It’s been a rollercoaster year for bank investors, especially those keeping an eye on Toronto-Dominion Bank (TSX: TD). While the TSX Composite Index has soared by 6.5% to fresh all-time highs, TD Bank stock has dipped by nearly 11% so far in 2024. This might sound alarming to new investors at first, but experienced investors know that such dips can present golden buying opportunities.
TD Bank just announced strong financial results for the second quarter of its fiscal year 2024 (ended in April) on May 23, which also beat the analysts’ expectations. Before I try to answer the question of whether TD Bank stock is a good buy now based on its fundamentals, let’s quickly look at some key highlights from its latest earnings report.
Key highlights from TD Bank’s second-quarter earnings report
In the second quarter, TD Bank posted a 1.6% YoY (year-over-year) positive growth in its adjusted net profit to $3.8 billion, exceeding Street analysts’ expectation of $3.3 billion. This growth was driven mainly by the strong performance of its Canadian personal and commercial banking segment, which saw a 10% rise in revenue due to volume growth and margin expansion. As a result, the bank’s adjusted earnings climbed by 5.2% YoY to $2.04, surpassing analysts’ expectations of $1.85 per share by a healthy margin and reflecting TD’s operational strength and efficiency despite the ongoing macroeconomic challenges.
TD Bank’s wealth management and insurance operations also performed well last quarter, with the segment’s net profit increasing roughly by around 19% YoY to $621 million. This was largely due to higher insurance premiums and fee-based revenue commensurate with market growth, as well as improved deposit margins.
Moreover, TD Bank’s total revenue in the April 2024 quarter rose 10.2% from a year ago to $13.8 billion, reflecting an improvement over its revenue growth rate of just 4.7% YoY in the previous quarter.
Update on the anti-money-laundering probe
As you might already know, TD Bank is currently undergoing an anti-money-laundering (AML) probe by U.S. regulators. The bank announced a provision of $615 million in the second quarter specifically to address these investigations, which affected its financial performance.
Nevertheless, the Canadian lender highlighted that it’s working cooperatively with the regulators and remains committed to overhauling its U.S. AML program to strengthen its global compliance measures. While this probe is hurting TD’s financial growth and seems like a big setback for the bank’s shareholders, I believe it’s a temporary issue that will be resolved in due course.
Is TD Bank stock a good buy now?
TD Bank stock currently trades at $76.81 per share with a market cap of $136.6 billion and offers a decent 5.3% annualized dividend yield. While it’s true that the ongoing AML probe against TD Bank has hurt its financial growth and stock price performance of late, it also created an opportunity for long-term investors to buy this high-quality dividend stock at a bargain.
We shouldn’t forget the fact that TD Bank is one of the largest and most stable banks in Canada. The bank has a proven track record of delivering consistent earnings growth and dividend increases over the years. Its solid financial position gives it the ability to withstand various economic scenarios and regulatory pressures. Given that, TD Bank stock is a good buy on the dip now, in my opinion, especially for investors who are looking for a reliable source of income and capital appreciation in the long run.
