Toronto-Dominion Bank (TSX: TD) (USA) places strong Q3 thanks to strong growth in the US



Toronto-Dominion Bank (TSX: TD) (NYSE: TD) has recently released the quarterly results and the bank stock continues to prove to investors why it is a good buy. With a net income in excess of $ 3.1 billion for the quarter, TD's profit increased by 12%, while sales increased by only 6%. Despite a solid performance, investors were not impressed by the quarter, so let's take a closer look at the results to see why that might be the case.

US market continues to stimulate growth

In the US retail segment of the bank, sales increased by more than 6.5%, while TD benefited from a rising economy south of the border. Without a major cost increase, it was able to see much of the improvement in revenue growing towards earnings, with the division reporting a net income that was 27% higher than what it had achieved a year ago.

TD notes that it benefited from a $ 61 million benefit from tax reforms, which is no surprise, as the company with its large presence in the US is expected to see an increase by the end of this year as a result of tax changes .

In comparison, the Canadian retail segment saw a much modest improvement compared to last year, with a profit increase of only 7% despite the fact that sales increased by 9%. Rising costs, and in particular higher insurance claims and non-interest costs, have removed part of the improvement that the segment was able to realize in the past quarter.

The bank's wholesale segment, which generates revenue both on capital markets and on investment banking services, was the biggest disappointment in the third quarter, as sales declined by 12%, while the result fell by 24%.

Has TD set the bar too high?

Although the bank has done well this quarter, investors expect that from one of the best banks in the country. In the second quarter TD saw a profit increase of 17%, which may have left investors with a bit of a disappointment that they had not seen a comparable performance this quarter. Expectations are also likely to be strengthened by the economy performing so well and with rising interest rates, investors may have sought TD to earn more as a result of higher spreads.

However, it is not all good news, because there is a risk that rising interest rates could have a negative impact on the economy and there are also concerns about the future, particularly in the US, where there are many questions about the political landscape and how to trade with Canada will look like a new trade agreement has been reached.

Is the stock a buy on these results?

Although the results were not spectacular, there was also nothing strange about the profit report that investors should have alarmed everywhere. Now that the economy is still doing well, it is just as good as any time to invest in bank shares.

In the past 10 years, the share of TD has increased by more than 150% on top of a growing dividend that will also boost these totals. If you invest for the long term, it is difficult to find a safer and better stock for your portfolio.

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Foolish contributor David Jagielski has no position in any of the listed shares.


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