TORONTO-DOMINION BANK $39 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 810.1 million; Market cap: $31.6 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) is the second-largest Canadian bank, with assets of $563.2 billion. Like Royal, TD has built up its U.S. operations over the past few years. It has focused more on retail banking, however, which is more stable than brokerage services or wealth management. Retail banking in Canada and the U.S. now accounts for roughly 80% of TD’s earnings.
Writedowns hurt 2008 earnings
TD is not immune to the current financial crisis. In fiscal 2008, earnings at TD’s wholesale banking division fell 92%, due to $350 million in trading losses and writedowns of illiquid securities. Even if you disregard all unusual items, TD’s earnings still fell 8.9%, to $3.8 billion from $4.2 billion. Per-share earnings declined 15.1%, to $4.88 from $5.75 on more shares outstanding. Loan-loss provisions jumped 64.8%, to $1.1 billion from $645 million. Bad loans now represent 0.52% of TD’s total loan portfolio, up from 0.32% a year earlier. TD’s earnings will probably improve to $5.31 a share in 2009, and the stock trades at 7.3 times that figure. The $2.44 dividend yields 6.3%. TD Bank is a buy.
