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TORONTO (Reuters) - Toronto-Dominion Bank (TD.TO) has made changes to its mortgage underwriting practices in recent years, its chief risk officer said on Thursday, potentially making it more resilient if house prices fall in Vancouver and Toronto.
Canada's banks are facing heightened scrutiny of their mortgage underwriting practices as authorities try to tackle the potential threat of a housing bubble in the two cities, where prices have soared.
The country's banking regulator last month raised concerns about mortgage underwriting standards across the industry, citing income verification checks as a concern.
Speaking to investors after the bank reported better-than-expected third-quarter results, TD's Chief Risk Officer Mark Chauvin said Canada's second-biggest lender had already tightened checks in response to price rises in recent years.
"There have been some changes. We put a lot more focus on income confirmation to ensure that the individual can service the mortgage that we provide, certainly at the time that we provide it," Chauvin said.
TD reported an increase in third-quarter profit, helped by growth in its U.S. retail and wholesale banking business.
Earnings, excluding one-off items, rose to C$2.42 billion ($1.87 billion), or C$1.27 per share, in the third quarter ending July 31 from C$2.29 billion, or C$1.20 per share, a year earlier. Analysts on average had expected earnings of C$1.21, according to Thomson Reuters I/B/E/S.
Chief Executive Bharat Masrani reiterated the bank's intention to expand further in the United States, potentially through acquisitions.
"We have a stated strategy of looking at acquisitions in the U.S.. In the southeast of the U.S. if there are tuck-ins available we would certainly be interested and look at them seriously," he said.
Net income at TD's U.S. retail bank rose to C$788 million from C$650 million a year ago. TD's wholesale banking unit's net income was C$302 million, up 26 percent from the third quarter last year.
At the bank's Canadian retail business, net income fell by 3 percent to C$1.51 billion, weighed by a 15 percent increase in insurance claims and related expenses to $692 million following the wildfires in Fort McMurray, Alberta, where TD has a significant market share.
Funds set aside by the bank to cover bad loans fell to C$556 million, compared with C$584 million, in the second quarter, reflecting lower provisions in the oil & gas sector where a recovery in the price of oil during the quarter benefited borrowers.
($1 = 1.2913 Canadian dollars)
Editing by W Simon and Meredith Mazzilli