Money comes and money goes!
TD Bank is facing a double blow of job cuts and a drop in its share price. Toronto-Dominion Bank is slashing 3,000 jobs to generate more savings and improve its profitability. Bloomberg reported that TD missed analysts’ earnings estimates after setting aside more money than forecast for potentially bad loans. The reduction would affect more than 3% of the bank’s workforce.
The layoffs, which the Toronto-based bank said will come through attrition as well as targeted cuts, follow similar announcements by other Canadian banks, including Royal Bank of Canada, Bank of Montreal and Bank of Nova Scotia.
Toronto-Dominion’s workforce reduction would amount to more than 3,000 positions. On a pretax basis, Toronto-Dominion said that it expects the restructuring to generate C$400 million in savings in the current fiscal year and C$600 million annually.
The bank, Canada’s second-largest lender, said that it took $266 million in after-tax restructuring charges in the fiscal fourth quarter related to the staff reductions as well as reworking its real estate footprint, including a reduction of 1.2 million square feet (111,000 square meters) of office space in its US operations.
“We’ve undertaken a restructuring program to streamline and deliver efficiency, to create capacity to invest in the future,” Toronto-Dominion Chief Financial Officer Kelvin Tran said in an interview. Some job cuts have already been made and others will happen in 2024, he said, declining to specify any particular area where the bank is trimming.
The bank’s shares slipped 1.8% to C$81.84 at 9:43 a.m. in Toronto trading. They have dropped 6.6% this year, compared with a 5.9% decline for the S&P/TSX Commercial Banks Index.
Also reporting results Thursday were Royal Bank, Canada’s biggest lender, and Canadian Imperial Bank of Commerce, both of which beat analysts’ estimates. Royal Bank’s earnings for the three months through October got a significant boost from C$578 million in deferred tax adjustments. The shares of both lenders climbed.
For fiscal 2024, it will be difficult for the bank to meet its medium-term adjusted earnings-per-share growth target of 7% to 10% and return-on-equity target of more than 16% “as it navigates a complex macroeconomic environment” along with “expected further normalization” in loan-loss provisions, Toronto-Dominion said in the statement.
“We believe it was a mixed quarter for TD at first look with elevated expenses offsetting much better margins in US lending, while credit costs were as expected,” Keefe, Bruyette & Woods analysts Mike Rizvanovic and Abhilash Shashidharan said in a note to clients. “Looking ahead, however, we see the bank’s sizable restructuring program as a positive, and likely to boost forward consensus estimates meaningfully.”
Toronto-Dominion said it’s still dealing with a US Department of Justice investigation about its compliance with anti-money-laundering rules. It said it doesn’t think that will have a major impact on financial results, but “there is a possibility that the ultimate resolution of legal or regulatory actions may be material to the bank’s consolidated results of operations for any particular reporting period.”
