Toronto-Dominion Bank Rating, Price Target Left Unchanged by National Bank Following First Look at Q2
10:46 AM EDT, 05/23/2024 (MT Newswires) -- National Bank on Thursday left its "Sector Perform" rating and $84 price target on Toronto-Dominion Bank (TD.TO) unchanged after its first look at the bank's Q2. National noted "a beat" on earnings, but said the focus is on the bank's U.S. issues.
TD reported Q2 2024 cash EPS of $2.04, vs National's $1.90 forecast and consensus of $1.85. The beat came via higher
PTPP (plus $0.15), which included better-than expected Capital Markets revenue performance (up about $0.05, combined). However, National added, a large hedge gain (vs. a typical loss) explains the bulk of the beat.
National said the overall impact is Neutral, adding it will be looking for any increased cost guidance to TD's AML program. It noted TD's restructuring program was finalized and added credit metrics were "stable/unalarming", with higher than expected PCLs driven by Stage 1&2 provision additions.
On consolidated highlights, National noted AML could trigger even higher costs. "Given the greater attention this issue has attracted, including from Canadian regulators, we will be looking to hear if TD will upsize expected costs associated with its AML program," the analysts said. "We note the bank states that its US program is "well underway, and will strengthen our program globally."
Of other highlights, National noted the restructuring program was clarified. To offset higher AML costs, the bank has quantified the full size of it. Restructure charges are expected to total near $870 million, including this quarter's $165 mln (pre-tax) and another $50 mln during Q3 2024. Cost savings are expected to total $725 mln annualized, which "creates capacity to reinvest". National believe this statement indicates how TD is offsetting AML program costs, "at least partially."
On Provisions for Credit Losses (PCLs), National noted Total PCL of $1,071 million vs. its forecast for a PCL of $1,018 mln and consensus of $1,029 mln. Stage 1 & 2 of $201 mln (consensus of $94 mln), stage 3 provisions of $870 mln (consensus of $938 mln). 47bps PCL ratio (vs. 28bps at Q2 2023 and 44bps at Q1 2024).
On Valuation, National derives its $84 price target by applying a 10.5x P/E multiple to its 2025E EPS estimate.
TD's stock was down near 0.6% in Canada on last look, Thursday.
Price: 76.46, Change: -0.36, Percent Change: -0.46