Toronto-Dominion Bank made a profit of $994-million in the fourth quarter, a drop of roughly 2 per cent, driven by increased business at its retail branches, but a slowdown in its wholesale banking division.
The profit at Canada's second-largest bank was equal to $1.07 per share. That compared to profit of $1.01-billion in the same quarter a year earlier, or $1.12 per share, the bank said on Thursday.
Revenue rose to $5.017-billion from $4.718-billion.
The results fell short of analysts expectations. Analysts were expecting profit of about $1.46 per share, according a poll by Thomson Reuters.
The drop in profit was attributed to several one-time charges, along with lower earnings at the wholesale banking division, a trend seen across the banking sector in recent months.
Excluding one-time items such as a tax charge and restructuring costs related to U.S. acquisitions in the quarter, TD reported adjusted net earnings of $1.26-billion, or $1.38 per share in the quarter, compared to $1.31-billion or $1.46 per share last year.
Canadian retail banking made $773-million in the fourth quarter, an increase of 24 per cent from the same period last year while the bank's large U.S. retail banking operation made $283-million, which was up 34 per cent from last year, once the adjustments were factored in, TD said.
"Our U.S. operations continued to perform very well despite new regulatory challenges and ongoing weakness in the economy," TD chief executive officer Ed Clark said in a statement. On the wholesale banking side, Mr. Clark said "markets remained challenging."
TD's wholesale banking division reported net income for the quarter of $95-million, a decrease of $277-million, or 74 per cent from last year.
TD's wealth management arm had net income for the quarter of $151-million, a decrease of $5-million compared to last year.
Analyst John Aiken at Barclays Capital called TD's quarter an "outright miss" compared to what the Street was expecting. "While capital markets were stronger than anticipated, weaker credit and higher expenses largely resulted in the miss," Mr. Aiken said in a research note to cli
The bank took a $121-million tax charge relating to a settlement with Canada Revenue Agency over wholesale banking strategies that it used in the past. While TD said it no longer enters into those types of strategies, the bank did not elaborate. TD executives will speak to analysts about the matter on a conference call this afternoon. The charge was equal to 14 cents a share in the quarter.
Provisions for credit losses, or the amount of money the banks set aside to cover unpaid loans, was $404-million in the quarter, an improvement on $521-million a year ago, reflecting improving economic conditions.
TD's return on equity was 9.7 per cent, compared to 11 per cent a year ago. The bank's Tier 1 capital ratio was 12.2 per cent at the end of the quarter, up from 11.3 per cent a year ago. TD kept its quarterly dividend at 61 cents.
While analysts consider TD to be likely to raise its dividend now that new global capital rules for banks are better understood, Mr. Clark has indicated that TD may wait until 2011 to hike its payout. The new rules require banks to hold more capital to backstop their operations.
"We expect to hold more capital as a result of the new rules being finalized by regulators. However, our current levels are very strong and we do not believe we will need to raise additional capital as a result," Mr. Clark said. "Our dividend policy remains driven by our outlook for earnings, rather than our capital position, and we expect to provide the market with some clarity in that regard in the next several months."