Toronto-Dominion Bank T.TD

BMO:Quick Look

[Dibah420]

March 3, 2022 | 09:21 ET~
TD Bank TD-TSX TD-NYSE Rating Market Perform Price: Mar-2 $101.49 Target $105.00 Total Rtn 7%
First Look at Q1/22 Results Bottom Line: Neutral. TD's adjusted cash EPS of $2.08 exceeded our/consensus estimates of $1.97/ $2.04. The beat to us was primarily in Canadian Banking (better credit and operating leverage) and Wholesale Banking (stronger trading). Total bank PCL ratio was 4bps (vs. our forecast 21bps).
Balance sheet remains strong with industry-leading CET1 ratio of 15.2%.
TD repurchased ~7.5mm shares in the quarter (15% of 50mm NCIB; since terminated with the First Horizon announcement - see link).
Key Points • PTPP income was up 7% y/y, reflecting 5% revenue growth y/y (higher feebased revenue and better margins); total bank-adjusted operating leverage of 1.9%.
Trading revenue was up 42% q/q to $726mm (strong FX and Equity), higher than our expectations of $540mm (trailing eight-quarter average of $652MM).
Total bank nontrading NIM was 318bps (up 14bps y/y; down 11bps q/q); spread-based income now makes up 54.2% of the bank’s revenues, a decline from 55.6% in the prior year.
Total bank NIX ratio of 56.0% vs 57.0% last year.
• Beat to us from Canadian P&C and Wholesale Banking with earnings at Canadian P&C up 15% y/y to $1,618mm, driven by strong loan growth (up 8% y/y), partly offset by lower margins (down 13bps y/y; mix).
Canadian Wealth & Insurance was relatively flat y/y, with noteworthy AUA growth (up 15% y/y) offset by lower direct investing transaction volumes. U.S. Retail (ex. SCHW) met us, up 29% y/y (lower PCLs, higher deposit volumes and lower expenses), despite lower margins.
Wholesale beat us, with relatively flat y/y earnings (higher expenses, partly offset by higher loan fees and prime service revenue).
• Weak Loan Growth Impacted by PPP Forgiveness. TD saw another quarter of weak loan growth reflective of PPP forgiveness, but there was improvement in its Canadian Banking business and RESL book (both up double digits y/y). • Conservative Credit Provisioning. The quarter included $72mm/4bps in PCLs (Stage 1&2: (14)bps; Stage 3: 18bps) and included a $257mm release in performing loans. Total allowances (specifics + collectives) now stand at ~$6.2bn or ~160bps of credit RWA (vs. "through the cycle" average of 121bps).
• Strong ROE Despite Higher Capital Levels. ROE of 15.9% for the quarter was driven by strong ROA of 86bps, not withstanding CET1 ratio of 15.2% (flat q/q).

Canadian Banks Sohrab Movahedi Analyst [e-mail] [phone] Ally Zhou,