TD Results Later: Regulatory Issues, Weak Asset Quality Fears

Toronto-Dominion (TD: A1/A/AA-) results are due later today, just as the Canadian regulator is sounding a warning over the bank’s risk controls. This is clearly unhelpful and results last time were far from a credit positive, either. Spreads have underperformed since then.

• These are 2Q24 results (3M to 30-Apr-24) so we are set for some of the earliest April indicators on Canadian and US asset quality and banking performance. Results last time (29-Feb) were positive on revenues but loan losses missed (on weak US performance), NPLs were a little above expectation and CET1 came in sub-par.
• There is a story out today indicating Canadian regulators have asked TD to improve risk controls (unhelpful), which only adds to the list of regulatory fines and ongoing AML (anti-money laundering) remediation programme.
• TD’s EUR spreads are 23bp tighter YTD and 4bp tighter in the last month (underperforming €IG banks which are -48bp and -16bp, respectively). This is also weaker than RBC, marginally worse than BMO but better than NBC and BNS. The equity is down 10% YTD, 11pp weaker than Canadian banks more widely, too.
• Earnings estimates are broadly unchanged since last results, as are revenues.

Results are 1100 (London time) with conf call at 1300 on https://td.streamme.ca/Q22024