TD Bank Group shares were trading up almost 5% Thursday afternoon after the bank reported fourth-quarter earnings that surprised to the upside and it raised its dividend by 13%.
The bank was trading up $4.44 or 4.8% at $96.38 on the Toronto Stock Exchange at midafternoon, boosted by a combination of its results and a wider market rally.
TD reported a rise in earnings in part from its U.S. division where it saw higher margins on loans, while Canadian retail banking also inched up amid increasing client activity and credit card spending.
“We have strong customer activity that is driving volume and revenue growth, and we feel very good about that,” said Kelvin Tran, chief financial officer, in an interview.
The bank said Thursday it will now pay a quarterly dividend of 89 cents per share, up from 79 cents per share. TD also says it plans to buy back up to 50 million of its shares.
The decision came after the federal banking regulator lifted restrictions last month on dividend increases, share buybacks and increases in executive compensation that were put in place at the start of the pandemic.
TD reported a net income of $3.8 billion in the fourth quarter, down 26% compared with last year when its earnings were bumped up by the sale of its investment in TD Ameritrade. Adjusted earnings were $3.9 billion, up 30% from last year.
On an adjusted basis, TD says it earned $2.09 per diluted share, up from an adjusted profit of $1.60 per diluted share in the same quarter last year.
Analysts on average had expected an adjusted profit of $1.96 per share, according to financial markets data firm Refinitiv.
Scotiabank analyst Meny Grauman said in a note that the estimate beat was notable because other Canadian banks so far have missed.
“In a sea of misses not only is the earnings per share beat refreshing, but is likely to stand out on earnings day.”
He said that while the quarterly results are positive, for the year TD had much more modest financial gains and the question now is how sustainable the results from the quarter are going foward.
Barclays analyst John Aiken said in a note that a good portion of the earnings beat was from lower than expected provisions as the bank reported a $123-million reversal of its provisions for credit losses.
He said however that the bank’s market platform also performed well and the bank benefited from a five basis point margin expansion in its U.S. retail, even though average loans were down slightly.
“We believe that the margin expansion in the U.S. as well as a better than expected increase in the dividend should garner some positive attention.”
TD said its Canadian retail business earned $2.1 billion, up from a profit of $1.8 billion in the same quarter last year, while its U.S. retail business earned nearly $1.4 billion, up from $871 million a year ago.
Wholesale banking at TD, which includes its capital markets and investment banking business, earned $420 million, down from a profit of $486 million in the same quarter last year.
For its full year, TD said it earned $14.3 billion or $7.72 per diluted share on $42.7 billion in revenue, compared with a profit of $11.9 billion or $6.43 per diluted share on $43.6 billion in revenue a year earlier.