TD Bank's quarterly net income slips to $1.01 billion; CEO defends strategy

By David Friend, The Canadian Press

TORONTO - TD Bank Financial Group (TSX: TD.TO) saw its quarterly profit decline to $1.01 billion after its first major writedown related to the credit crisis, but the bank's CEO defended his strategy in a tough economy.

The bank's earnings in its fourth quarter ended Oct. 31 were down 7.3 per cent from $1.09 billion a year ago. The results included a $350-million credit loss disclosed last month.

"In this environment, our strategy has been the right one," president and chief executive Ed Clark stated.

"We remain conservatively positioned with over 90 per cent of our earnings coming from retail businesses."

Earnings per share were $1.22, down by 19 per cent from $1.50 a year ago. EPS adjusted for one-time items slumped 44 per cent to 79 cents, as adjusted earnings fell to $665 million, compared with $1.02 billion a year ago.

TD said revenue was $3.64 billion, up from $3.55 billion a year earlier - but down from $4.04 billion in the third quarter of this year.

The bank said the quarter reflected solid contributions from its Canadian and U.S. retail businesses, while "illiquid and volatile markets impacted results in wholesale banking."

It also benefited from one-time items, including a $323-million after-tax reduction in reserves put away for potential Enron-related litigation. There also were after-tax gains of $118 million on changes in fair value of hedging derivatives, and $59 million on credit default swaps. These were partly offset by $126 million in amortization of intangibles and $25 million in restructuring and integration items.

Provision for credit losses more than doubled to $288 million from $139 million.

TD's full-year revenue was $14.67 billion, up from $14.28 billion, with reported net income of $3.83 billion, down from just under $4 billion.

For the quarter, domestic consumer banking posted a five per cent rise in profit to $600 million.

In the United States, the consumer banking division posted profits of $276 million - up 123 per cent - on the acquisition of Commerce Bank.

"Looking at next year, while we can't outrun a recession, our U.S. retail operations are demonstrating that they can perform and grow even in what many are calling the toughest operating environment for financial services in U.S.," Clark said.

TD's wealth management division posted a $170-million fourth-quarter profit, off from $194 million a year ago.

"As the economy slows, understandably there's concern from governments and the public that banks may restrict credit," Clark commented in releasing the results.

"What's clear from our reporting today is that TD continues to supply credit to its customers and clients," he added.

He said personal and commercial lending in Canada has continued to grow at an accelerating rate through 2008, despite a general slowdown in credit expansion.

"While the lack of visibility on the economic environment calls for caution, we have a strategy and competitive position that will help us weather the storm."

TD shares gained as much as 2.9 per cent in morning TSX trading but at midafternoon slipped 36 cents to $42.14, down from $74.50 a year ago.