TD Bank misses estimates as expenses, loan losses climb

financialpost.com:

Toronto-Dominion Bank saw its expenses and provisions for credit losses rise in the third quarter, another signal that borrowers are feeling squeezed by aggressive rate hikes.

The Canadian bank set aside $766 million for troubled loans in the quarter ended July 31, about 4 per cent more than analysts had projected. Non-interest expenses were up 24 per cent over the previous year.

Those factors dragged earnings per share down to $1.99 on an adjusted basis, missing consensus estimates of $2.04, as compiled by Bloomberg.

“TD delivered strong revenue growth in the quarter and demonstrated the value of its diversified business mix in a challenging economic environment,” chief executive Bharat Masrani said in a statement Thursday.

Toronto-Dominion had a deal to buy Tennessee-based First Horizon Corp., but the transaction fell apart in May after the bank said it couldn’t secure timely approval from regulators. The deal was held up by regulatory concerns about TD’s handling of suspicious customer transactions, a person familiar with the matter told Bloomberg.

The deal’s collapse left the bank with a much fatter capital cushion than its rivals. Its common equity tier 1 capital ratio, barometer of financial strength, clocked in at 15.2 per cent as of July. That’s far above the regulatory minimum and has raised questions about how Toronto-Dominion will deploy that capital — and where it will find growth.

In late May, the bank withdrew its target of increasing earnings per share by 7 per cent to 10 per cent a year over the medium term, citing the failure to get First Horizon and a softer economic outlook.

Still, TD has been the best-performing stock of Canada’s Big Six banks since the announcement that the deal wouldn’t go through.