* Higher costs will not carry forward - CEO
* Strong U.S. bank profit suggests east with U.S. regs
* Shares down 2.6 percent (In U.S. dollars, unless noted)
By Cameron French
TORONTO, Dec 2 (Reuters) - Toronto-Dominion Bank (TD.TO) Chief Executive Ed Clark said on Thursday he's pleased with the bank's fourth-quarter results, despite the drop in TD's shares that suggested investors did not share his enthusiasm.
The stock was down 2.6 percent by mid-afternoon after the bank reported adjusted results of C$1.38 a share, which missed analyst expectations of C$1.46 a share. On a net basis, the bank's fourth-quarter profit fell.
Analysts said the miss was primarily due to higher than expected costs.
Clark acknowledged the higher costs, but said they were due largely to one-time items.
"Those expenses were more timing items, single items, not repeatable, so they don't reflect what our running rate is," he told Reuters.
"We actually are quite happy with the results."
TD's domestic retail bank earned C$773 million, up 24 percent year over year, while its wholesale -- or investment banking -- arm, earned C$95 million, down 277 percent.
But Clark pointed to the performance of TD's U.S. retail franchise as a reason for optimism.
Income from the growing network, which covers the U.S. East Coast, rose 117 percent to C$265 million.
Clark said the strong performance makes him more optimistic that TD will easily be able to absorb new U.S. financial regulations, particularly "Regulation E", a rule that will limit overdraft fees that banks can charge.
"I think our performance in Reg E was better than we had anticipated, so the impact was slightly less than our forecast," he said.
He also said the strong performance confirmed his belief that the bank can reach its stated target of reaching $1.6 billion in annual profit in three years.
The bank's shares were down C$1.97 at C$73.32 on the Toronto Stock Exchange.
$1=$1.00 Canadian Reporting by Cameron French; editing by Rob Wilson