TORONTO-DOMINION BANK $60 (Toronto symbol TD; SI Rating: Above average) is Canada’s second-largest bank, with $365.2 billion in assets. In its fourth fiscal quarter ended October 31, 2005, TD’s earnings fell 8.9% to $0.82 a share (total $589 million) from $0.90 a share ($595 million) a year earlier. If you disregard unusual items, per share earnings improved 16.5%, to $1.06 from $0.91. Revenue rose 19.2%, to $3.1 billion from $2.6 billion.
TD feels that U.S. banking offers an opportunity to expand its profits. Last year it paid about $5 billion for a controlling stake in U.S.-based Banknorth Group Inc. (now called TD Banknorth). This subsidiary now plans to pay $1.9 billion U.S. for Hudson United Bankcorp, which operates over 200 branches in the New York City area.
Meanwhile, TD plans to sell the U.S. operations of its TD Waterhouse online brokerage to rival Ameritrade. In exchange, TD will receive 32% of Ameritrade. It will also acquire Ameritrade’s Canadian brokerage business for $60 million U.S.
These moves should help TD’s fiscal 2006 profits grow to $4.47 a share, and the stock trades at 13.4 times that figure. The $1.68 dividend yields 2.8%.
TD Bank is a buy.