TORONTO-DOMINION BANK $74(Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 878.5 million; Market cap: $65.0 billion; Price-to-sales ratio: 2.6; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.td.com) is Canada’s second-largest bank, with total assets of $619.5 billion.
TD recently agreed to buy privately held Chrysler Financial, which provides car loans and leases to buyers of Chrysler vehicles in Canada and the U.S. The purchase will make TD one of the top five car-loan providers in North America.
The bank will pay $6.3 billion U.S. for Chrysler Financial when the deal closes in April 2011. This purchase will let TD profit from rising new-car demand. It will also add $100 million to TD’s annual earnings, starting in fiscal 2012.
This is a big purchase for TD, which earned $5.2 billion (Canadian) in fiscal 2010. That’s up 10.9% from $4.7 billion in fiscal 2009. Earnings per share rose 7.9%, to $5.77 from $5.35, on more shares outstanding. These figures exclude unusual items, such as costs to integrate South Financial Group, Inc., which TD bought in September 2010. South operates branches in Florida and the Carolinas.
TD’s revenue rose 9.6% in fiscal 2010, to $19.6 billion from $17.9 billion in fiscal 2009.
The bank continues to set aside less money to cover bad loans. That’s the main reason why earnings at its retail-banking business rose 53.7% in the U.S. and 25.2% in Canada. Earnings from wealth management rose 7.4%. However, earnings from TD’s trading business fell 23.8%, due to lower trading volumes, a drop in underwriting activity, and fewer gains from its investment portfolio.
TD has risen 5% since it announced that it is buying Chrysler Financial. The shares trade at 11.6 times TD’s likely 2011 earnings of $6.40 a share.
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