Toronto-Dominion Bank (TSX:TD) has reported a big drop in earnings for the third quarter as “very strong performances” in many of its banking sectors were offset by losses on the insurance side.
Despite the results, which missed analyst expectations on both earnings and revenue, Canada’s second-largest bank boosted its quarterly dividend by four cents, or five per cent, to 85 cents per share.
TD said net income in the quarter was $1.53 billion or $1.58 per diluted share on revenue of $5.95 billion. That compared with $1.7 billion or $1.78 per share on $5.84 billion of revenue in the year-earlier period.
Adjusted diluted earnings were $1.59 billion or $1.65 per share, down 13 per cent from $1.82 billion or $1.91 per share in the same 2012 period.
Analysts on average expected $1.55 in adjusted earnings per share on revenue of $5.99 billion, according to a survey by Thomson Reuters.
The earnings figures included charges of $24 million relating to the acquisition of the credit card portfolio of MBNA Canada and a loss of $48 million after tax due to the impact of the Alberta flood on the loan portfolio.
TD’s personal and commercial banking section posted reported adjusted net income of $997 million in the third quarter, up 12 per cent compared to a year ago. The bank says this reflected continued good loan and deposit volume growth, favourable credit performance and effective expense management.
TD Insurance posted a third quarter loss of $243 million after tax, the result of charges of approximately $418 million after tax from a combination of severe weather-related impacts and increased general insurance claims.
The wealth and insurance division delivered net income of $7 million for the quarter, compared to $360 million in the third quarter last year. Higher earnings from wealth and TD Ameritrade were largely offset by losses in the insurance business.
“Our results this quarter demonstrate the strength of our diversified business model, as evidenced by very strong results in a number of businesses, the dividend increase announced today, and our higher capital ratio,” said president and CEO Ed Clark.
“For the remainder of the year, we will continue to manage expense growth while strategically investing in our businesses. I’m confident we have the right strategy, brand and team to deliver on our vision to be The Better Bank.”
Last month, TD Bank gave investors advance notice that it expected to book an after-tax loss of between $240 million to $290 million in the quarter as it recognized claims associated with recent severe flooding in Alberta and the Toronto area.
The bank also recently secured an agreement with Aeroplan rewards card operator Aimia Inc. (TSX:AIM) that will see it become the lead partner in credit cards, taking over for longtime partner CIBC (TSX:CM).
Some of the details of the new agreement haven’t been etched out, which means that CIBC could still retain at least part of its existing Aerogold customers who have other products with the bank, such as chequing accounts and mortgages.
TD Bank is one of North America’s largest retail banks, with operations across Canada and in several parts of New England and the U.S. northeastern and mid-Atlantic states.
Last fall, the bank announced it was acquiring the U.S. credit card portfolio of Target Corp. under a seven-year agreement. The portfolio has about five million active accounts under both Visa and private-label brands.