The Toronto-Dominion Bank’s TDsecond-quarter fiscal 2018 (ended Apr 30) adjusted earnings were C$1.62 per share, up 21% year over year. Also, adjusted net income rose 20% year over year to C$3.1 billion ($2.4 billion).
Improvement in revenues was partially offset by higher provisions and a modest rise in operating expenses.
After considering certain non-recurring items, net income was C$2.9 billion ($2.3 billion), up 17% from the prior-year quarter.
Revenues, Provisions & Expenses Increase
Total revenues (on an adjusted basis) came in at C$9.5 billion ($7.4 billion), up 12% year over year. The rise was attributable to growth in net interest income, as well as non-interest income.
Adjusted net interest income grew 7% year over year to C$5.4 billion ($4.2 billion). Also, adjusted non-interest income came in at C$4.1 billion ($3.2 billion), jumping 21% from the year-ago quarter.
Adjusted non-interest expenses flared up marginally year over year to C$4.7 billion ($3.7 billion).
Adjusted efficiency ratio was 50.1% at the quarter end, down from 55.8% as of Apr 30, 2017. A decline in efficiency ratio indicates an improvement in profitability.
Total provision for credit losses increased 11% year over year to C$556 million ($436 million).
Strong Balance Sheet
Total assets came in at C$1.28 trillion ($1 trillion) as of Apr 30, 2018, up 2% from the prior quarter. Net loans grew 2% sequentially to C$622 billion ($484. 7 billion), while deposits rose 2% to C$829.8 billion ($646.6 billion).
Profitability and Capital Ratios Improve
Return on common equity, on an adjusted basis, came in at 17.6%, up from 14.8% as of Apr 30, 2017.
As of Apr 30, 2018, common equity Tier I capital ratio was 11.8%, up from 10.8% in the prior-year quarter. Total capital ratio came in at 15.8% for the reported quarter, up from 14.9% as of Apr 30, 2017.
Our Viewpoint
TD Bank’s efforts toward improving revenues, both organically and inorganically, are supported by its strong capital position. Though elevated level of provisions remains a concern, the export-driven economy of Canada is likely to benefit from gradual recovery of the U.S. economy. This, in turn, might aid the Zacks Rank #3 (Hold) company’s growth over the long run.