TORONTO (Reuters) - Higher profits in wealth management and retail banking drove a 5 percent rise in first-quarter net income at Toronto-Dominion Bank (TD.TO), offsetting weaker results in wholesale banking, Canada’s second largest bank said on Thursday.
TD Bank also increased its quarterly dividend by 3.5 percent, to 59 Canadian cents — less than analysts had expected and highlighting that it was a tough quarter even for one of the brightest spots in Canada’s banking sector.
“We believe they are better positioned for the environment that we are in, and that we are heading into, which is slower capital markets,” said Edward Jones Investments analyst Craig Fehr.
“Their premier retail banking franchise in Canada and the one that they’re developing in the United States positions them better for sustainable growth even through these slower capital market periods,” Fehr added.
Shares in TD dipped 31 Canadian cents to C$67.43 on the Toronto Stock Exchange, down less than most of its peers.
TD said it earned C$970 million ($998 million), or C$1.33 a share, in the three months to January 31, up from C$921 million, or C$1.26 a share, in the same period a year earlier.
Adjusted to exclude the amortization of intangibles, a gain on the value of credit default swaps, lower future tax assets and a provision for insurance claims, TD earned C$1.45 a share, meeting analyst expectations for profit of C$1.45 per share before items, according to Reuters Estimates.
The 5 percent increase in profit falls below the bank’s goal of 7 percent to 10 percent. But President and Chief Executive Ed Clark had already warned that it might be tough to hit the low end of the target range this year.
Unlike its large Canadian bank peers, TD has not reported writedowns on investments tied to the U.S. mortgage crisis.
Earnings at the Canadian retail banking unit, TD Canada Trust, rose 10 percent from a year earlier to C$598 million.
In its wealth management segment, which includes TD’s 40 percent stake in TD Ameritrade Holding Corp (AMTD.O), profit jumped 16 percent to C$216 million.
TD, which expects to close the acquisition of New Jersey-based Commerce Bancorp Inc (CBH.N) next month, said its U.S. unit, TD Banknorth, earned C$127 million. That was twice the profit recorded a year earlier, when TD’s ownership interest was lower.
In wholesale banking, where capital markets revenue declined, net income fell 17 percent to C$163 million.
“We expect the operating environment to remain challenging which may lead to lower capital market activity and lower trading revenues relative to the prior year,” the bank said.
Its provision for credit losses jumped 56 percent to C$255 million in the latest period, from C$163 million in the 2007 first quarter. Analysts have expected for some time that banks might have to set aside more money for loan losses.
TD cited higher specific provisions in Canadian and U.S. personal and commercial banking and in wholesale banking as reasons behind the increase in provisions.
Reporting by Lynne Olver and Nicole Mordant; editing by Rob Wilson