12/01/2011 06:57 EST | Updated 01/31/2012 05:12 EST

TD Bank Q4 Earnings: Profit Jumps To $1.57 Billion On Strong Domestic Demand

AP File

TORONTO - TD chief executive Ed Clark said Thursday that Canada's second-largest bank will show more growth in the coming year despite the economic threat posed by the Europe's unresolved debt crisis and a tenuous recovery in the United States.

"Our possibly pessimistic view of the economic outlook is not matched by a pessimistic view of our prospects," Clark said in a conference call after the TD Bank (TSX:TD) reported nearly $1.6 billion in net income for the fourth quarter.

Besides its extensive Canadian retail operations, TD also owns one of the biggest U.S. regional banks — the former TD Banknorth, Commerce Bancorp and Hudson operations in New England, New York state, New Jersey and other states.

TD also holds 42 per cent of TD Ameritrade, a major U.S.-based discount broker.

"We have seen that a business model built on service and convenience, combined with continuous re-investment, will always outperform on a relative basis," Clark said.

The bank's latest quarterly report coincided with the closing of its acquisition of the MBNA credit card business in Canada, a deal that bolstered TD's position in the industry and added about 1,700 employees to the bank.

TD's retail and wholesale arms also reported strong growth in the quarter, which spanned August through October — a period that included major and growing concerns over European leaders' inability to deal with the staggering debts accumulated by the Greek, Italian and other governments that use the euro.

Clark said TD Canada Trust, its main banking arm in Canada, should deliver "solid growth" in fiscal 2012 despite low interest rates on the money it lends and an expected slow-down in lending to consumers.

"We expect loan growth will continue in the mid- to high single-digit range with a strong contribution from business banking volumes and continued personal loan growth, though at a slower rate than we've seen in the last couple of years."

He said it's more difficult to predict what lies ahead for wholesale banking — an arm of the industry that can be extremely volatile because it involves big deals that may be affected by macroeconomic trends and stock market activity.

"While this is a difficult business to forecast, TD Securities should see continued growth in our core dealer operations next year," Clark said. "Offsetting this is that fact that we're unlikely to see the same level of security gains that we saw in 2011."

"We expect this business to generate a solid risk-adjusted return on capital next year, despite the tough trading environment."

The Toronto-based bank (TSX:TD) reported earlier Thursday that its fourth-quarter profit was up 58 per cent compared with the same time last year as it TD booked stronger results from domestic retail banking and wholesale banking.

The bank's announced earlier that its increased to $1.57 billion in the three-month period, or $1.69 per share, compared with $994 million, or $1.07 per share, in the same period a year earlier.

On an adjusted basis, earnings were $1.77 per share, above analyst expectations of $1.53 per share.

Revenue rose to $5.67 billion from $5.02 billion.

In the Canadian retail banking division, quarterly earnings rose 17 per cent to $905 million from $773 million a year ago.

Profit at the U.S. retail banking operations was up slightly to C$316 million from $265 million.

Wholesale banking results increased 203 per cent to $288 million, from $95 million, on better equity and foreign exchange trading, as well as lower personal and commercial loans.

The wealth management division saw profits rise to $193 million from $151 million.

For the full year, TD Bank's profits increased to $5.89 billion from $4.64 billion in 2010. Revenue was up $21.59 billion from $19.57 billion.

Canada's second-largest bank predicted earlier this year that its profit growth would pull back in the second half as consumer borrowing slowed and banks compete more fiercely for their business.

While the latest round of results has outshone the bank's earlier caution, TD offered another footnote to its outlook for domestic banking in the coming year.

"For 2012, we expect earnings growth to moderate as the momentum in the business bank and the contribution from MBNA Canada will be partially offset by lower margins and slower personal banking growth," said Canadian banking head Tim Hockey said in a statement earlier Thursday.

"Overall, we're confident that the resilience of our business model, our focus on delivering great customer service and the investments we've made in our franchise leave us well positioned for the future."

Stonecap Securities analyst Brad Smith said the restrained outlook shouldn't come as much of a surprise to investors given the prolonged economic malaise in the United States.

"If there is an economic slowdown, if there was a pickup in interest rates, the ramifications for credit would be shocking for people," Smith said.

In the summer, the bank bought MBNA, the Canadian credit card business of Bank of America Corp., bulking up its position in the cards segment of the Canadian consumer debt market, an area where it has often lagged competitors.

In September, TD Bank said it would issue eight million shares to investors to raise $612 million for general corporate purposes.