Toronto-Dominion Earnings: Loss Provisioning and Restructuring Expenses Eat Away at Decent Results

Wide-moat-rated Toronto-Dominion Bank reported solid underlying second-quarter results that were marred by a variety of restructuring- and acquisition-related expenses, as well as a CAD 615 million provision for potential losses as the bank's anti-money laundering, or AML, practices are investigated by regulators. Revenue increased 11% from last year and 1% from last quarter to CAD 13.8 billion. Meanwhile, diluted earnings per share decreased 20% to CAD 1.35. However, adjusted for the AML provision as well as other restructuring and acquisition expenses, adjusted earnings per share increased 7% to CAD 2.04. As we incorporate these results, we are reducing our fair value estimate for Toronto-Dominion bank to CAD 90/USD 66 from CAD 92/USD 69 as we incorporate higher losses and more ongoing compliance expenses into our model. Even with the decrease, we still see the shares as undervalued at the current price.