The Toronto-Dominion Bank Q1 FY2026 earnings call

• Ray mentioned strong quarter with record earnings of $4.2 billion and EPS of $2.44, ROE of 4.2% up 100 bps y/y; robust trading and fee income growth, volume growth in Canadian P&C banking, margin expansion; impaired PCLs ticked up in wholesale and U.S. commercial. - Leo shared progress on USAML remediation program, new KYC platform went live, implemented ML models, rolled out enhanced financial crime risk assessment methodology. - Kelvin talked about strong top-line momentum, revenue grew 11% y/y, expenses increased 7% y/y with third consecutive quarter of positive operating leverage; incurred restructuring charges of $200 million pre-tax, restructuring program concluded with $886 million pre-tax charges and $775 million pre-tax annual cost savings expected. - Ajay discussed credit performance, gloss-impaired loan formations increased, gross impaired loans increased, provision for credit losses 43 basis points, impaired PCLs increased, performing PCL recovery of 125 million, allowance for credit losses decreased.

Canadian Personal and Commercial Banking: Delivered record revenue, PTPP, earnings, deposit, and loan volumes; average deposits rose 3% y/y, average loan volumes rose 5% y/y; NIM stable. U.S. Banking: Earnings up 22%, CTPP up 7%, ROTCE expanded by 330 basis points to 14.7%; net interest margin 3.38%, up 13 basis points q/q; completed conversion of Nordstrom card clients onto servicing platform. Wealth Management and Insurance: Delivered record earnings and assets; saw market share gains in direct investing; ETF assets surpassed $31 billion. Wholesale Banking: Delivered record revenue and earnings, supported by strong client activities; impaired PCLs increased.

• Expect fiscal 2026 PCLs to fall within 40 to 50 basis points range. - U.S. banking on track to achieve $2.9 billion U.S. in earnings in fiscal 2026. - Expecting medium-term target of $1 billion in value from AI; target of 13% CET1 ratio by second half of fiscal 2027; confident in achieving 16% ROE as levers like CET1 ratio reduction, expense takeout, and business performance improvement are in place.

• Forward-looking statements involve assumptions and inherent risks and uncertainties. - Credit performance may be affected by economic conditions; impaired PCLs in wholesale and U.S. commercial related to small number of borrowers across various industries. - AML remediation spend composition may change, and volatility in insurance business growth.

Q: Assumed reaching 13% CET1 ratio by end of 2027 and cost savings continuing, can get to 16% ROE, talk about factors preventing or unknowns.

A: Ray said on things they control, CET1 ratio getting to 13% by second half of 2027 gives 100 basis points, well on pace on $2 - $2.5 billion expense takeout giving 150 basis points pickup, every business at TD improved ROE as per investor day commitment, confident on getting to 16% ROE.

Q: U.S. loan book total loans down 9% but core loans up 2%, areas of focus to grow book and when core loan growth to outpace sales and runoffs.

A: Matt was told core loan growth 2%, strong consumer lending growth, 15% balance growth in credit card book, 33% unit sales growth y/y, 200 basis point increase in credit card penetration to deposit client base y/y; mid-market business saw 4% growth, 15% growth in commitment; higher education loan growth of about 5%; expect growth rate to moderately accelerate over next couple quarters, targeting net loan growth in U.S. portfolio in third quarter.

Q: Credit performance, performing release, macro changes resulting in material releases.

A: Ajay said performing release well-founded, two drivers: macro changes with improved unemployment and GDP numbers in Canada and U.S., and loan migration from performing to impaired reversing the performance.

Q: U.S. NIM, what drove upside this quarter and guidance for next quarter; U.S. bank operating leverage and efficiency ratio.

A: Paul was told NIM 338 basis points, up 13 basis points q/q, driven by loan repositioning work last year, selective repricing activities, tractor on rates; next period will have less tailwind from bond repositioning but still margin expansion opportunities; expense strategies in place with store closures, vendor management programs, AI and process automation, expect downward pressure on expenses for rest of year; successfully converted Nordstrom portfolio onto platform, FT increase due to additional call center representatives, collection staff, and fraud services to manage expanded volume flow.

Q: Canadian Personal and Commercial Banking, medium-term targets for efficiency ratio and ROE, room for improvement.

A: Sona said targeting 40% range for efficiency ratio and ROE; have levers like distribution optimization, tech platforms, procurement, and AI deployment to favor efficiency ratio and improve ROE; momentum and progress on AI is incredible, seeing lots of possibilities for upside to targets