Toronto-Dominion Bank $69 – Toronto symbol TD

TORONTO-DOMINION BANK $69 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is Canada’s second-largest bank with $392.9 billion in assets.

Like Royal Bank, TD has expanded its American operations in the past few years. These businesses now provide around 45% of TD’s income,

In 2006, TD combined the U.S. operations of its TD Waterhouse discount brokerage subsidiary with rival Ameritrade to form TD Ameritrade. TD owns 39.8% of this operation, which is now among the top three discount brokers in the U.S.

TD is also expanding its U.S. retail banking business. It currently owns 57% of publicly traded TD Banknorth, which operates 600 branches in eight northeastern states. TD now aims to buy the rest of TD Banknorth for $3.6 billion.

This is a huge purchase for TD, which earned $1.04 a share (total $762 million) in the three months ended October 31, 2006. It earned $0.82 a share ($589 million) in the year-earlier period, which works out to a 26.8% gain. Revenue rose 6.5%, to $3.3 billion from $3.1 billion.

TD’s current dividend of $1.92 yields 2.8%. The Banknorth acquisition could hurt TD’s ability to raise it in 2007. But savings from a cost-cutting plan should free up more cash for dividends. In fact, TD’s efficiency ratio in the latest quarter improved to 66.4% from 71.5% a year earlier.

TD will probably earn $5.23 a share in fiscal 2007, and the stock trades at 13.2 times that figure.

TD Bank is a buy.

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