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Toronto-Dominion Eases Concerns, Beats Estimates

Summary

Q3 earnings beat on both top and bottom lines.

Provision for credit losses are showing signs of stabilizing.

U.S. Retail division continues to post strong results.

Four of Canada's largest banks, Bank of Montreal (NYSE:BMO), Royal Bank of Canada (NYSE:RY), CIBC (NYSE:CM) and Toronto-Dominion (NYSE:TD), released earnings this week. All four banks beat earnings expectations and grew revenues year-to-date ("YTD"), defying expectations once again despite low oil prices and a slumping Canadian economy.

Earlier this week I wrote an article outlining some factors to consider prior to TD's earnings release. Post-earnings, here are my thoughts on the recent quarter.

Key Numbers:

  • EPS rose 5.8% to C$1.27 from C$1.20 a year earlier;
  • Revenue rose 8.7% to C$8701 million from C$8006 million a year earlier;
  • Dividends per share of C$0.55 - unchanged.

Provision for Credit Losses ("PCL") & Delinquency Rates

Despite persistently low oil prices, PCLs are showing signs of stabilizing. Although PCLs increased 27% YOY from C$437 million to C$556 million, TD saw a 6% decrease in PCLs quarter-over-quarter. The impact of low oil is not having as large as an effect on bank earnings as feared, however with oil prices remaining persistently low, investors should continue to scrutinize banks to determine how they are faring in a low-oil environment.

As mentioned in my previous article, delinquency rates among Canadians have been on the rise and I was wondering what impact this may have on their Canadian retail earnings...


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