The Toronto-Dominion Bank Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
TD Bank Group's Q4 2025 earnings call highlighted strong financial performance, strategic progress in deepening client relationships and leveraging AI, and a commitment to disciplined capital allocation and expense management. The bank is optimistic about achieving its medium-term targets, with potential upside from macroeconomic tailwinds and reduced trade uncertainty.
Key Financial Results
Q4 2025 Earnings: CAD 3.9 billion.
EPS: CAD 2.18.
ROE: Up 110 basis points year-over-year.
Positive operating leverage was delivered this quarter.
CET1 ratio: 14.7%.
Total payout ratio for fiscal 2025 was 93%, including share buybacks and common share dividends.
Fiscal 2025 earnings were up 5% year-over-year.
EPS was up 7% year-over-year.
Business Segment Results
Canadian Personal and Commercial Banking: Record revenue, deposits, and loan volumes.
U.S. Retail: Core loans up 2% year-over-year; U.S. Bankcard balances up 14% year-over-year.
Wealth Management: Record earnings and assets.
Wholesale Banking: Record CAD 2.2 billion in revenue.
Capital Allocation
Dividend Increase: CAD 0.03 increase, bringing the dividend to CAD 1.08 per share.
Share Buybacks: Expect to complete the current CAD 8 billion share buyback by the end of the first quarter of 2026.
Plan to initiate a new share buyback of CAD 6 billion to CAD 7 billion, subject to regulatory approval.
The bank will effectively return all the capital generated from the Schwab sale to shareholders through these two share buyback programs.
Industry Trends and Dynamics
Digital Adoption: Record year in digital sales for day-to-day banking products in Canadian Personal and Commercial Banking.
AI Implementation: Implemented approximately 75 AI use cases that generated CAD 170 million in value this year.
Fraud Reduction: Fraud losses were down 26% year-over-year due to investments in fraud modernization.
Macroeconomic Environment
Canada-US Trade: High degree of uncertainty around tariffs and trade dynamics.
Canadian Economy: Remains largely resilient despite economic uncertainty.
US Economy: Continues to perform, benefiting from regulatory and monetary policy changes.
Growth Opportunities and Strategies
Deepening Relationships: Focus on deepening relationships with clients across businesses.
AI Utilization: Prioritizing AI investments across customer acquisition, insights, and risk management.
Expense Management: On track to deliver 3% to 4% expense growth and positive operating leverage in fiscal 2026.
U.S. Balance Sheet Restructuring: Aims to deliver approximately $20 billion of RWA relief.
Direct Investing: Direct Investing is an acquisition engine for the bank and drives outsized opportunities to deepen relationships.
Financial Guidance and Outlook
Expect to achieve 6% to 8% EPS growth and 13% ROE targets for fiscal 2026.
Potential upside to EPS and ROE targets from strong business momentum, positive macroeconomic conditions, and reduced trade and tariff uncertainty.
Expect similar investments in fiscal 2026 for total U.S. BSA/AML remediation and governance and control.
Expect NIM to be relatively stable in Q1 for Canadian Personal and Commercial Banking.
Expect NIM to moderately expand in Q1 for U.S. Retail.
Expect U.S. Retail expense growth in the mid-single digit range this year.
PCLs are expected to be in the 40 to 50 basis points range.
US Balance Sheet Restructuring
Total assets were $382 billion.
Achieved and exceeded the 10% asset reduction announced on October 10 of 2024, creating $52 billion of capacity versus the asset limitation.
Investment portfolio repositioning generated an NII benefit of approximately $500 million pre-tax in fiscal 2025 and is expected to generate an NII benefit of approximately $550 million pre-tax in fiscal 2026.
AML Remediation Program
Completed key milestones, including the deployment of the next generation transaction monitoring system.
Deployed another round of machine learning enhancements to the transaction monitoring system this quarter.
Introduced a new and enhanced system for submitting unusual transaction referrals (UTRs).
Completed the majority of US management remediation actions this year.
