The Toronto-Dominion BankFollow td.com

Sentiment Score: +14

Sentiment Change: +17

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The Toronto-Dominion Bank Earnings - Analysis & Highlights for Q1 2025

Overview

PositivesNegativesOutlook

Volume growth in Canadian Personal and Commercial Banking and strong trading and fee income in market-driven businesses.
The bank is well capitalized with a strong balance sheet, a resilient business model, and conservative risk appetite.
The bank is making steady progress in each of the four pillars of the strategic review.
The team delivered a record quarter in active account and cardholder spend in credit cards.
Loans grew 1% YoY or 3%, excluding the impact of the loan portfolios identified for sale or runoff.

Q1 2025 Earnings Call

Expenses increased reflecting higher technology spend, the impact of TD shares issued to eligible employees and various other operating expenses.
Expenses increased by 12% YoY, with approximately one-third of the growth driven by variable compensation commensurate with higher revenues and foreign exchange.

Q1 2025 Earnings Call

The company expects to begin implementing machine learning tools to analyze customer data more effectively in Q3.
The company expects to begin implementing machine learning tools to analyze customer data more effectively in Q3.
The company expects to begin implementing machine learning tools to analyze customer data more effectively in Q3.
The company expects to begin implementing machine learning tools to analyze customer data more effectively in Q3.

Q1 2025 Earnings Call

Q&A Highlights from The Toronto-Dominion Bank Earnings Call Q1 2025

Analyst asked about the potential for the CAD 9 billion portfolio sale to be NII accretive.
- The company plans to use the proceeds from the sale to reduce its bank borrowings, which will result in a reduction in interest expenses and potentially increase net interest income.
Analyst asked about the actual costs incurred in Q1 and the risk of the $500 million bogey growing into something larger.
- The total expenses for the first quarter for the AML remediation were $86 million, which is slightly lower than the previous quarter. The company expects some of the look back expenses related to the monitor costs to become more material in the second half of the year. The company is confident in its guidance of $500 million and has already released a number of releases on its transaction monitoring platform. Any additional expenses beyond the $500 million will be updated as the company goes along.
Analyst asked about the possibility of a seasonal increase in AML remediation costs in the second half of the year.
- Vi Luan Tran confirmed that there will be an increase in AML remediation costs, but did not provide further details.
Analyst asked about the discrepancy between TD Bank's messaging and the Canadian economy, specifically the deceleration in the economy.
- Ajai K. Bambawale explained that TD Bank's messaging is consistent, but the moving parts of the scenario and models drive a release in macro and a model update in cards, which resulted in a better predictive model and segmentation of risk across TD banks, leading to a release in performing.
Analyst asked about the expected NIM expansion and if it can be quantified at the segment or consolidated level.
- Leo Salom stated that the NIM expansion is expected to be substantial, but provided no specific numbers. He mentioned that the expansion will be driven by the US business, but did not provide further details.
Analyst asked about the sequential decline in expenses on an adjusted basis in the US, specifically in relation to the incremental remediation costs.
- Leo Salom explained that the sequential decline is due to two lumpy items in the fourth quarter, namely a sign-on bonus related to Nordstrom and a CFPB settlement. He mentioned that when adjusted for these factors, the sequential decline is neutralized. He also stated that the rate of growth would moderate towards the second half of the year, with the growth rate being 4% in Q1. He mentioned that governance and control costs represented about 7% of the growth, and that the company continues to look at productivity measures that will give them the space to invest in governance and control initiatives as well as critical business priorities.
Analyst asked about the calculation of the overlay of CAD 149 million.
- The overlay of CAD 149 million is based on a top-down analysis of industries that may be impacted by tariffs, considering risk-rating migrations. The analysis captured the initial view on how risk ratings may migrate, and the migration was different for the US commercial book and the Canadian commercial or TD Securities book. The company is doing more bottom-up work for the next quarter, and the macro scenario will determine the impact.
Analyst asked about the CAD 300 million to CAD 500 million or CAD 500 million target for fiscal 205.
- The target of CAD 300 million to CAD 500 million or CAD 500 million is an in-year profile, and the lion's share of that number will materialize over the subsequent quarters. The company reflected about CAD 46 million related to the bond repositioning in the first quarter.
Analyst asked about the biggest opportunities to drive capital investment.
- The company is still going through the strategic review process and has identified significant organic opportunities, as well as looking to simplify portfolios, optimize the balance sheet, and look at efficiency opportunities. The company will share more comprehensive information about where they will allocate capital at the Investor Day.
Analyst asked about the all-bank level margin compression.
- The NIM at the total bank level would have been positive quarter-over-quarter from the retail businesses, but the decline was driven by the wholesale bank due to some business volumes. The company is focused on growing its prime franchise, which has lower interest-paying deposits but is attractive from an ROE perspective.

Q1 2025 Earnings Call