TD Bank: US Credit Quality Weaker But No Meltdown. Credit Neutral.

Toronto-Dominion (TD CN) 1Q24 results missed at the headline level but were perhaps better underlying. Credit metrics appear as expected so we’d see these as credit neutral, in line with the other Canadian banks which have reported over the last 48 hours.

• Key credit metrics: credit losses are up 5bp to 44bp (most of the rise is in the US), gross non-performers are up 4bp (to 40bp) and CET1 ratio is 50bp lower (at 13.9%, consensus: 14.15%). So no meltdown, these feel broadly credit neutral.
• Adjusted revenues were 4% above consensus (+5% y/y), costs were around 2% worse (+12% y/y) and credit losses were around 6% weaker (+45% y/y). Between restructuring and the FDIC charge, net income missed by c.10% but, ex-FDIC one-off, would have beaten expectations.
• Outlook: there is no meaningful forward guidance here but underlying results would have been ahead of consensus, so there is some chance of an upgrade here.