On Friday, BMO Capital maintained its Market Perform rating on Toronto-Dominion Bank (TD:CN) (NYSE: TD), with a steady price target of Cdn$84.00. The firm's analysis followed the bank's latest earnings report, which showed an adjusted cash earnings per share (EPS) of $2.05, excluding a significant anti-money laundering (AML) provision. This figure aligned with BMO Capital's and the consensus estimates of $2.05 and $2.07, respectively.
The bank's performance varied across different sectors. While the Canadian Personal and Commercial Banking and U.S. Retail segments outperformed expectations, the Canadian Wealth & Insurance and Wholesale Banking divisions fell short. The bank's Provision for Credit Losses (PCL) met predictions. The Common Equity Tier 1 (CET1) ratio stood at 12.8%, reflecting a balance between internal capital generation and capital impacts from the AML provision, share buybacks, and other activities.
Toronto-Dominion Bank's CET1 ratio was influenced by several factors during the quarter. The bank generated 25 basis points (bps) of internal capital, which was more than offset by a 71bps reduction due to the AML provision and a 19bps decrease from share buybacks. Notably, the bank announced that no further buybacks are planned under the current Normal Course Issuer Bid (NCIB).
In a strategic move to bolster capital, Toronto-Dominion Bank sold approximately 40.5 million shares of Charles Schwab Corporation (NYSE:SCHW), reducing its ownership stake to 10.1%. This sale generated around 54bps of capital in the fourth quarter of 2024. Despite these developments and the mixed financial performance in different divisions, BMO Capital saw no reason to adjust its rating or price target for the bank's shares.
In other recent news, TD Bank Group has announced steady third-quarter earnings for the fiscal year 2024, with a consistent revenue of $1.8 billion and earnings per share of $2.05. In light of ongoing anti-money laundering matters, the bank has allocated a $2.6 billion provision for potential fines, anticipating a resolution by year-end.
The Canadian Personal and Commercial Banking segment, as well as the Wealth Management and Insurance segments, reported record revenues. This is despite increased claims and expenses, with the U.S. Retail Bank maintaining strong operating momentum.
TD Bank Group has also sold shares in First Horizon (NYSE:FHN) and repurchased over 100 million shares, signaling a return for shareholders. The bank's Common Equity Tier 1 (CET1) ratio remained at 12.8%.
Analysts have noted the bank's focus on maintaining growth and peer-leading performance in its U.S. franchise. TD Bank Group foresees high single-digit adjusted expense growth for fiscal 2024.
InvestingPro Insights
As Toronto-Dominion Bank navigates through various strategic decisions and sector performances, real-time data from InvestingPro provides a deeper understanding of the bank's financial health. The bank's market capitalization stands robust at $102.32 billion, reflecting its significant presence in the industry. Despite concerns about cash burn and weak gross profit margins as noted in InvestingPro Tips, the bank boasts a history of dividend reliability, having maintained its dividend payments for an impressive 52 consecutive years. This is particularly notable as dividends are a key factor for income-seeking investors.
The bank's current P/E ratio is 18.6, which adjusts to a more attractive 14.4 when considering the last twelve months as of Q3 2024. This, coupled with a dividend yield of 5.12%, positions Toronto-Dominion Bank as a potentially appealing option for those focused on steady income generation. It's also worth noting that analysts predict profitability for the current year, which is consistent with the bank's positive performance over the last twelve months.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available, offering insights into the bank's financial trends and analyst expectations. With a keen eye on the bank's strategic moves and financial metrics, investors can make more informed decisions regarding their interest in Toronto-Dominion Bank.
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