The Toronto-Dominion Bank Q3 FY2025 earnings call

Management Statement and Operational Highlights

• External Environment: Global trade dynamics are fluid; Canadian and U.S. economies resilient but momentum slowed. Federal government focusing on removing internal trade barriers and diversifying export markets.
• TD's Strategic Moves: Partnership with Fiserv and TD Merchant Solutions to simplify portfolio and reduce costs. Investor Day on September 29 to share strategy.
• U.S. AML Remediation Program: Completed milestones, including strong AML leadership, tactical risk reduction, improved investigative capabilities, and deployment of machine learning models in transaction monitoring.
• Balance Sheet Restructuring: Progress on loan sales, investment portfolio repositioning, with expectation to modestly exceed 10% asset reduction guided last October.
• Credit Performance: Impaired PCLs decreased quarter-over-quarter, but added $600 million in reserves for policy and trade uncertainty.

Segment Performance

• Canadian Personal and Commercial Banking: Delivered strong quarter with record revenue, earnings, deposits, and loan volumes. RESL volumes surpassed $400 billion, with cards acquisition at a decade high. Loans in Business Bank up 6% Y/Y, and TD Auto Finance had record retail originations.
• U.S. Retail: Core loans up 2% Y/Y, bank card balances up 12% Y/Y to $3 billion. Completed investment portfolio repositioning, expecting NII benefit of approximately $500 million pretax in fiscal 2025.
• Wealth Management and Insurance: Strong underlying performance with record assets in Wealth due to market appreciation and account origination. Direct Investing had strong trading volumes. Insurance business showed profitable growth.
• Wholesale Banking: Delivered over $2 billion in revenue for the third consecutive quarter, with broad-based revenue growth in Global Markets and Corporate and Investment Banking.
• Corporate: Net loss was $164 million, smaller than the same quarter last year, but higher net corporate expenses driven by governance and control costs.

Guidance

• Expect to incur total restructuring charges of $600 million to $700 million pretax over several quarters. Fiscal 2025 expense growth expected in the upper end of 5%-7% range, net of productivity and restructuring savings.
• U.S. Retail expects to modestly exceed 10% asset reduction guided last October.
• Launched TD AI Prism and Virtual AI Assistant for client personalization and productivity enhancement.

Risks

• Global trade dynamics and CUSMA/USMCA renegotiation creating business uncertainty.
• U.S. AML remediation work subject to ongoing review by monitor and regulators.
• Policy and trade uncertainty leading to additional reserves for credit losses.

Question and Answer

• Q: John Aiken from Jefferies asked about loan growth in U.S. portfolio and inflection point.

A: Leo Salom responded that core underlying growth is taking place, but there will still be a runoff scenario for much of 2026 as they aim for the right size of U.S. business.

• Q: Gabriel Dechaine from National Bank Financial inquired about loan exits and ROE.

A: Leo Salom stated criteria for exiting portfolios were non-accretive to ROE and not core to the franchise.

• Q: Gabriel Dechaine asked about additional expenses beyond AML.

A: Kelvin Tran and Ajai Bambawale discussed governance and control costs across the bank, including investments in AML, fraud, cyber, and compliance.

• Q: Matthew Lee from Canaccord Genuity asked about Wholesale Banking's investment banking growth.

A: Tim Wiggan responded about broad-based revenue growth in Wholesale Banking, diversified across industries like biotech, energy infrastructure, etc.

• Q: Ebrahim Poonawala from Bank of America asked about U.S. segment expenses and AML timeline.

A: Leo Salom discussed mid-single-digit expense growth in U.S. segment and ongoing AML remediation with some longer-tail items into 2026-2027.

• Q: Sohrab Movahedi from BMO Capital Markets asked about Wholesale Banking's investment and ROE.

A: Tim Wiggan mentioned investment in risk and control platform and expected revenue growth to meet targets at Investor Day.

• Q: Doug Young from Desjardin Capital Markets asked about credit reserves.

A: Ajai Bambawale explained the $600 million reserve for tariff assumptions and potential release if uncertainty reduces.

• Q: Paul Holden from CBIC asked about Canadian P&C NIM outlook.

A: Sona Mehta stated guidance for stable NIM, driven by mix impacts and balance sheet mix.

• Q: Darko Mihelic from RBC Capital Markets asked about reserve release.

A: Ajai Bambawale explained reserves could be released if tariffs are lower than anticipated, reducing uncertainty.