TD Flash Note Impact PositiveRecord Quarterly Earnings Reflective of AUMA Growth Graham Ryding, CFA Rasib Bhanji, CFA, (Associate) Event Q2/21 Results
Impact: POSITIVE Adjusted EPS of $0.99 was above our $0.96 estimate (consensus was the same) and a quarterly EPS record. This compares with $0.85 q/q and $0.77 y/y. We believe this illustrates that IGM is positioned to deliver earnings growth in 2021/2022, an area that has been lacking in previous years. The contributions from wealth (IG and IPC), asset management (Mackenzie), and strategic investments (Great-West, China AMC, Northleaf, and Fintech) were all above expectations.
Revenue of $844mm was above our $832mm estimate (up 5% q/q and 19% y/y). Wealth and asset management fees were above our estimates, as was strategic investments income.
Expenses of $537mm were slightly below our $539mm estimate. 2021 expense guidance was increased slightly (~4% excluding acquisitions and pension expense increase, up from ~3% previously). This entirely relates to the variable component of business development expense at Mackenzie, reflecting the very strong sales ytd (management flagged this expense relationship previously).
AM/WM EBITDA of $328mm was above our $312mm estimate. This is up from $287mm q/q and $245mm y/y. Margins of 41.4% were above our 39.9% forecast, and up from 38.0% q/q and 37.1% y/y. Retail fund flows (previously reported) were strong at +$1.9bln (implies a solid 3.4% organic growth rate annualized). This is up from +$0.9bln y/y.
Total flows, including AUA and institutional flows, were $2.5bln (4.1% organic growth rate). This reflects +$0.8bln from wealth (IG) and +$1.8bln from asset management (Mackenzie).
Mackenzie's inflows have been supported by strong flows into growth, sustainable, and fixed income mandates. Value mandates continue to be in redemption. Fund performance over the past year has fallen off slightly relative to the three-year/five-year periods.
Ending AUMA of $262bln is up 5% q/q and 23% y/y (ex acquisitions).
Strategic investments revenue of $49mm was slightly higher than our $47mm estimate. China AMC earnings are up 46% y/y. Northleaf raised another $1.7bln in private equity/credit/infrastructure commitments (9% AUM increase). Wealthsimple growth remains very strong (AUA of $15.3bln is up 115% y/y),
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