® TORONTO-DOMINION BANK

(NYS:TD)
Report Date: April 28, 2021

Over the past year, TD shares are up

52.7%, versus a gain of 30.1% for the
broader market. The 52 week trading
range is $37.62 to $69.06. The Argus A6
target price is $75 representing a 9.4% gain
from the current level.

Toronto-Dominion is one of Canada's two largest banks and operates three business segments: Canadian retail banking, U.S. retail banking, and wholesale banking.
Growth Analysis GAAP Data Growth Rates Argus Rating: BUY
2016 2017 2018 2019 2020 1-Year 3-Year 5-Year Rating Since: 01/29/20
Revenue (B) 25.9 27.8 29.0 30.9 Nil Nil Nil Nil
Gross Margin Nil Nil Nil Nil Nil Nil Nil Nil Current Price: $68.54
Operating Income Nil Nil Nil Nil Nil Nil Nil Nil Target Price: $75.00
Interest Expense (B) 5.1 7.0 10.7 13.7 Nil Nil Nil Nil
Market Cap: $124.6 billion
Pre Tax Income (B) 8.1 9.6 10.4 10.1 Nil Nil Nil Nil
Net Income (B) 6.7 8.1 8.5 8.9 Nil Nil Nil Nil Dividend: $3.16
EPS 3.56 4.26 4.53 4.75 Nil Nil Nil Nil Yield: 4.6%
Dividend/Share 1.65 1.82 1.97 2.20 Nil Nil Nil Nil
Shares Outstanding (B) 1.4 1.4 1.4 1.4 Nil Nil Nil Nil Beta: 0.78
Market Cap (B) 64.3 81.7 76.9 79.2 Nil Nil Nil Nil Sector: Financials
Book Value (B) 37.27 39.29 41.47 47.42 Nil Nil Nil Nil
Industry: Diversified Banks
Financial Condition GAAP Data Growth Rates
2016 2017 2018 2019 2020 1-Year 3-Year 5-Year Argus A6 Sub-component Scores
Cash / Short Term Inv. (B) 43.9 42.8 26.7 23.1 Nil Nil Nil Nil
Current Assets Nil Nil Nil Nil Nil Nil Nil Nil H Hi gh M Medi um L Low
Current Liabilities Nil Nil Nil Nil Nil Nil Nil Nil
Working Capital Nil Nil Nil Nil Nil Nil Nil Nil H Indus try
Short-Term Debt Nil Nil Nil Nil Nil Nil Nil Nil Earnings revisions, analyst conviction, performance and
Long Term Debt (B) 31.5 29.7 27.2 28.8 Nil Nil Nil Nil historical industry weighting.
Total Debt (B) 31.5 29.7 27.2 28.8 Nil Nil Nil Nil H Ma na gement
Shareholders Equity (B) 55.3 57.5 59.5 66.6 Nil Nil Nil Nil Consistency of growth & financial strength.

Ratio Analysis Trend H Sa fety

2016 2017 2018 2019 2020 1-Year 3-Year 5-Year Liquidity, dividend yield, market cap, debt leverage and
Operating Margin Nil Nil Nil Nil Nil Nil Nil Nil stock price beta.
Net Margin 26% 28% 29% 28% 27% Lower Lower Higher H Fi na nci a l Strength
ROE 13% 15% 15% 15% 14% Lower Lower Lower Balance sheet debt and liquidity ratios.
ROA 1% 1% 1% 1% 1% Lower Lower Lower Growth
H
Current Ratio Nil Nil Nil Nil Nil Nil Nil Nil
Normalized earnings estimates and sales trends.
Interest Coverage Nil Nil Nil Nil Nil Nil Nil Nil
Dividend Payout Ratio 46% 43% 43% 46% Nil Nil Nil Nil M Va l ue
L-T Debt/Equity 61% 55% 49% 46% 52% Higher Lower Lower Price/earnings, price/sales ratios, trend lines, and DCF
Total Debt/Total Cap 36% 34% 31% 30% 33% Higher Lower Lower valuation.

Valuation Analysis Trend Vicker's Institutional & Insider Holdings

2016 2017 2018 2019 2020 1-Year 3-Year 5-Year
13F Non Mutual Funds
Price - Year End 45.38 56.85 55.46 57.07 44.23 Lower Lower Higher
52-Week High 54.59 65.24 79.36 77.74 76.72 Lower Higher Higher 13F Mutual Funds

52-Week Low 34.04 44.54 54.88 48.31 33.83 Lower Lower Lower 13F Total: 715.3m

P/E High 15.3 15.3 17.5 16.4 Nil Nil Nil Nil Insider
P/E Low 9.6 10.4 12.1 10.2 Nil Nil Nil Nil
Other Mutual Funds
P/S High 4.1 4.4 5.1 4.6 Nil Nil Nil Nil
Other
P/S Low 2.5 3.0 3.5 2.9 Nil Nil Nil Nil
Outstanding: 1,818.6m
P/B High 2.1 2.3 2.7 2.3 Nil Nil Nil Nil
P/B Low 1.3 1.6 1.8 1.4 Nil Nil Nil Nil The financial information in the tables to the left is proprietary to Morningstar
Yield High 3.02% 2.79% 2.48% 2.82% Nil Nil Nil Nil and/or its content providers; may not be copied or distributed; and is not
warranted to be accurate, complete or timely. Neither Morningstar nor its
Yield Low 4.84% 4.09% 3.58% 4.54% Nil Nil Nil Nil content providers are responsible for any damages or losses arising from any use
of this information. © 2017 Morningstar, Inc. All Rights Reserved.
Return 11% 25% -2% 3% -22% Lower Lower Nil

© 2021 Argus Res ea rch Compa ny ARGUS A6 Report

 ®

Diversified Banks
Peer Comparison Table: Financials .
Market Cap 5-yr EPS Current FY 1-yr EPS
Ticker Company Price($) Net Margin Argus Rating
(Millions $) Growth Rate P/E Growth Rate
C CITIGROUP INC 73.01 152,349.97 -13% 8.20 13% -41% BUY
RY ROYAL BANK OF CANADA 95.07 135,424.80 Nil Nil 24% Nil BUY
TD TORONTO-DOMINION BANK 68.54 124,646.56 Nil Nil 27% Nil BUY
USB US BANCORP 58.82 88,381.40 -3% 15.48 20% -26% HOLD
TFC TRUIST FINANCIAL CORP 58.89 79,197.92 20% 13.58 18% -17% BUY
Peer Average 116,000.1 1% 7 21% -17%

Our rating on the Financial Services sector is Over-Weight. With market optimism rising
on positive vaccine developments and the new administration in Washington, interest
rates have started to move higher at the long end of the yield curve. We expect banks
to benefit from wider net interest margins and lower loan-loss provisions as the
economy normalizes, and insurance companies to generate higher income in their
investment portfolios.
The sector accounts for 11.3% of the S&P 500, down from 16.3% following the exclusion
of REIT stocks. Over the past five years, the weighting has ranged from 9% to 17%. We
think the sector should account for 12%-13% of diversified portfolios. The Financial
sector is outperforming the market thus far in 2021, with a gain of 15.4%. It
underperformed in 2020, with a loss of 4.1%, and slightly outperformed in 2019, with a
gain of 29.2%.
The projected P/E ratio on 2021 earnings is 16, below the market multiple of 23. As for
earnings expectations, analysts now expect earnings to rise 12.6% in both 2021 and
2022 after falling 24.8% in 2020 and rising 39.0% in 2019. Yields are slightly above the
market average. Dividends and share repurchases also remain subject to regulatory
approval for large banks deemed too-big-to-fail.
Key Sector Trends
Banking
● The coronavirus has significantly impacted many sources of revenue for banks,
from reduced loan growth as companies and individuals put off purchases, to
narrower interest margins after the Fed cut rates to zero, to lower fee-based income
as activity slows.
● We believe the Fed has done an admirable job in shoring up the fixed-income and
mortgage-securities markets, offering much needed liquidity. We also note that the
banking industry is in a much better capital position than during the financial crisis of
2008-2009. While the largest seven banks have all suspended buyback activity to
conserve capital,
● we believe dividends will be maintained unless lockdowns are reimposed and the
economy falters.
● Meanwhile, credit quality, which often tracks the employment picture (i.e., higher
unemployment translates to a diminished ability to repay loans) is likely to be the biggest
wildcard for earnings. Banks recorded sharply higher loss provisions in the first half of
2020, bracing for delinquencies from home loan, credit card and business customers who
have lost their sources of income.
● Top Stock Pick: JPMorgan Chase
Insurance
● Life insurance companies will likely see weak investment returns in the near term as they
reinvest their bond portfolios at lower interest rates. Life insurance stocks have also
dropped since the end of February 2020 on coronavirus fears.
● Property-Casualty (P&C) insurers continue to manage their combined ratios, with the
premier operators keeping costs at 82%-85% of total revenue. We are optimistic about
P&C insurers based on expectations for high single-digit growth and improvement in
ROE. Additionally, P&C insurers are not as sensitive to interest rate movements, as their
investment horizons are shorter than those of life insurers.
● P&C stocks also declined on coronavirus fears, as they may be responsible for business
interruption proceeds. However, the fears are for the most part unfounded as most
insurers wrote clauses exempting themselves from disease-related losses after the SARS
outbreak in 2003. Recent rulings in a number of states have sided with insurance
companies.
● P&C companies have been hurt by an increase in catastrophe losses, including claims
related to wildfires in California, hurricanes, and social unrest. Additionally, lower pricing
for insurance premiums and low returns on investment portfolios have weighed on
results.
● Top Stock Pick: Allstate

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 ®

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