December 4, 2008 / 1:08 PM / 9 years ago

UPDATE 2-TD Bank profit falls 7 percent on trading losses

* Net C$1.22/share vs C$1.50

* Tier 1 capital ratio 9.1 pct after equity issue

* Says Canadian retail lending grew in 4th quarter (Adds CEO comment, details on Canadian and U.S. profit)

TORONTO, Dec 4 (Reuters) - Toronto-Dominion Bank (TD.TO) said quarterly profit fell 7 percent because of previously announced writedowns for credit trading losses in illiquid debt markets.

As expected, Canada’s second-largest bank said on Thursday that net income was C$1.01 billion ($798 million), or C$1.22 a share, in the fiscal fourth quarter ended Oct. 31. That includes various unusual items, including a litigation reserve gain of C$323 million related to Enron.

A year earlier, net income was C$1.09 billion, or C$1.50 a share.

The bank surprised observers on Nov. 20 by saying credit trading losses would lead to a quarterly net loss of C$228 million for TD Securities, its wholesale banking unit. TD’s retail banking operations are much bigger than its wholesale business, and although the bank avoided toxic U.S. mortgage-backed securities and derivatives, it was stung by mark-to-market losses as the value of some of its debt securities fell.

“In this environment, our strategy has been the right one, and we remain conservatively positioned with over 90 percent of our earnings coming from retail businesses,” TD President and Chief Executive Ed Clark said in a statement.

However, he added that the “lack of visibility on the economic front calls for caution.”

Adjusted to exclude a variety of unusual items, including the Enron reserve reversal, profit in the latest quarter was C$665 million, or 79 Canadian cents a share, down from C$1.02 billion, or C$1.40 a share, a year earlier.

The company reclassified C$7.4 billion of debt securities to “available for sale” in the quarter, thus avoiding any fair-value writedowns on those securities under new accounting rules.

TD Bank concluded a C$1.4 billion common share issue earlier this week, which boosted its Tier 1 capital ratio to 9.1 percent. With financial market instability, investors have been keen to see capital ratios well above the minimums required by regulators.

Net income in TD Canada Trust, its Canadian retail banking unit, rose 5 percent to C$600 million due to strength in personal deposits, business banking and life insurance.

Despite concerns that banks are restricting credit, TD said its personal and commercial lending in Canada grew in every quarter of fiscal 2008.

Profit in TD’s U.S. unit more than doubled from a year earlier to C$276 million due to the addition of earnings from New Jersey-based Commerce Bank. ($1=$1.26 Canadian) (Reporting by Lynne Olver; editing by John Wallace)

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