(Bloomberg) — Toronto-Dominion Bank missed estimates on weak performance in the lender’s US banking operations and said it’s suspending growth guidance amid a reassessment of business priorities in the wake of a historic money-laundering settlement with US authorities.
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Canada’s No. 2 lender earned C$1.72 per share on an adjusted basis in its fiscal fourth quarter, according to a statement Thursday, missing the C$1.83 average estimate of analysts in a Bloomberg survey.
Net income at its US retail unit totaled C$863 million ($614 million) for the three months through October, down 32% and less than analysts expected, during what the bank called a “challenging quarter” for the business. In the firm’s capital-markets division, adjusted net income totaled C$299 million, missing the C$379 million average of analysts’ estimates.
Toronto-Dominion “is currently undertaking a strategic review of organic opportunities and priorities, productivity and efficiency initiatives, and capital allocation alternatives,” the bank said in the statement. During the review, the lender is suspending medium-term financial targets for earnings growth, return on equity and operating leverage.
Provisions for credit losses totaled C$1.11 billion, in line with analysts’ forecast.
The bank has been operating under the overhang of sweeping US investigations for well over a year, and finally resolved those cases in October after pleading guilty to failing to prevent money laundering by drug cartels and other criminals. It also agreed to pay almost $3.1 billion in fines and other penalties and faces a cap on its American assets.
Just weeks before that resolution, Toronto-Dominion announced plans for Chief Executive Officer Bharat Masrani to retire next April. He’ll be replaced by Raymond Chun, who spent three decades across the bank’s operations.
“We believe that Mr. Chun has to restore morale in addition to revamping the bank’s strategy,” RBC Capital Markets analyst Darko Mihelic wrote in a report last month.
With the US asset cap in place indefinitely until lifted by American banking regulators, Toronto-Dominion’s stock is trading at a steep valuation discount to its peers — something likely to continue for the foreseeable future, Mihelic said.
Toronto-Dominion last month pre-announced higher-than-normal catastrophe-loss claims in its insurance business, saying it expects that figure to total C$388 million after reinsurance and before taxes in the quarter. The bank missed analysts’ estimates on adjusted earnings in the fiscal third quarter largely because of a jump in insurance claims owing to extreme weather and wildfires.
