Toronto-Dominion Bank reported Thursday what analysts called solid results for its fiscal third quarter, which ended July 31, but analysts said its U.S. banking business continues to rely largely on cost cuts for earnings growth.
Toronto-Dominion got $101 million of earnings from its TD Banknorth unit in Portland, Maine, during the three months that ended June 30. The $122 billion-asset Canadian company said the unit's contribution to its fiscal third quarter results rose 65.6% from a year earlier. Last year, Toronto-Dominion owned just a minority stake in TD Banknorth, but on April 20 it bought the remaining shares.
TD Banknorth reported net income of $93.4 million a year earlier, and a comparison with the results reported Thursday is virtually impossible, since Toronto-Dominion no longer breaks out the same kinds of results for TD Banknorth. In the first quarter, the last period TD Banknorth reported results on its own, it earned $55.2 million.
But analysts said that the numbers Toronto-Dominion did disclose suggested that TD Banknorth's performance neither deteriorated nor improved much from the somewhat sluggish earnings reported in recent quarters. "Banknorth looks steady as she goes," said Brad Smith, an analyst at Blackmont Capital Inc. in Toronto. Brenda Lum, an analyst at the debt-rating agency DBRS Ltd., said the results were "as expected."
Both analysts said TD Banknorth is likely to continue to rely on expense cuts for a while rather than revenue growth. It has struggled with stiff competition for loans and deposits, and in the first three months of the year it embarked on a broad cost-cutting program.
TD Banknorth's chief executive, Bharat B. Masrani, said in an interview Thursday, "We see some revenue momentum," and the unit's cost-cutting has already improved efficiency.
Toronto-Dominion said credit quality in the United States worsened somewhat in the second quarter, mainly because of "a slowdown in the residential real estate construction market."
TD Ameritrade Holding Inc., in which Toronto-Dominion owns a 40% stake, said July 19 that second-quarter profit rose 12.4%, to $128.7 million. Its contribution to Toronto-Dominion's third-quarter results rose 7.3%, to $55 million. The Wall Street Journal reported Wednesday that TD Ameritrade is talking to E-Trade Financial Corp. about a deal. Toronto-Dominion's chief executive, Edmund Clark, said Thursday on a conference call that he would support TD Ameritrade's pursuit of a deal, though he said, "The key issues looking at deals are strategic." TD Ameritrade has remained a "pure play brokerage" and has done well as such.
