Key Takeaways:
- The Canadian operation of Toronto-Dominion Bank benefits from a rebound in consumer spending and the country’s housing market’s continued strength.
Profit in the Canadian retail business increased 19% to C$2.14 billion ($1.7 billion) in the fiscal 4th quarter, according to a statement issued by the Toronto-based bank on Thursday. Overall profit exceeded analysts’ expectations.
Dominion’s mortgage and home equity line of credit balances have risen throughout the pandemic as Canadian home prices have risen and sales volumes have remained strong. As the country’s consumers increase their spending, the unit has posted two consecutive quarter-over-quarter increases in credit-card balances.
“The recovery is underway, and we’re particularly pleased because we are a strong consumer retail bank,” said Chief Financial Officer Kelvin Tran in an interview. “We’ve been designed specifically for this recovery.”
The bank was freed from industrywide restrictions on increasing its dividend and buying back stock last month. Rised its quarterly dividend by 13 percent to 89 percent share and announced plans to repurchase 50 million shares, or 2.7 percent of its outstanding stock, for approximately C$4.6 billion at the current price.
Dominion shares have increased 28 percent this year, while the S&P/TSX Commercial Banks Index has increased 26 percent.
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In the fiscal quarter ended Oct. 31, net income fell 26% to C$3.78 billion, or C$2.04 per share. Profit after deducting certain items was C$2.09 per share. On average, analysts predicted C$1.96.
The lender’s net interest margin widened to 1.58 percent in the fourth quarter from 1.56 percent in the third, representing the difference between what it earns from loans and what it spends on deposits.
This contrasts with rivals such as Royal Bank of Canada and National Bank of Canada, which reported narrowing spreads in the previous quarter. According to Tran, higher wholesale lending revenue and better investment revenue in the U.S. bank aided Toronto-margin.
Toronto-Dominion released C$123 million in credit loss provisions. According to analysts, the bank will set aside C$161 million.
The company’s retail operations in the United States have not gained the same traction as the Canadian division. While the total number of personal loans increased from the third quarter, business loans fell 5.9 percent. Business loans in Canada have increased sequentially for four consecutive quarters.
Source: Bloomberg
