TD Bank lays off employees as quarterly results mirror a bleak economic outlook
TD Bank Group announced it is cutting three percent of staff and increasing funds for bad loans as it reveals fourth quarter results portraying a worsening economic outlook.
The bank disclosed on November 30 that the layoffs, equaling approximately 3,100 employees based on its third quarter staff total, will result in a $363 million restructuring charge this quarter, combined with a similar cost in the first half of next year.
“This is part of a broader restructuring program to simplify operations, and create capacity to invest in future growth,” stated chief financial officer Kelvin Tran during an interview.
The bank anticipates cost savings of $400 million pre-tax for its 2024 fiscal year, followed by $600 million annually after that.
TB’s cost reductions are in line with what Scotiabank publicized during the quarter, and within the amount guided by RBC in its third quarter results.
Mr. Tran mentioned TD has already implemented some cuts and will continue to do so throughout the next year, while also aiming to achieve some reductions through attrition, and looking to redeploy staff wherever possible.
Alongside severance and other personnel-related expenses, the charges also encompass the retraction of its real estate footprint and asset impairments.
The charges, combined with increased provisions for bad loans, led to an earnings pressure, totaling $2.89 billion or $1.49 per diluted share for the quarter ended Oct. 31, down from a profit of $6.67 billion or $3.62 per diluted share a year earlier.
TD’s chief financial officer Kelvin Tran described it as a mixed quarter in a “challenging environment,” warning that achieving its medium-term targets regarding earnings growth and return on equity will be a difficult task.
“What we see for the following year, in 2024, is actually quite a complex environment, including continued normalization of (provisions for credit loss),” mentioned Mr. Tran.
“That’s why we think it’s going to be challenging to meet those targets.”
The bank set aside $878 million in the quarter for bad loans, up $261 million from last year, and slightly higher than analyst expectations.
Results also included a $197 million acquisition-related expense for Cowen Inc.
TD stated its Canadian personal and commercial banking segment earned $1.68 billion in its latest quarter, down from $1.69 billion in the same quarter last year, and its U.S. retail business earned $1.28 billion in the most recent quarter, down from $1.54 billion a year earlier.
TD’s wealth management and insurance business earned $501 million, down from $516 million a year ago, while its wholesale banking operations earned $17 million, down from $261 million in the same quarter last year.
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There is a growing concern about a potential economic downturn, and the strain on borrowers as waves of mortgage renewals arrived, possibly at much higher interest rates.
The bank remains confident in its portfolio, as Mr. Tran stated, “For sure, higher rates are putting pressure on the consumer, but we feel that we are very well prepared for that.”
On an adjusted basis, TD says it earned $1.83 per diluted share, down from an adjusted profit of $2.18 per diluted share a year ago, falling short of analyst expectations.
The bank also raised its dividend, and will now pay a quarterly dividend of $1.02 per share, up from 96 cents.
Analysts were expecting an adjusted profit of $1.90 per share, with Scotia Capital Inc. estimating $1.92, but the results were further off the expected projections.
