TD Bank Group reports profits down, rolls out expanded share buyback program

A person makes their way past a Toronto-Dominion Bank in the Financial District of Toronto, Monday, Aug. 14, 2023. THE CANADIAN PRESS/Spencer Colby

Toronto — TD Bank Group announced it was significantly expanding a share buyback program as it reported its third-quarter profit fell compared with a year ago.

The bank said Thursday its net income totalled $2.96 billion or $1.57 per diluted share, down from $3.21 billion or $1.75 per diluted share in the same quarter last year, as it saw a rise in provisions for credit losses as well as higher expenses in part related to its failed bid to buy U.S.-based First Horizon.

TD called off the US$13.4-billion deal in May citing regulatory uncertainty, leaving a question as to what it would do with the extra cash it had built up for the deal.

Investors got a partial answer Thursday as the bank announced a plan to buy back 90 million shares, or about 4.9 per cent of outstanding shares, after it just completed a 30-million share buyback program.

TD chief financial officer Kelvin Tran said in an interview that the buybacks were part of the bank's consistent capital deployment approach that balances organic growth, acquisitions and payouts to shareholders.

"This strategy depends what’s optimal any point in time, but we're really happy that we can do that by returning excess capital to shareholders."

The buyback program comes as the bank's adjusted earnings amounted to $1.99 per diluted share in its latest quarter, down from an adjusted profit of $2.09 per diluted share in the same quarter last year.

The result fell below the average analyst estimate of $2.04 per diluted share, based on estimates compiled by financial markets data firm Refinitiv.

The miss came in part from higher than expected provisions for credit losses that totalled $766 million, up from $351 million a year earlier, Barclay's analyst John Aiken said.

The higher-than-expected provisions came largely from the bank's extensive U.S. operations, where earnings also disappointed.

“The miss can largely be attributed to weaker earnings in its U.S. retail segment, which saw margins decline and provisions increase," he said in a note.

He said however that the modest miss will likely be offset by the share buyback program.

Revenue at the bank totalled $12.78 billion, up from $10.93 billion in the same quarter last year.

TD said its Canadian personal and commercial banking business earned $1.66 billion compared with $1.68 billion in the same quarter last year, mainly due to higher provisions for credit losses, partially offset by revenue growth.

Tran said the bank's operations were boosted by new accounts up 26 per cent year over year, driven by a record quarter for new-to-Canada accounts, while it also saw record spending on Canadian credit cards.

Mortgage volumes are also rebounding from the lows earlier this year, despite higher rates, he said.

"Obviously when rates go up people are a little bit more cautious, but structurally there's a lot of demand."

And while those rates are affecting consumers, credit card revolving balances remain below pre-pandemic levels and overall client profiles look good, he said.

"We feel very good about the credit quality of our book," said Tran.

The bank's U.S. retail operations earned $1.31 billion, down from $1.44 billion a year earlier as it faced charges related to its unsuccessful attempt to buy U.S. bank First Horizon Corp.

Meanwhile, TD's wealth management and insurance operations earned $504 million, down from $575 million a year ago, as it faced more severe weather-related events and lower transaction revenue in wealth management.

TD's wholesale banking earned $272 million compared with $271 million a year ago.

This report by The Canadian Press was first published Aug. 24, 2023.