Toronto-Dominion Bank (TSX:TD)(NYSE:TD), also known as TD Bank Group, is one of Canada’s strongest banks. Under the leadership of CEO Bharat Masrani, the bank has built a fortress balance sheet and pays a regular dividend. TD’s banking operations also have significantly lower risk today than at any other time over the last decade. The bank’s outperformance appears set to continue given the significant cost-cutting measures recently undertaken.
Corporate citizenship approach
TD is a purpose-driven organization that understand the role of business to enrich the lives of the bank’s customers, colleagues, and communities it serves. TD’s corporate citizenship approach, through an initiative called the TD Ready Commitment, leverages the bank’s business, philanthropy, and people to embed the company’s efforts across the bank.
In addition, TD appears to believe that the bank can contribute in positive ways to ensure a more sustainable future. TD has integrated the bank’s environmental, social, and governance (ESG) principles into the bank’s business practices in substantial ways.
Consistent revenue growth
The COVID-19 pandemic had profoundly altered the economic landscape and appears to continue to have a significant impact on TD’s financial performance. The bank’s earnings in 2020 were adversely impacted by the deterioration in the economic outlook and the resulting impact on credit migration, which resulted in significantly higher provisions for credit losses, particularly in the second and third quarters. Reductions in interest rates also seems to have resulted in lower net interest margins for TD.
Notwithstanding these impacts, TD’s revenue has grown consistently, reflecting volume growth in the personal and commercial banking businesses and strong contributions from the bank’s capital market-sensitive businesses. TD’s expenses appear to have grown moderately over the past eight quarters, primarily reflecting investments in support of business growth.
Full suite of competitively priced products
The personal and business banking environment in Canada comprises of large chartered banks with sizeable regional banks and a number of niche competitors providing strong competition in specific products and markets. Continued success for TD will depend upon the bank’s ability to continue delivering a full suite of competitively priced products, outstanding customer service and convenience, maintaining disciplined risk-management practices, and prudent expense management.
Sizeable market share growth
Canada’s wealth management industry includes banks, insurance companies, independent asset management companies, and brokerages. TD’s sizeable market share growth in the wealth management industry has relied on the bank’s ability to differentiate by providing an integrated wealth solution and keeping pace with technological changes and the regulatory environment. TD has managed to outperform by providing the right products, and legendary and consistent relationship-focused client experiences to serve the evolving needs and goals of the bank’s client base.
Also, the property and casualty insurance industry in Canada is fragmented and competitive, consisting of personal and commercial line writers, whereas the life and health insurance industry is comprised of several large competitors. TD has managed to remain successful in the insurance business by offering a range of products that provide protection at competitive prices that properly reflect the level of risk assumed.