TD loses profit estimates by wide margin, increases dividend

Toronto-Dominion Bank (TD.TO) increased its dividend as it posted a 2.4% rise in first-quarter profits to $ 2.41 billion, falling short of street expectations.

The lender's profits from its US retail operations were strong 30% more than in the previous year, but the net revenue from its retail operations in Canada declined and the wholesale revenue reported a net loss of $ 17 million.

The quarter also included a charge of $ 607 million related to the long-term loyalty agreement with Air Canada, which had an impact of 24 cents per share, the bank said.

"TD's retail segments in Canada and the US have had a strong start to the year, with continued revenue growth and solid profits," Bharat Masrani, the company's chief executive, said in a statement.

"However, market volatility and lower customer activity impacted our wholesale segment in the quarter."

The bank's net income in the first quarter was $ 1.27 per diluted share, up from $ 1.24 for the quarter ended Jan. 31 last year.

The result came as TD increased its quarterly payout to common stock holders by seven cents to 74 cents per share.

On an adjusted basis, TD earned $ 2.95 billion, relatively stable compared to the same period last year. That was $ 1.57 in diluted earnings per share, up from $ 1.56 a year ago, but down from $ 1.72 forecast by analysts polled by Thomson Reuters Eikon.

Canada's net retail profit totaled $ 1.38 billion, down 22% from the year-ago quarter. Adjusted net income, excluding Air Canada's charge and a charge of $ 31 million associated with the acquisition of Greystone Managed Investments based in Saskatchewan, was $ 1.86 billion, an increase of 6% over the previous year .

Its US retail division, however, was a plus point with net income of $ 1.24 billion, up 30 percent from the first quarter of 2018. TD Ameritrade contributed $ 311 million against $ 106 million a year earlier. TD's retail banking division, excluding TD Ameritrade, earned US $ 929 million, a 10% increase in volume of loans and deposits, and higher margins, the bank said.

The wholesale banking sector, however, posted a net loss in the quarter of $ 17 million, compared with a profit of $ 278 million in the first quarter of last year "reflecting lower revenue and business origination activity and higher expenses" . Revenue fell 35% from the same period last year, "impacted by challenging market conditions and reduced customer activity."

TD is the latest Canadian lender to post lower market-related profits after market volatility late last year amid political uncertainties including trade tensions between the US and China.

Provisions for credit losses, or money reserved for loans that could go wrong, totaled $ 850 million, $ 157 million higher than the same quarter of 2018.

The bank's common stock rate, a key measure of its financial health, was 12%, up from 10.6 the previous year, but stable compared to the previous quarter.

The loss of TD in the capital market led to the loss of this quarter, said Gabriel Dechaine, an analyst with the National Bank of Canada Financial Markets.

"Canada's P & C performed relatively well, while the US P & C was hampered by the loss of single-name profits," he said in a statement to customers.