By James Langton

(January 23 – 14:30 ET) – Merrill Lynch has raised its target price for TD Bank.

Yesterday the firm upped its forecasts for Royal Bank, and today it is doing the same with TD. The investment dealer is maintaining its Accumulate/long-term Buy rating for TD shares, while upping its target price to $49.

Merrill says that last year TD suffered a little, as it slid from its large outperformance in 1999. Weakness on the discount broker side, high telecom loan exposure and integration concerns all weighed on the stock.

Merrill concedes that the discount brokerage business still looks tough, although it suggests sequential earnings momentum could be strong thanks to recent interest rate cuts.

It points out that TD has managed impaired loans better than its peers, and it has handled its integration with Canada Trust very well. “Most unusually in these circumstances, TD Canada Trust have improved customer satisfaction levels while raising prices. The real moment of truth arrives when the bank implements its aggressive bank branch closure program this summer.”

Merrill says the bank’s earnings sustainability is improving, and TD is shifting its business mix toward higher multiple retail and wealth management businesses. The earnings contribution from these arms rose from 51% in 1999 to 62% in 2000, and Merrill sees it going to 65% this year.

“TD combines ‘top-of-class’ critical mass and growth in domestic retail banking with long-term asset management powerhouse TD Waterhouse. Expect TD to shine as wealth management enters next leg of secular growth, meanwhile TD Canada Trust provides integration spin.”