose nearly 12 percent.

TD’s results, which were also hurt by a decline in capital markets earnings, come as Canadian banks have been facing increasing margin pressures after the Bank of Canada unexpectedly cut interest rates last year.

Net interest margins, a closely watched indicator of a bank’s profitability, slipped to 2.06 percent.

TD experienced some margin compression in Canada, though U.S. margins were solid in the quarter, Chief Financial Officer Riaz Ahmed said.

“It's just a reflection of a continued low interest rate environment,” he said in an interview. “The effects of the last rate cut by the Bank of Canada continued to work their way through the book.”

TD shares were up 0.7 percent in morning trading.

Gross impaired loans in the oil and gas sector fell to C$86 million in the first quarter, from C$93 million in the fourth quarter. Provisions for credit losses in the energy industry also dropped from the fourth quarter.

“It’s a function of our exposure. We are comfortable with the quality of the portfolio,” Ahmed said about the comparatively low amount TD has set aside to cover for bad loans in the energy sector.   Continued...

A logo of Toronto Dominion Bank (TD) is seen at a branch location in Toronto, March 6, 2014. REUTERS/Aaron Harris