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Profitable TD ‘feeling quite good'

Globe and Mail Update

Toronto-Dominion Bank reported second-quarter profit of $618-million on Thursday, compared to $852-million a year ago, as the amount it set aside for soured loans nearly tripled.

Factoring out one-time items, the bank's earnings per share came in at $1.23, slightly above analysts' estimates.

Chief executive officer Ed Clark said the company is holding up well under the weight of the recession. “With adjusted earnings over $1-billion again this quarter, we're feeling quite good about these results,” he said.

The bank's effective tax rate was only 5.7 per cent this quarter, compared with 16.8 per cent a year ago. It paid $35-million in taxes for the three months ended April 30, down from $160-million.

“Relative to our expectations, TD's results were best of the four banks that have reported so far,” RBC Capital Markets analyst Andre-Philippe Hardy said in a note to clients.

TD boosted its provisions for loan losses to $656-million in the quarter, compared to $232-million a year earlier, as the recession weakened the outlook for the bank's unsecured lines of credit and credit card portfolios in Canada, and its commercial real estate exposure in the U.S. Provisions were $537-million in the prior period.

The bank's Canadian lending business brought in $589-million, up one per cent from a year ago. Higher provisions for troubled loans were offset by revenue growth and cost control.

Wealth management operations, which include the bank's stake in TD Ameritrade, earned $126-million, a drop of 31 per cent. Market declines ate into results from the mutual fund and advisory businesses, and caused assets under management to decrease by $2-billion to $168-billion despite the addition of new clients.

TD's U.S. lending business earned $231-million, including profits from TD's $8.5-billion (U.S.) acquisition of New Jersey-based Commerce Bancorp, whose results weren't included in the Canadian bank's until the third quarter of last year. Compared to the first quarter of this year, results were down four per cent.

“We remain cautious on the U.S. economic environment and so have increased our reserves prudently, which is reflected in higher provisions for credit losses,” Mr. Clark said.

TD's wholesale banking division earned $173-million (Canadian), up 86 per cent from a year ago, driven largely by trading profits. Those profits were partially offset by losses related to Mr. Clark's decision to wind down TD's public equity investment portfolio and redeploy the money into other areas.

More to come.

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