TORONTO-DOMINION BANK $62 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is the secondlargest Canadian bank, with $384.4 billion in assets.
Like Royal, TD is aggressively expanding in the U.S., mainly through subsidiary TD Banknorth Inc., which operates 400 branches in northern New England and upstate New York. TD now gets 8% of its revenue from the U.S. operations.
Also like Royal, TD is concentrating on markets close to its current operations. For example, TD Banknorth recently agreed to buy Interchange Financial Services Corp., which has 30 bank branches in northern New Jersey, for $480.6 million U.S. That will make TD Banknorth the ninth-largest bank in New Jersey, with around 130 branches.
TD Bank will help fund this purchase by buying $405.2 million U.S. worth of new TD Banknorth common shares. To put that in context, TD earned $1.15 a share (total $835 million) before unusual items in its first fiscal quarter ended January 31, 2006. The extra shares will increase TD’s stake in TD Banknorth, from 55.8% to 58.6%.
It will probably take a year before the new operations contribute to TD’s profits. In the meantime, strong growth at its Canadian retail banking and wealth management operations should lift TD’s profits in fiscal 2006 to $4.68 a share. The stock now trades at 13.2 times that figure. The $1.76 dividend yields 2.8%.
TD Bank is a buy.