A red number for an important line item sank the company’s shares.
No investor likes a surprise net loss, and an unexpected quarterly deficit put Toronto-Dominion Bank‘s (TD -2.12%) stock in the doghouse on Thursday. The company’s share price sagged by more than 2% in late-session trading, a steeper decline than the 0.8% slide of the S&P 500 index at the same time.
High provisions sank the bottom line
Toronto-Dominion’s results for the fiscal third quarter of 2024 came out Thursday morning before market open. For the period, the lender’s non-GAAP (adjusted) revenue was 14.2 billion Canadian dollars ($10.4 billion), an improvement over the CA$13.1 billion ($9.6 billion) of the same quarter of 2023.
However, there was a dramatic change on the bottom line, and not for the better. Toronto-Dominion flipped to a GAAP net loss of CA$181 million ($133 million) from the year-ago profit of CA$2.56 billion ($1.88 billion). The major reason for the stark difference was the CA$2.6 billion ($1.9 billion) the company set aside in the quarter for anticipated fines from the U.S. Department of Justice (DoJ). The federal agency is investigating the bank for its anti-money laundering (AML) practices.
When the DoJ-related provision and other one-time items are stripped from the GAAP results, the adjusted bottom line landed well in the black. It was CA$3.6 billion ($2.6 billion), although this was essentially flat year over year.
On average, analysts tracking Toronto-Dominion stock were modeling slightly over CA$13 billion ($9.5 billion) for total adjusted revenue, and CA$2.07 ($1.52) for per-share, adjusted net income.
No. 1 priority firmly in place
That net loss shocked investors and was a major factor in their overall negative reaction. It’s also uncomfortable to be reminded of a top-level government investigation into a company’s business practices. In its earnings release, Toronto-Dominion said that addressing this was a priority and that it was devoting considerable resources to improving the situation.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.