(Reuters) -TD Bank reported a rise in third-quarter profit on Thursday, as the Canadian lender built lower cash reserves to cover potential customer defaults on loans.
While Canada is yet to achieve a trade deal with the United States, the outlook has improved considerably from early April, when U.S. President Donald Trump‘s tariffs sparked fears of a trade war across North America.
Canadian banks had built higher provisions fearing a macroeconomic slowdown, anticipating defaults on commercial loans, credit cards, and mortgages.
TD’s provision for credit losses was C$971 million ($702.76 million) in the reported period, down from C$1.34 billion in the previous quarter. The lender had set aside C$1.07 billion for rainy day funds last year.
TD’s shares have rallied over 37% so far this year, as of last close, eclipsing double-digit rallies by the rest of the big six Canadian banks.
The rally in TD’s shares follows a tumultuous 2024 – when it agreed to pay over $3 billion in penalties to U.S. regulators for money laundering charges – ending the year down 10.6%.
The penalty also sparked a broader makeover to comply with the U.S. government-ordered anti-money laundering remediation program. In July, the bank named independent director John MacIntyre as the new chair of its board.
Earlier this week, peers Bank of Montreal, Bank of Nova Scotia, and Royal Bank of Canada beat third-quarter earnings estimates on smaller-than-expected loan loss provisions.
On an adjusted basis, the second largest Canadian bank reported a profit of C$3.87 billion, or C$2.20 per share, for the quarter ended July 31, compared with C$3.65 billion, or C$2.05 per share, a year earlier.
($1 = 1.3817 Canadian dollars)
(Reporting by Ateev Bhandari in Bengaluru; Editing by Shailesh Kuber)