Update: TD Bank Reports Q2 Adjusted Earnings Beat With Canada Ops Buoyed By Lower PCLs; Lifts Dividend
(updates on performance across business units and TD economic outlook from paragraph 11)The Toronto-Dominion Bank (TD.TO), the last of Canada's Big Six banks to report for the second quarter period, reported Thursday increased adjusted earnings that were boosted by a record contribution from Canadian Personal and Commercial Banking, primarily reflecting higher revenue and lower provisions for credit losses, while it declared a higher dividend.For Q2, TD said its adjusted diluted earnings per share stood at C$2.38, compared with $1.97 in the prior year period. FactSet had forecast $2.26. Meanwhile, adjusted net income jumped to $4,168 million, versus $3,626 million in the same period last year.Reported diluted earnings per share were $2.43, compared with $6.27, while reported net income was $4,251 million, versus $11,129 million.It had total revenues of $15,797 million compared to $22,937 million in the year earlier period. Total revenue adjusted was $16,037 million versus $15,138 million. It exceeded FactSet analysts' estimates of $14,524.3 million.The second quarter reported earnings figures included the following items of note: amortization of acquired intangibles of $33 million ($25 million after tax or 1 cent per share), compared with $43 million ($35 million after tax or 2 cents per share) in the second quarter last year. It also reported an impact from the terminated First Horizon Corporation (FHN) acquisition-related capital hedging strategy of $43 million ($33 million after tax or 2 cents per share), compared with $47 million ($35 million after tax or 2 cents per share) in the second quarter last year. Also, it included income tax adjustment on gain on sale of The Charles Schwab Corporation (Schwab) shares of ($288) million (($288) million after tax or (17) cents per share) and change in partnership share in the U.S. strategic cards portfolio of $197 million ($147 million after tax or 9 cents per share).Among other Q2 highlights, adjusted return on common equity, a measure of profitability and efficiency, widened to 14.4% from 12.3% in the same period last year. TD's Common Equity Tier 1 Capital ratio was 14.3%.The bank declared a dividend of $1.12 per payable on and after July 31, 2026, to shareholders of record at the close of business on July 10, 2026. It was up from $1.08 In prior quarter.PCL for the quarter was $498 million, a decrease of $124 million compared with the second quarter last year. PCL - impaired was $465 million, an increase of $37 million, or 9%, largely reflecting credit migration in the consumer lending portfolios, partially offset by lower provisions in the commercial lending portfolio. PCL - performing was $33 million, a decrease of $161 million compared with the second quarter last year."This was another strong quarter for TD. We drove record Q2 earnings in Canadian Personal and Commercial Banking, all-time high earnings in Wealth Management and Insurance and Wholesale Banking, and we accelerated momentum in U.S. Banking. We demonstrated disciplined execution as we grew return on equity and delivered our fourth consecutive quarter of positive operating leverage, on an adjusted basis. We also continue to make consistent progress on our AML remediation and enhancements, which remain our top priority," said Raymond Chun, CEO of TD Bank Group."Our bank has momentum, and we are making important investments in talent, innovation, AI and client experience, as we fundamentally restructure our cost base to drive performance and continue winning," added Chun.The U.S. Banking reported net income was $813 million, an increase of $771 million year-on-year. On an adjusted basis, net income was $960 million, an increase of 8% year-over-year. "U.S. Banking performance was supported by growth across core lending portfolios, including double-digit growth year-over-year in middle market commercial lending and TD's proprietary credit card balances," TD said.The Wealth Management and Insurance unit's net income stood at $837 million, up 18% year-over-year, driven by record assets, higher insurance earned premiums, and deposit volume growth.TD said its Wholesale Banking reported net income of $612 million for the quarter, up 46% year-over-year on a reported basis and 38% year-over-year on an adjusted basis, reflecting higher revenues and lower PCL, partially offset by higher non-interest expenses.In its economic guidance, TD said the global economic outlook continues to slow in calendar 2026."The conflict in the Middle East and resulting surge in oil prices has already lifted inflation and is expected to continue to put downward pressure on global growth. The conflict has also increased volatility in financial and commodity markets due to uncertainty over the duration of restricted oil flows through the Strait of Hormuz and elevated oil prices. While some economies, including parts of Europe, may see a modest pickup in economic activity from higher government spending later in the year, the near-term fallout from the oil supply crunch will remain a dominant theme weighing on growth in much of Asia and Europe," it added.The lender noted that Canada's economy has continued to expand at a modest pace. The impact of U.S. tariffs is evident both directly, via weaker exports in affected sectors, and indirectly, through elevated uncertainty that has tempered hiring and delayed some investment decisions."Overall, Canada's labour market has shown a lack of dynamism. Slower population growth has reduced labour force growth, which has kept the unemployment rate in a still-elevated range of 6.5%-7%. Looking ahead in 2026, a modest improvement in the economy is expected alongside a gradual improvement in housing activity, public infrastructure and defense outlays, and some firming in business investment," TD said.Shares of the bank closed down $0.31 at $155.13 in Toronto on Wednesday.