Photo: The Canadian Press

TORONTO — TD Bank Group shares were trading up almost 5% Thursday afternoon after the bank reported fourth-quarter earnings that surprised to the upside and it raised its dividend by 13%.

The bank was trading up $4.44, or 4.8%, at $96.38 on the Toronto Stock Exchange at mid-afternoon, boosted by a combination of its results and a wider market rally.

TD reported a rise in earnings in part from its U.S. division where it saw higher margins on loans, while Canadian retail banking also inched up amid increasing client activity and credit card spending.

“We have strong customer activity that is driving volume and revenue growth, and we feel very good about that,” chief financial officer Kelvin Tran said.

The bank said Thursday it will now pay a quarterly dividend of 89 cents per share, up from 79 cents per share. TD also says it plans to buy back up to 50 million of its shares.

The decision came after the federal banking regulator lifted restrictions last month on dividend increases, share buybacks and increases in executive compensation that were put in place at the start of the pandemic.

TD reported a net income of $3.8 billion in the fourth quarter, down 26% compared with last year when its earnings were bumped up by the sale of its investment in TD Ameritrade. Adjusted earnings were $3.9 billion, up 30% from last year.

On an adjusted basis, TD says it earned $2.09 per diluted share, up from an adjusted profit of $1.60 per diluted share in the same quarter last year.

Analysts on average had expected an adjusted profit of $1.96 per share, according to financial markets data firm Refinitiv.

Scotiabank analyst Meny Grauman said in a note that the estimate beat was notable because other Canadian banks so far have missed.

“In a sea of misses not only is an [earnings per share] beat refreshing, but is likely to stand out on earnings day.”