Why Toronto-Dominion Bank shares are down today

No investor likes a surprise net loss and an unexpected quarterly deficit Toronto-Dominion Bankhis (T.D -2.19%) stock in the doghouse Thursday. The company’s share price was down more than 2% in late trading, a steeper decline than the 0.8% drop in S&P 500 index at the same time.

Big provisions have sunk the bottom line

Toronto-Dominion’s fiscal 2024 third quarter results were released Thursday morning before the market opened. For the period, the lender’s non-GAAP (adjusted) income was C$14.2 billion ($10.4 billion), an improvement from C$13.1 billion ($9.6 billion ) from the same quarter in 2023.

However, there has been a dramatic change in the bottom line, and not for the better. Toronto-Dominion swung to a GAAP net loss of $US181 million ($133 million) from a year-ago profit of $US2.56 billion ($1.88 billion). The major reason for the major difference was the CA$2.6 billion ($1.9 billion) the company booked in the quarter for anticipated fines from the US Department of Justice (DoJ). The federal agency is investigating the bank for its anti-money laundering (AML) practices.

When DoJ-related provisions and other one-offs are removed from GAAP results, the adjusted bottom line landed well in the black. It was CA$3.6 billion ($2.6 billion), although that was basically flat year over year.

On average, analysts following Toronto-Dominion’s stock were forecasting just over $US13 billion ($9.5 billion) in adjusted total revenue and $US2.07 ($1.52) in adjusted net income per share.

Priority no. 1 firm in place

That net loss shocked investors and was a major factor in their overall negative reaction. It’s also uncomfortable to remember a high-level government investigation into a company’s business practices. In its earnings release, Toronto-Dominion said addressing this is a priority and is devoting considerable resources to improving the situation.