Source: The Canadian Press

TD Bank’s forecast for the global economy is a little more stormy for 2011, but chief executive Ed Clark expects the bank to weather the choppy waters ahead.

“I think we feel this kind of odd feeling that when you look at the world — I think you have to feel more nervous about the world than you felt six months ago,” Clark said told a meeting with financial analysts to discuss the bank’s fourth-quarter results.

“You have all of these big structural issues around the world, whether it’s the trade imbalance with China, fiscal problems in the U.S. and obviously the sovereign (debt) crisis in Europe. And yet, when we talk to our operators and we get down to the ground, people today would be more optimistic.”

“So on the ground we’re quite pleased with what we are seeing and how our operating business is actually operating,” he said.

The bank earned $994 million or $1.07 per diluted share for the three months ended Oct. 31 compared with a profit of $1.01 billion in the same period a year ago, or $1.12 a share.

TD (TSX:TD) said it was hurt by higher costs and weaker results at its wholesale banking division.

On an adjusted basis, stripping out one-time items, earnings per share were $1.38 compared with $1.46 in the prior-year period.

The average analyst estimate had been for a profit of $1.46 per share, according to those polled by Thomson Reuters.

TD’s overall revenue lifted to $5.02 billion, compared with estimates of $4.91 billion, with most of the bank’s major divisions — including its main operations in Canada and the United States — contributing to the growth.

Return on equity slipped to 9.7% from 11% a year ago.

National Bank raised its dividend to shareholders on Monday, but TD chose to hold steady with its current payment.

“Our dividend policy is linked to the board’s outlook on long-term sustainable growth in earnings rather than on capital levels,” said Clark, who noted the bank hoped to update investors on the situation after its next quarter.

TD Bank has steadily expanded its U.S. operations in recent years, up and down the East Coast.

It also owns about 40% of TD Ameritrade (Nasdaq:AMTD), a discount brokerage based in the U.S. Midwest. And earlier this year, TD picked up South Financial Group Inc., a bank in the U.S. southeast, for US$191.6 million.

“There is sufficient uncertainty about the macroeconomic environment and the regulatory environment in the United States that we’re probably still focused on small deals not large deals,” Clark said.

TD now has more than 1,000 branches throughout the U.S. Northeast, mid-Atlantic, Florida and Washington, D.C., areas.

Overall provisions for credit losses improved compared with the fourth quarter of 2009, when Canada was just beginning to come out of a major recession, but weakened from the third quarter of 2010 ended July 31.

However the bank’s provisions for bad loans were up from its third quarter.

The fourth-quarter provisions totalled $404 million, higher than the $339 million set aside in the third quarter, but below $521 million in the fourth quarter of 2009.

John Aiken of Barclays Capital said in a note that TD’s shares would likely take a hit because it is the only bank to have missed analyst expectations so far. Both National Bank (TSX:NA) and CIBC (TSX:CM) have also reported.

“Although we continue to have faith in the growth prospects of TD’s U.S. expansion, the impact on its credit and near-term earnings will likely continue to be a focus of the market,” he wrote.

Shares of TD Bank closed down $2, or 2.7%, at $73.29 on the Toronto Stock Exchange.

The notable weak spot for TD during the quarter was wholesale banking, which provides financial services to large corporate clients, mid-sized companies, real estate developers and investors.

In that division, revenue declined 24% to $677 million from $886 million in the fourth quarter of fiscal 2009.

The bank attributed the decrease to lower fixed income, credit and equity trading, and lower underwriting fees, partially offset by improved currency trading, investment banking income and gains in the investment portfolio.

“Wholesale results in the second half of the year returned to more normalized levels and are more reflective of what we expect to see going forward,” chief financial officer Colleen Johnston told the analysts.

For the full financial year ended Oct. 31, TD earned $4.6 billion in net income, rising from $3.1 billion in 2009. Revenue was $19.57 billion. up from $17.86 billion. TD’s Tier 1 capital ratio was 12.2%.