The Toronto-Dominion Bank Earnings - Q2 2025 Analysis & Highlights
Key Takeaways
TD Bank Group's Q3 2025 earnings call highlighted strong financial performance, strategic initiatives including a partnership with Fiserv, progress in US AML remediation and balance sheet restructuring, and a focus on innovation and efficiency. The call also addressed the external environment, including global trade dynamics and economic resilience.
Key Financial Results
Q3 2025 earnings were CAD 3.9 billion with EPS of CAD 2.20.
The bank saw robust fee and trading income in market-driven businesses and volume growth in Canadian personal and commercial banking.
Positive operating leverage was delivered, with strong revenue growth offsetting elevated expenses.
Impaired PCL decreased quarter over quarter, reflecting strong credit performance.
The bank added to performing reserves for policy and trade uncertainty, taking a prudent approach with almost CAD 600 million in reserves added year to date.
The bank's Q3 CET1 ratio was 14.8%, reflecting strong capital generation.
Business Segment Results
Canadian Personal and Commercial Banking delivered a strong quarter with record revenue, earnings, deposits, and loan volumes.
Reso volumes surpassed CAD 400 billion, driven by strong performance across distribution channels.
Cards acquisition was the highest it's been in almost a decade.
In the business bank, loans were up 6% year over year.
US retail saw continued momentum with core loans up 2% year over year.
US bank card balances were up 12% year over year, reaching a new milestone with $3 billion in balances.
In the US wealth business, total client assets were up 12% year over year, with mass affluent client assets up 26% year over year.
Wealth Management and Insurance delivered record earnings and assets in wealth and strong underlying business performance in insurance.
Wholesale Banking delivered over $2 billion in revenue for the third consecutive quarter.
Capital Allocation
As of quarter end, TD was over halfway through its share buyback with 46 million shares repurchased for a total of over CAD 4 billion.
The bank repurchased 16 million common shares under its share buyback program in Q3, which reduced CET1 by 25 basis points.
The bank is still looking to deploy about $8 billion from the Schwab sale proceeds for its current NCIB.
Industry Trends and Dynamics
TD Asset Management continues to take share in its growing ETF franchise.
Strong quarter in direct investing with trades per day up 18% year over year.
Macroeconomic Environment
Global trade dynamics continue to be fluid.
Canadian and US economies have shown resilience, but momentum has slowed.
Policy and trade related reserves are now approximately CAD 600 million.
Growth Opportunities and Strategies
TD announced a strategic relationship between Fiserv and TD Merchant Solutions to simplify TD's portfolio, reduce costs, and improve the experience for Canadian business banking clients.
The bank continues to identify opportunities to innovate, drive efficiency, and operational excellence.
TD launched TD AI Prism to deliver greater client personalization through accelerated AI-driven insights and support client services and growth.
TD Securities launched a virtual AI assistant to enhance the productivity and effectiveness of front office, institutional sales, trading, and research professionals.
The bank is prioritizing and executing on its AML remediation.
The bank completed the investment portfolio repositioning announced last October and achieved its targeted 10% asset reduction.
The US Retail segment could grow core loans at a rate consistent with historical performance through the medium term without breaching the asset limitation.
The bank continues to invest in its insurance business and enhance its client acquisition strategies.
Financial Guidance and Outlook
The restructuring program is expected to generate savings of approximately CAD 100 million pre-tax in fiscal 2025 and annual run rate savings of CAD 550 million to CAD 650 million pre-tax.
Fiscal 2025 expense growth, assuming fiscal 2024 levels of variable compensation, FX, and the US strategic cards portfolio, is expected to be at the upper end of the 5% to 7% range.
As the bank looks forward to Q4, NIM is expected to be relatively stable.
Looking forward to Q4, US NIM is expected to moderately expand.
US BSA/AML remediation and related governance and control investments are expected to be approximately $500 million pre-tax in fiscal 2025, with similar investments expected in fiscal 2026.
US retail expense growth is expected to be in the mid-single digit range in fiscal 2025.
Ajai expects fiscal 2025 PCL results to fall within the range of 45 basis points to 55 basis points.
