An increase in Toronto Dominion Bank's capital base in the fourth quarter of 2009 strongly indicates that Canada's second largest bank by market capitalization is planning an acquisition or more, says Brad Smith, CI Capital Markets analyst.
TD's equity capital account grew by US$1.7-billion during the past quarter, according to the latest call report data from the Federal Deposit Insurance Corporation. The bank's full year surplus is now just over US$3-billion.
"Why TD management saw fit to bolster the subsidiary's capital base so aggressively when the return on invested capital remains well below management's own assessment of its cost remains an open question," said Mr. Smith in a note to clients.
"The likelihood of repatriating the capital anytime soon is in our view low leaving us to conclude that further acquisitions may be on the horizon sooner rather than later."