TORONTO Toronto-Dominion Bank (TD.TO)
reiterated its cost-savings outlook from its recent Commerce
Bancorp purchase and lifted its full-year U.S. earnings
forecast, leaving analysts relieved that the bank's U.S.
business isn't worsening.
TD, Canada's third-largest bank by assets, said on Monday
that it expects net income from its U.S. personal and
commercial banking segment to be at least C$750 million ($745
million) in fiscal 2008, up from a previous estimate of C$700
"We view this very positively in light of the difficult
environment faced by U.S. banks," Dundee Securities analyst
John Aiken said in a research note.
Investors appeared to agree. TD shares were up 83 Canadian
cents, or 1.3 percent, at C$65.77 by early afternoon on the
Toronto Stock Exchange. That topped the S&P/TSX financial
index's 0.8 percent rise.
For fiscal 2009, TD's target net income for the U.S.
segment is "at least" C$1.2 billion, unchanged from a previous
estimate, but a bank executive said earnings could turn out to
"In fact you should think of C$1.2 billion as a starting
point," Chief Financial Officer Colleen Johnston said on a
conference call. "We won't be satisfied at this level."
As for New Jersey-based Commerce Bancorp, which the
Canadian bank acquired on March 31, TD reiterated that it
expects cost savings of $310 million before tax, to be realized
by the end of fiscal 2009.
Ongoing restructuring and integration charges will amount
to $420 million pre-tax over the next two or three years and
will affect its income statement, TD said. The bank's earnings
forecasts exclude such restructuring charges.
TD said it expects second-quarter earnings from U.S.
personal and commercial banking to be C$130 million, excluding
contributions from Commerce. That compares with C$127 million
in the first quarter.
TD's second quarter ends April 30, and it will report
results on May 28.
"I recognize that some people are still worried about our
business in the United States," President and Chief Executive
Ed Clark said on the conference call.
But despite fears of a U.S. recession and integration
concerns, as well as a "tough period" ahead for loan-loss
provisions, Clark said that TD will still be a "positive
outlier" -- in other words, it will exceed industry
The bank said it sees the third-quarter net income "run
rate" for its U.S. segment at around C$250 million, assuming
the Canadian and U.S. dollars are at par. This will include
contributions from Commerce, reported with a one-month lag.
Bharat Masrani, president and CEO of TD Commerce Bank --
the new name for the U.S. retail operation -- said TD is
comfortable with its $29.7 billion commercial lending
portfolio, including having 36 percent of the portfolio
composed of investment real estate loans.
The real estate loans are diversified by property type and
by geography, Masrani noted.
"We have limited exposure to the markets hardest hit by the
current economic conditions," Masrani said.
Robert Sedran, an analyst at National Bank Financial, noted
that TD's Banknorth unit is seeing higher loan loss provisions,
consistent with other U.S. banks.
However, "the fact that TD is looking for this segment to
be slightly better than originally announced should be viewed
positively, in our opinion," Sedran said in a research note.
(Additional reporting by John McCrank; editing by Rob