January 28, 2009 / 6:54 PM / 9 years ago

UPDATE 1-TD Bank sees rising loan losses, but dividend secure

*CFO sees provision for credit losses rising

*Bank’s dividend rate will not be cut

*Shares rise 6.1 pct

(Adds details)

TORONTO, Jan 28 (Reuters) - Toronto Dominion Bank’s (TD.TO)chief financial officer expects its provision for credit losses to increase this year as the effects of the recession deepens, but he remained confident that Canada’s second-largest bank would not cut its dividend.

For all of 2008 the big Canadian bank had provisions for credit losses at just under C$1.1 billion ($827.1 million), which represented about 0.54 percent of its total loans, Colleen Johnston, the bank’s chief financial officer said during an industry conference in New York on Wednesday.

Johnston was not certain by how much the bank’s provisions for losses would increase in 2009, but added that it was not its “base case” to allow the level to double to 1 percent.

The bank’s ability to absorb bad loans has been questioned by analysts recently, but Johnston moved to assure investors that it was in good shape.

“The high quality of our loan portfolio and our disciplined credit culture has served us very, very well in this current credit environment,” she said. “We do continue to expect to be a positive outlier in terms of our credit performance.”

Canadian banks are facing a fallout from the global economic and stock market downturn, such as weaker profits from wealth management and rising loan loss provisions.

Loan loss provisions are set aside by the banks for bad loans such as customer defaults.

Johnston also said that the bank was expected to move through 2009 without cutting its dividend. The bank, which was the only Canadian bank to increase its dividend twice in 2008, declared a quarterly dividend of 61 Canadian cents in December.

The CFO said the bank has managed its dividend at the low end of its payout range giving it more leeway as earnings slow down or decline, adding that the bank’s dividend growth would track its earnings growth.

“Frankly we do not see a scenario where we would consider cutting our dividend,” she said.

TD shares were up 6.1 percent at C$42.16 on the Toronto Stock Exchange, where financial stocks rose on homes that Canada’s C$40 billion stimulus package would promote economic stability. ($1=$1.21 Canadian) (Reporting by Scott Anderson; Editing by Frank McGurty)

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