The Toronto-Dominion Bank Q2 FY2024 earnings call

• Bharat noted Q2 was strong for TD with earnings of $3.8 billion and EPS of $2.04, emphasizing the strength of the diversified business model. Addressed US AML issues, stating TD is overhauling its US AML program and has taken action against responsible employees. - Kelvin discussed revenue increase of 10% year-over-year, expenses, restructuring charges (higher than initially anticipated but expected to generate savings), and provided segment-specific performance details. - Ajai commented on credit quality, noting gross impaired loan formations were stable, and PCLs were higher quarter-over-quarter. - Other executives highlighted segment-specific highlights: Canadian personal banking had strong loan and deposit growth; US retail bank had operating momentum; wealth management and insurance had revenue growth; wholesale banking had record revenues.

Canadian Personal and Commercial Banking: Delivered strong quarter with average loan volumes rising 7% year-over-year (7% growth in personal volumes driven by real estate secured lending up 7% and cards up 11%, 7% growth in business volumes) and average deposits up 4% year-over-year (6% growth in personal deposits, offset by 1% decline in business deposits). Net interest margin was 2.84%, flat quarter-over-quarter. US Retail Bank: Continued operating momentum with sequential earnings and loan growth. Average loan volumes increased 7% year-over-year, deposits were relatively flat, and net interest margin was 2.99%, down 4 basis points quarter-over-quarter. Wealth Management and Insurance: Saw strong performance with revenues up 11% year-over-year, reflecting higher insurance premiums, asset growth, and increased rates per day in direct investing. Wholesale Banking: Delivered record revenues for the second consecutive quarter, reflecting broad-based growth across the business including in US underwriting, sales, and trading.

• No change to expense guidance for fiscal 2024, expecting adjusted expense growth in the mid-single digits. - Restructuring program is expected to generate savings of approximately $400 million pre-tax since fiscal 2024 and annual run rate savings of approximately $725 million pre-tax. - Expect lower net interest margin in Canada due to competitive market dynamics and BA to CORRA-based loan migration, partially offset by tractor on and off rate; US retail bank expected modest NIM expansion in the second half of the year.

• US AML program issues: TD did not effectively monitor, detect, report, and respond to suspicious activity, leading to a need for a comprehensive overhaul of the US AML program. - Credit migration: Seen in various portfolios including US retail commercial, US auto, Canadian auto, and commercial across industries, impacting RWA and capital ratios.

Q: Doug Young asked about the CET1 ratio decline and credit migration details, and Kelvin quantified the op risk impact on CET1.

A: Ajai discussed credit migration in various segments, and Kelvin provided the capital impact quantification.

Q: Meny Grauman inquired about US store openings and the 150-store guidance.

A: Leo Salom discussed store retooling, digital and mobile strategies, and ongoing AML and governance focus.

Q: Matthew Lee asked about the Cowen acquisition and US wealth management business outlook.

A: Riaz Ahmed and Leo Salom discussed the Cowen integration and plans for building the US wealth franchise.

Q: Ebrahim Poonawala asked about AML issues and risk framework.

A: Bharat, Ajai, and Leo Salom addressed the US AML program issues, risk management improvements, and franchise stability.

Q: Gabriel Dechaine asked about hedge gains, cost guidance, and buybacks.

A: Kelvin and Bharat discussed hedge gain context, cost guidance, and buyback intentions.

Q: Paul Holden asked about AML regulatory spread and NIM guidance.

A: Bharat and Kelvin provided insights on expense guidance and NIM outlook.

Q: Sohrab Movahedi asked about the restructuring program and US retail expenses.

A: Kelvin and Leo Salom discussed restructuring program savings and US retail expense management.

Q: Lemar Persaud asked about AML discussions and wealth management strength.

A: Kelvin, Raymond Chun, and Barbara Hooper discussed AML discussion status and wealth management growth drivers.

Q: Nigel D’Souza asked about US CRE portfolio and civil matters.

A: Ajai and Leo Salom discussed US CRE portfolio reserves and civil matter confidentiality.