Toronto Dominion FY 1Q15 Earnings Call Notes

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Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Good start to 2015, but some headwinds

“Good organic growth in loans and deposits, strong credit quality, good expense management and improved margins versus the fourth quarter contributed to an impressive start to 2015.

However, we continue to expect modest growth in the U.S. for the full year. We expect credit to normalize, our NIM for the full year will be down compared to 2014 and we anticipate lower securities gains. Our wholesale bank had a solid quarter with good trading results in a volatile market offset by lower fee based revenues.”

We will grow but it wont be easy

“This quarter demonstrated the strength of our growth engines, but major external forces like technology innovation, regulatory changes and the sustained low rate environment impact our business and industry. We are evolving our strategies to add that to these changes”

Oil will hurt the Canadian economy

” I will talk about two that are top of mind with just about everybody, oil prices and interest rates. The Bank of Canada has said the decline in oil prices in unambiguously negative for the Canadian economy. We agree, however the impact will be uneven. Oil producing provinces will bear the brunt of the drop while others including Ontario will likely benefit from a weaker dollar and stronger export demand.”

Not seeing a deterioration

“From a credit perspective we believe our direct exposure to oil and gas producers is manageable. We are not seeing any signs of deterioration though it is early days.’

Low oil prices don’t pose a material risk to the bank

“ith respect to the oil and gas sector, a series of stress tests were completed during the quarter to determine the potential impact of sustained low oil prices on the Canadian and wholesale business segments. The test indicated the sustained low oil prices are not expected to have a significant impact on the bank for the following reasons.

First, lending within the oil and gas industry is governed by disciplined underwriting standards based on strong collateral positions.

Second, unsecured consumer credit exposure to the regions most impacted is less than 2% of the bank’s total Canadian consumer credit exposure.

Third, the bank’s higher concentration in Ontario.

And lastly deposit impact of low oil prices on our Ontario and U.S. businesses. As result, I don’t believe the sustained low oil prices represent a material risk to the bank.”

Target is back on track and we think it’s sustainable

“Yes it is getting back on track and yes I think it is sustainable the — and I think with the extension of the program it gives both parties more confidence to invest in that and I think that you’ll see those investments are made that where the program should expand nicely.”

Very happy with our positioning with Ameritrade

“We’re very happy with our stake in Ameritrade, this has been central to our world strategy in many, many years it continues to perform well. So, I can’t comment on what others are doing, but we are very happy and this is a key investment for us and is more than just an investment it plays a very important role in our wealth strategy going forward in the U.S. as well, so very happy with our positioning.’