Bank group says that earnings growth will be hard to generate in 2025
This is a year that TD Bank Group would probably like to put behind it, but the fallout from its tough 2024 is set to continue.
In its quarterly earnings report this week, the Canadian big six bank admitted that things are not going to be easy in terms of generating earnings in 2025, an outlook that disappointed investors. The fourth quarter dividend of $1.05 per common share is up just 3 cents from the previous quarter.
Following the bank’s guilty plea to US charges over its anti-money-laundering operations south of the border, TD was hit by a financial penalty of more than $3 billion and has also faced other regulatory actions.
And the forward warning that growing earnings will not be easy in the year ahead, Grant White, portfolio manager and investment advisor with iA Private Wealth, told BNN Bloomberg that TD is not an investment for now.
“I know a lot of people have been looking at this as perhaps a value opportunity, but I think this earnings report and the language that’s being used is exactly why we stayed away from this company as an investment option over the last year,” he said, adding that the bank will have a long way to go to rebuild investor trust.
Although he believes TD will be fine eventually, for now White says rebuilding trust is “going to be a process and it’s going to be a while, so this is one that I would steer clear of for a while as an investor because we just don’t know how far it goes, we don’t know how long it’s going to take and there’s a lot of work to do there.”
Quarterly results
TD’s fourth quarter results show reported earnings were $3.6 billion, up 26.8% compared with the fourth quarter last year, while adjusted earnings were $3.2 billion, down 8.0%.
"Despite a challenging quarter, we are pleased with the Bank's underlying fundamentals, which were reflected in our revenue growth. This quarter, we delivered higher fee income in our markets-related businesses, volume growth in Canada, and stable deposits in the US," said Bharat Masrani, Group President and CEO, TD Bank Group. "A key development this quarter was the resolution of our US AML matters, bringing important clarity to our stakeholders. Remediation is our number one priority, and we continue to make meaningful progress in addressing the failures."
The bank suspended its medium-term financial targets on EPS growth, return on equity and positive operating leverage and said it will update these targets in the second half of 2025.
"TD faced challenges in 2024, but we have a strong Bank, with well-positioned businesses serving millions of customers. Our AML remediation is our top priority, and we remain focused on strengthening our risk and controls to meet our obligations," said Raymond Chun, Chief Operating Officer, TD Bank Group. "I'm confident that in the year ahead, we will refresh our strategy, drive change, and enhance efficient execution to deliver for our shareholders and all stakeholders."
