TD Bank Group sees strong wealth and insurance gains, but closing U.S. locations

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TORONTO — TD Bank Group topped expectations as it reported its first-quarter profit rose 10 per cent compared with a year ago.

Yet the bank's Toronto-listed shares fell nearly 1.7 per cent to close at $78.07 apiece on Thursday, after fellow Canadian banks this week also reported better-than-expected earnings growth.

"TD did not benefit from capital markets, wealth management and cost controls to the same degree as its peers," wrote Barclays analyst John Aiken in a research note.

"What stood out in the quarter from our perspective was the ongoing struggles in its U.S. retail banking platform."

Profits fell in TD's U.S. retail business, after Charles Schwab Corp. finished its acquisition of TD Ameritrade Holding Corp. in October. TD said Schwab contributed $209 million in earnings, compared with the contribution of $201 million from TD Ameritrade in the first quarter last year.

TD’s U.S. business is closing 82 branches, said Greg Braca, head of TD’s U.S. banking, as it looks to "optimize" redundant locations.

Climbing premiums, insurance sales and uptake in digital term life applications lifted insurance profits by 22 per cent, the bank said.

Teri Currie, the head of TD’s Canadian personal banking, said TD has been investing in its insurance business, focusing on unique aspects like collision centres for auto insurance borrowers.

"As an online insurer we have, I think, the business model, capabilities and customer experience for the future. And in Q1, we had record earnings in that business," said Currie.

TD said its wealth management business's profits rose 55 per cent in Canada amid higher transaction and fee-based revenue, while there were also strong mortgage originations and chequing account growth.

"On the wealth side there was strength across the board, and we did have the highest wealth asset levels on record," said Currie. "We've been adding advisors for wealth... to help our customers who are often, right now, sitting on more liquidity than they had planned for."

Overall, TD earned net income of $3.28 billion or $1.77 per diluted share for the quarter ended Jan. 31, up from $2.99 billion or $1.61 per diluted share a year earlier. Revenue totalled $10.81 billion, up from $10.61 billion.

On an adjusted basis, TD says it earned $1.83 per diluted share, up from an adjusted profit of $1.66 per diluted share a year earlier. Analysts on average had expected an adjusted profit of $1.49 per share, according to financial data firm Refinitiv.

Provisions for credit losses amounted to $313 million, down from $919 million a year earlier.

"While TD did come in well ahead of expectations, the entire quantum of the beat can essentially be chalked up to lower than expected provisions," Aiken wrote.

Currie said that customers have been paying down credit cards amid COVID-19 lockdowns, and that January tends to be a slow month for the credit card business.

The bank has a split of customers focused on travel and luxury cards and cash back and everyday spending cards, and Currie said TD is well-positioned for an economic rebound in its partnerships with Amazon and Air Canada, and a presence in the buy-now, pay-later market.

TD chief executive Bharat Masrani in a statement that the bank has been investing in training for thousands of workers during the pandemic.

"(We) also continue to work with governments to facilitate access to relief programs and introduce new initiatives to help those most impacted by the pandemic," Masrani said.

This report by The Canadian Press was first published Feb. 25, 2021.

Companies in this story: (TSX:TD)

Anita Balakrishnan, The Canadian Press