TD Bank Financial Group is reporting weaker earnings for the second quarter ended April 30.

The bank said operating cash earnings were $313 million, or 45¢, for the quarter, compared with $546 million, or 83¢, a year ago.

Net earnings per share were 20¢, down from 56¢ a share in the prior-year period.

In April, TD Bank said it will lift reserves for bad loans to $400 million and take $115 million investment writedowns to cope with problems in its telecoms portfolio as well as its exposure to Argentine banks.

“Overall TD’s earnings fall significantly short of our expectations and are reflective of the challenges we faced during a difficult credit cycle, further weakening in the telecommunications industry and declining capital market activity,” said TD chairman and CEO Charles Baillie.

TD also announced today, effective Nov. 1, 2002, it intends to report stock option awards as compensation expense. “With the introduction of a new Canadian standard on stock-based compensation, we believe the time is right to change the way in which we account for options,” Baillie noted. “Option awards are a part of compensation and should be treated in a similar manner to other compensation expenses.”

Narrower margins in lending products, coupled with fewer business days in the second quarter, resulted in more modest revenue generation from TD Canada Trust, as compared to the prior quarter.

During the quarter, on an operating cash basis, revenue declined by 4% while expenses declined by 1%, as compared to the prior quarter. Operating cash expenses increased by 4% compared to the same quarter a year ago due to investments in customer service and process improvement initiatives, offsetting expense synergies from branch mergers. As a result, the operating efficiency ratio weakened by two percentage points to 60%.

Lower commissions on sales of TD Wealth Management products coupled with modest growth in lending volumes resulted in flat year-over-year revenues.

TD Canada Trust enjoyed a strong RRSP season with net sales volume in registered accounts up 11% year-over-year.

TD Securities posted poor returns in the quarter as a result of higher loan losses and writedowns in its private equity portfolio. TD Securities’ trading businesses posted solid performances in the quarter although down from an exceptionally strong first quarter.