Toronto-Dominion's U.S. Unit Gets a Lift on Efficiency Gains

(Bloomberg) -- Toronto-Dominion Bank is getting a U.S. earnings boost, thanks to efficiency gains.

Fiscal fourth-quarter earnings from its U.S. retail division rose 11 percent to C$776 million ($602 million) from a year earlier, helping propel the division to record annual profit of C$3.32 billion, Canada's largest lender said in a statement Thursday. Toronto-Dominion has been benefiting from its best productivity levels in the U.S. since before the financial crisis.

“As the franchise matures, we have an ability to get much more efficient and productive," Chief Financial Officer Riaz Ahmed said in a telephone interview. “So some of that is just related to the maturity of the franchise, but also revenue growth continues a pace here that allows the scale benefits to materialize."

Toronto-Dominion, which has more branches in the U.S. than Canada, gets about a third of its annual profit from retail operations in that country. The U.S. division includes TD Bank and a 41.3 percent stake in online brokerage TD Ameritrade. The lender also added U.S. contributions from its takeover of Scottrade Bank, which it gained in September as part of a $4 billion acquisition with TD Ameritrade.

Banks calculate productivity using an efficiency ratio, which measures expenses as a percentage of revenue. The lower the ratio, the better. Toronto-Dominion's in U.S. retail reached 57.5 for 2017, its lowest in a dozen years, according to disclosures. A ratio of 57.5 means that for every dollar earned a bank spends 57.5 cents on costs.

Earlier Thursday, Canadian Imperial Bank of Commerce reported quarterly profit that topped analysts' expectations, led by gains in commercial banking and wealth management. Net income rose 25 percent to C$1.16 billion, or C$2.59 a share, from C$931 million, or C$2.32, a year earlier, the Toronto-based bank said in a statement. Adjusted earnings were C$2.81 a share, compared with the C$2.61 average estimate of 12 analysts surveyed by Bloomberg.

Here's a summary of Toronto-Dominion's fourth-quarter results:

• Net income rose 18 percent to C$2.7 billion, or C$1.42 a share, from C$2.3 billion, or C$1.20, a year earlier. Adjusted profit, which excludes such items as costs associated with the Scottrade deal, was C$1.36 a share, missing by two cents the average estimate of 11 analysts surveyed by Bloomberg.
• Total revenue climbed 6 percent to C$9.27 billion, while non-interest expenses fell 0.4 percent to C$4.83 billion.
• Canadian retail, which includes domestic wealth management, posted quarterly profit of C$1.66 billion, up 11 percent.
• Wholesale banking earned C$231 million, compared with C$238 million a year earlier.
• Total full-year net income rose 18 percent to C$10.5 billion.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, David Scanlan at dscanlan@bloomberg.net, Steven Crabill, Larry DiTore

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