Shareholders Face 3.6% Loss in Toronto-Dominion Bank: A Three-Year Earnings Decline

As a shareholder of Toronto-Dominion Bank (TSE:TD), you might be feeling a bit disheartened lately. The company's stock price has taken a hit, dropping by 3.6% in recent months. But what's really behind this decline? Let's dive into the numbers and find out.



A Closer Look at TD's Earnings Over the Past Three Years
To understand TD's recent stock price performance, we need to examine the company's earnings over the past three years. Here's a breakdown of TD's annual earnings per share (EPS) from 2021 to 2023:

* 2021: $7.95
* 2022: $8.90
* 2023: $9.25

At first glance, it might seem like TD's earnings have been steadily increasing. However, when we look at the quarterly earnings, a different picture emerges. In Q3 2023, TD reported EPS of $2.25, which was a significant drop from the previous quarter's EPS of $2.45. This decline can be attributed to several factors, including higher provisions for credit losses and increased expenses.



The Impact of Higher Provisions for Credit Losses
One of the main reasons for TD's earnings decline is the increase in provisions for credit losses. In Q3 2023, TD set aside $3.6 billion to pay for fines related to its involvement in money laundering in the U.S. This contributed to a reported net loss of -$181 million for the quarter. Additionally, TD has been grappling with a deteriorating credit environment, as high interest rates and slowing economic growth put stress on borrowers. This led to an increase in provisions for credit losses, which rose to $1.1 billion in Q4 2024, compared to $878 million in the same quarter last year.

The Rising Cost of Expenses
Another factor contributing to TD's earnings decline is the rising cost of expenses. In Q3 2024, TD reported non-interest expenses of $8.05 billion, up 5.5% year-over-year and 9.1% sequentially. These costs, attributed to investments in infrastructure and risk controls, particularly in the U.S., weighed heavily on adjusted earnings.

TD's Stock Price Performance Compared to Peers
To put TD's stock price performance into perspective, let's compare it to some of its major competitors. Over the past three years, TD's stock price has grown by approximately 40%, while the S&P/TSX Composite Index has grown by around 35%. In comparison, RBC and BMO have grown by approximately 30% and 25% respectively during the same period. While TD's stock price performance has been relatively stable, the recent decline has been a cause for concern among shareholders.

Strategic Initiatives to Address Declining Earnings
TD Bank Group has undertaken several strategic initiatives to address its declining earnings. These include focusing on cost-cutting and operational efficiency, investing in digital and technology, expanding into new markets, strengthening risk management, and focusing on wealth management and insurance. By implementing these initiatives, TD aims to improve its financial performance and position the bank for long-term success.



Conclusion
In conclusion, TD's 3.6% stock price decline is partly attributable to the company's decline in earnings over the past three years. Higher provisions for credit losses and rising expenses have contributed to this earnings decline. However, TD is taking steps to address these challenges and improve its financial performance. As a shareholder, it's essential to stay informed about the company's strategic initiatives and monitor its progress. By doing so, you can make more informed investment decisions and better navigate the ups and downs of the market.