TD Banknorth Inc., which reported first-quarter results that it acknowledged were lackluster, said it is undertaking a set of initiatives with the help of its parent company to enhance its product lineup and service levels.
Earnings fell 27.6% from a year earlier, to $55.2 million, largely because of charges related to acquisitions and cost-cutting efforts, the $41.2 billion-asset Portland, Maine, unit of Toronto-Dominion Bank said Monday. Its outlook for credit quality and competition for loans and deposits remained downbeat.
“Our earnings are not where we would like them to be,” Bharat B. Masrani, TD Banknorth’s president and chief executive, said on a conference call. “We are not sitting idly by, hoping the environment changes around us.”
Some of the planned changes include investments in new products and improvements to sales and service. One project executives discussed Monday involves opening a private-label card business, through which TD Banknorth would issue consumer and small-business credit cards starting in the fall.
Mr. Masrani said he would provide more details on the new initiatives at TD Banknorth’s June 28 investor day.
For the quarter, it booked $20.9 million of expenses related to its Jan. 1 acquisition and integration of Interchange Financial Services Group Corp. and some branch closures.
TD Banknorth’s loan-loss provision doubled from the fourth quarter and quadrupled from a year earlier, to $31.8 million. Net chargeoffs rose 39% from the fourth quarter and tripled from a year earlier, to $19.7 million. Mr. Masrani expects quarterly chargeoffs of $15 million to $20 million for the foreseeable future.
Mario Mendonca, an analyst of Genuity Capital Markets, said he was reassured by TD Banknorth’s prediction that chargeoffs would pull back from their highs. He also said the willingness to talk about improvements struck him as an encouraging change in style from previous calls held by TD Banknorth and Toronto-Dominion executives.
“What this management team has historically done is get on the call and talk about all the bad stuff and never give us any sense for what the good stuff is,” he said. “Something’s changed in them.”
Financial reporting by the companies has been somewhat complicated since Toronto-Dominion took a majority stake in TD Banknorth in 2005, because their calendars do not align. TD Banknorth’s first-quarter earnings are part of Toronto-Dominion’s results for its fiscal second quarter, which ended April 30. Toronto-Dominion, which bought the rest of TD Banknorth in April, expects to release its results May 24.
