Toronto-Dominion Bank TD-T reported a higher third-quarter profit that beat analysts’ estimates but also booked restructuring charges as the bank works to shore up deficiencies in its anti-money laundering controls and adjust to a cap on U.S. retail assets imposed by regulators.
TD earned profit of $3.37-billion, or $1.89 per share, in the fiscal third quarter that ended July 31. That compared with a quarterly loss in the same quarter last year after U.S. regulators hit the bank with a US$3-billion fine over serious lapses in its programs to prevent money laundering.
Adjusted to exclude that one-time charge, TD said it earned $2.20 per share, which was higher than the $2.05 consensus estimate among analysts.
The quarterly earnings were affected by $262-million incurred from TD’s moves to restructure its U.S. balance sheet, which has included selling loans to stay under the regulatory asset cap.
TD now has US$386-billion of assets in its U.S. business, which is below the US$434-billion limit. TD also took a $333-million restructuring charge in the quarter as part of a previously announced plan to spend $600-million to $700-million over several quarters to reduce its overall staffing by 2 per cent and eventually save $550-million to $650-million annually, before tax.
A bright spot in TD’s third-quarter results was its Canadian retail banking division, which reported profit of $1.95-billion, up 4 per cent from last year. The division has lagged rival banks in recent quarters, but has emerged as a key point of emphasis as the bank’s ambitions to grow in the U.S. have been curbed for the time being.
Profit from U.S. retail banking was $760-million, compared with a loss in the same quarter last year. Loans were down 7 per cent because of asset sales, and the division had higher governance and control costs.
Wealth management and insurance profit was $703-million, up 63 per cent from a year ago. And profit from wholesale banking was $398-million, up 26 per cent year over year.
“We are well positioned to build on this momentum as we compete, grow and build our bank for the future,” chief executive officer Ray Chun said in a statement.
TD set aside $971-million in provisions for credit losses, or money earmarked to cover loans that may default. That was lower than the second quarter and well below the $1.2-billion analysts anticipated, according to LSEG.
TD’s common equity Tier 1 ratio, a key measure of its resilience in times of stress, is 14.8 per cent.
TD plans to hold an investor day presentation on September 29 to unveil its updated strategy under Mr. Chun to analysts and shareholders.