Toronto-Dominion Has Record U.S. Quarter on Ameritrade Boost

(Bloomberg) -- Toronto-Dominion Bank posted a record quarter in the U.S., thanks to Americans who took out more loans and turned to the discount broker services of a bulked-up TD Ameritrade.

The Canadian lender reaped C$225 million ($174 million) from its investment in the U.S. brokerage, which along with tax cuts and loan growth helped drive record profit of C$1.14 billion at its U.S. retail division, the Toronto-based bank said Thursday as it posted earnings that topped analysts’ estimates.

“While TD came in ahead of expectations, it really was the strong contributions it received from TD Ameritrade that helped bolster earnings," Barclays Plc analyst John Aiken wrote in a note to clients. “We do not believe that the market will be displeased with the earnings per se, but more disappointed with what could have been."

Shares of the lender slipped 0.3 percent to C$79.05 at 12:21 p.m. in Toronto. The stock has advanced 7.3 percent this year, outpacing the 2.2 percent gain of the eight-company S&P/TSX Commercial Banks Index.

About 20 percent of U.S. retail earnings in the three months ended July 31 came from its 41 percent stake in the Omaha, Nebraska-based firm. TD Ameritrade’s contribution was the most since the Canadian lender sold its own U.S. brokerage operation 12 years ago, getting part of the combined company. Toronto-Dominion’s U.S. division also includes TD Bank, which has 1,246 branches in a network stretching from Maine to Florida.

TD Ameritrade Holding Corp. posted record quarterly earnings in July, fueled by sooner-than-expected cost benefits from its September 2017 purchase of Scottrade Financial Services. Toronto-Dominion gained Scottrade’s online bank as part of the three-way deal, which also added to U.S. earnings.

“The U.S. retail segment generally has enjoyed very strong organic growth, both on the asset-gathering side as well as trading side for TD Ameritrade, and we’ve had very good deposit and loan volume growth in the U.S. retail bank," Chief Financial Officer Riaz Ahmed said in a phone interview. “The macro environment has also been very good with interest rate increases and the benefits of U.S. tax reform."

The bank’s overall net income rose 12 percent to a record C$3.1 billion, or C$1.65 a share, from C$2.77 billion, or C$1.46, a year earlier, Toronto-Dominion said. Adjusted per-share earnings were C$1.66, beating the C$1.63 average estimate of 13 analysts surveyed by Bloomberg.

“U.S. platform remains solid,” Canaccord Genuity analyst Scott Chan said in a note. “Canadian retail performance has tracked peers thus far, the U.S. retail platform remains solid while capital markets was weak due to lower trading-related revenue.”

Here’s a summary of TD’s results:

• Revenue rose 6.5 percent to C$9.89 billion and non-interest expenses climbed 5.4 percent to C$5.12 billion.
• The bank set aside C$561 million for soured loans, up from C$505 million a year earlier.
• Canadian retail earnings, which includes wealth management, were C$1.85 billion, up 7.4 percent from a year earlier.
• U.S. retail earnings rose 27 percent to C$1.14 million.
• Wholesale banking profit was down 24 percent to C$223 million reflecting lower trading-related revenue of C$275 million, which dropped 41 percent from a year earlier as the bank took losses on revaluing some short-term trading deposits.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, ;David Scanlan at dscanlan@bloomberg.net, Jacqueline Thorpe, Steven Crabill

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