May 22, 2014 / 1:28 PM / 4 years ago

UPDATE 1-TD Bank profit rises on strong retail lending

(Adds segment details, analyst and CFO comments)

By Cameron French

TORONTO, May 22 (Reuters) - Toronto-Dominion Bank said on Thursday that its quarterly profit rose 16 percent as recent credit card and wealth management acquisitions boosted Canadian and U.S. retail lending.

Canada’s second-largest bank said it had earned C$1.99 billion ($1.82 billion), or C$1.04 a share, in the second quarter ended April 30, compared with C$1.72 billion, or 89 Canadian cents a share, a year earlier.

Excluding a C$63 million charge for amortization of intangibles and other special items, the bank earned C$1.09 per share. That was ahead of analysts’ expectations of C$1.02, according to Thomson Reuters I/B/E/S.

RBC Capital Markets analyst Darko Mihelic said the results had benefited from lower-than-expected loan-loss provisions. They fell to C$392 million from C$417 million, while he had expected them to rise to C$497 million.

“We view the quarter as strong,” Mihelic said in a note. “However, at some point we would expect loan loss provisions to ‘normalize’ higher.”

TD operates a 1,300-branch network on the U.S. East Coast in addition to its Canadian retail bank. It also owns about 40 percent of TD Ameritrade Holding Corp.

Canadian retail banking income rose 13 percent to C$1.33 billion as stronger business lending and the addition of the lucrative Aeroplan Visa credit card portfolio helped offset sluggish mortgage growth.

The bank in September said it would buy about half of the Aeroplan portfolio from Canadian Imperial Bank of Commerce and became the primary issuer of the card. TD estimated at the time that the new business would add 10 Canadian cents a share to its results in 2014.

“We’re very pleased with the take-up on new accounts,” TD Chief Financial Officer Colleen Johnston said in an interview. “I think for this year it’s safe to say that Aeroplan will definitely exceed our expectations.”

With Canada’s housing market cooling, TD has sought to expand its reach into higher-growth areas, such as credit cards, auto lending and wealth management.

Real estate secured lending grew 4 percent during the quarter, well below the 12 percent growth in both business lending and in credit cards and other products.

Acquisitions also helped drive up profit from TD’s U.S. retail bank. Net income from the unit rose 15 percent to US$495 million.

Last year, TD bought asset manager Epoch Investments and retailer Target Corp’s U.S. Visa and private label credit card portfolio for the U.S. unit.

$1 = 1.0934 Canadian dollars Reporting by Cameron French; Editing by Lisa Von Ahn

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