The Toronto-Dominion Bank Reports Second-Quarter Results

Key Takeaways

• Toronto-Dominion Bank reported second-quarter results that included revenue and adjusted profit above estimates.
• Reported net income missed expectations due to over 1 billion Canadian dollars in one-time charges.
• TD provided an update on the ongoing investigation from U.S. regulators into anti-money laundering practices.
• The bank also announced a quarterly dividend of C$1.02 per share.

Toronto-Dominion Bank (TD) recently released its second-quarter fiscal 2024 results, exceeding analyst estimates as it begins a series of Canadian bank earnings reports over the coming month. The bank reported revenue that surpassed expectations, but its reported net income fell short due to over 1 billion Canadian dollars in one-time charges, including restructuring costs and provisions for ongoing investigations into its anti-money laundering practices.

Revenue for the quarter grew by more than 11% year-over-year to C$13.82 billion ($10.11 billion), surpassing analyst expectations of C$13.53 billion. However, net income of C$2.56 billion, or C$1.35 per share, was below the C$3.02 billion and C$1.57 per share that analysts had predicted. The bank attributed the miss to various one-time charges related to legal and restructuring costs.

After adjusting for these costs, TD’s profit came in at C$3.79 billion, or C$2.04 per share, exceeding the C$3.45 billion and C$1.84 per share that analysts had forecasted. Earnings from TD’s Canadian operations and wealth management division grew by 7% and 19% year-over-year, respectively, helping offset a 59% decrease in earnings from its U.S. operations. The decline in U.S. earnings was primarily driven by the one-time charges related to the anti-money laundering investigation, with adjusted income falling by 16% to C$1.27 billion.

In addition to its financial results, TD also announced its quarterly dividend of C$1.02 per share, which is set to be paid on July 31 to shareholders of record as of market close on July 10.

Updates on US Regulators’ Probe Into AML Practices

The largest one-time charge incurred by TD in the second quarter was C$615 million related to investigations by U.S. regulators and law enforcement into the bank’s anti-money laundering policies. These investigations are focused on whether TD and other banks failed to prevent money laundering in various instances across the U.S.

While TD had previously disclosed its involvement in these investigations, a recent report by the Wall Street Journal revealed that some of the money potentially laundered was linked to illegal drug sales in the U.S. The bank stated that it has been cooperating with U.S. regulators and authorities in good faith for several months and is actively working to bring these investigations to a resolution.

TD emphasized its commitment to overhauling its U.S. anti-money laundering program to strengthen its practices globally and provide investors with greater clarity on the situation. Despite the challenges posed by the ongoing investigations, TD shares on the New York Stock Exchange rose by about 2.5% ahead of the opening bell following the earnings release.

In conclusion, Toronto-Dominion Bank’s second-quarter results showcased strong revenue growth and adjusted profit performance, despite challenges posed by one-time charges related to legal and restructuring costs. The bank’s ongoing cooperation with U.S. regulators in addressing anti-money laundering concerns underscores its commitment to regulatory compliance and transparency in its operations.

For investors and stakeholders, TD’s ability to navigate these challenges while maintaining solid financial performance highlights the resilience and adaptability of the bank in a dynamic regulatory environment. As TD continues to address the issues raised by the investigations, investors will be closely monitoring developments to assess the impact on the bank’s long-term growth prospects and reputation in the financial industry.