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What's in the Cards for Toronto-Dominion (TD) in Q2 Earnings?

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The Toronto-Dominion Bank TD is slated to announce second-quarter fiscal 2022 (ended Apr 30) results on May 26, before the opening bell. The company’s earnings are expected to have decreased on a year-over-year basis.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results were supported by higher revenues, lower provisions and a rise in loan balance. However, an increase in expenses acted as an undermining factor.

In a major development in the reported quarter, Toronto-Dominion announced an all-cash deal to acquire First Horizon Corporation FHN for $13.4 billion. TD anticipates the acquisition to close by Nov 1.

Following the completion, on a pro-forma basis, excluding merger adjustments, the acquisition of FHN will make TD's U.S. franchise — TD Group US Holdings — one of the top six banks in the United States, with around $614 billion in assets and a network of 1,560 stores across a 22-state footprint.

Toronto-Dominion has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 7%.

Toronto Dominion Bank The Price and EPS Surprise

Toronto Dominion Bank The Price and EPS Surprise
Toronto Dominion Bank The Price and EPS Surprise

Toronto Dominion Bank The price-eps-surprise | Toronto Dominion Bank The Quote

The Zacks Consensus Estimate for fiscal second quarter earnings has been revised marginally lower over the past seven days to $1.47 per share. This indicates a decline of 9.3% from the prior-year reported number.

Factors at Play

Net Interest Income (NII): Overall demand for loans improved in the February-April quarter, mainly on the back of an improving economy. Further, the Bank of Canada raised the interest rates twice during the quarter. Thus, higher interest rates and gradually increasing loan demand are expected to have supported Toronto-Dominion’s NII.

Investment Banking Revenues: Unlike the past several quarters, deal-making came to a grinding halt in the fiscal second quarter as the ongoing Russia-Ukraine conflict and raging inflation numbers weighed on business sentiments globally. Thus, Toronto-Dominion’s advisory fees are likely to have been adversely impacted.

Similarly, the IPOs and follow-up equity issuances dried up as equity market performance turned disappointing. On the other hand, bond issuances are likely to have been decent. Hence, growth in Toronto-Dominion’s underwriting fees is likely to have been healthy in the fiscal second quarter.

Trading Income: Due to persistent macroeconomic and geopolitical issues, equity markets witnessed a significant rise in volatility and higher client activity in the fiscal second quarter. Also, fixed income markets’ performance remained decent amid concerns related to inflation. Thus, Toronto-Dominion’s trading revenues are likely to have been impressive in the to-be-reported quarter.

Provisions: With the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, Toronto-Dominion is expected to have built reserves in the fiscal second quarter.

What Our Model Predicts

Our proven model does not conclusively predict an earnings beat for Toronto-Dominion this time around. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Toronto-Dominion is 0.00%.

Zacks Rank: The company currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

HSBC Holdings HSBC reported first-quarter 2022 pre-tax profit of $4.2 billion, down 27.9% from $5.8 billion recorded in the prior-year quarter.

HSBC’s results were primarily hurt by a decline in adjusted revenues, partly offset by lower expenses. The expected credit losses and other credit impairment charges (ECL) were a charge in the quarter under review against a release in the prior-year quarter, which was another headwind.

ICICI Bank’s IBN fourth-quarter fiscal 2022 (ended Mar 31) net income was INR70.19 billion ($926 million), jumping 59% from the prior-year quarter.

Results were driven by a rise in net interest income, non-interest income and growth in loans and deposits. Provisions also declined during the quarter. However, higher operating expenses posed a headwind for IBN.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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ICICI Bank Limited (IBN) : Free Stock Analysis Report
First Horizon Corporation (FHN) : Free Stock Analysis Report
Toronto Dominion Bank The (TD) : Free Stock Analysis Report
HSBC Holdings plc (HSBC) : Free Stock Analysis Report
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