TD Bank profit tops view but shares dip as peers do better

TORONTO (Reuters) - Toronto-Dominion Bank reported third-quarter profit which topped expectations, helped by a sharp rise in earnings from the United States, but analysts said its performance was less impressive than rival Canadian lenders.

FILE PHOTO: A Toronto-Dominion Bank (TD) sign is seen outside of a branch in Ottawa, Ontario, Canada on May 26, 2016. REUTERS/Chris Wattie/File Photo

Canada’s second biggest lender said earnings per share, excluding one-off items, rose to C$1.66 in the quarter ended July 31, from C$1.51 a year ago. Analysts, on average, estimated earnings of C$1.63, according to Thomson Reuters I/B/E/S.

Net income, excluding one-off items, rose to C$3.13 billion ($2.42 billion) from C$2.87 billion a year earlier.

Shares in TD, which have risen about 7.5 percent in the year to date, more than any other Canadian bank, were down 0.2 percent at 10:10 am EDT (1350 GMT).

“After two quarters in which TD’s results were clearly the best of the group, Q3 marked a step down for the bank as its results, while still good, shone less brightly relative to some peers,” said Cormark Securities analyst Meny Grauman.

Eight Capital analyst Steve Theriault said TD’s performance in the quarter amounted to a “relatively modest beat”.

Bank of Montreal and Canadian Imperial Bank of Commerce have posted stronger beats over the past week while Royal Bank of Canada’s earnings also exceeded expectations.

Bank of Nova Scotia reported earnings in line with analysts’ forecasts.

TD’s core tier 1 capital ratio, a measure of its financial strength, was 11.7 percent at the end of July, the highest among Canada’s six biggest banks and up 70 basis points from a year ago.

Chief Financial Officer Riaz Ahmed said that gives the bank flexibility to invest in the business including making acquisitions.

“We’re always open to looking at acquisitions if they make sense from a strategic and financial point of view,” he said in an interview.

Ahmed said opportunities to expand on the U.S. East Coast would be attractive.

“Also, we have an excess of deposits in the United States that need to be invested and, therefore, good asset generating businesses would be attractive to us,” he added.

Net income, excluding one-time items, at the bank’s U.S. retail business rose by 29 percent to C$1.16 billion, benefiting from improved margins and tax changes.

Net income at the bank’s Canadian retail business grew by 7 percent to C$1.85 billion, reflecting improved margins and an increase in loans and deposits.

($1 = 1.2919 Canadian dollars)

Reporting by Matt Scuffham; Editing by Jason Neely, Jeffrey Benkoe and David Gregorio