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    TD
    Earnings call· Oct 2025(Q4 FY25)

    TORONTO DOMINION BANK TD

    Dec 4, 2025 Source

    Executive summary

    TD Bank Group Q4 FY25 — Strong Performance Across Businesses and Strategic Progress

    TD Bank Group concluded FY25 with a strong fourth quarter, marked by robust performance across all segments and significant progress on strategic pillars like AI adoption and AML remediation. The bank delivered positive operating leverage and exceeded its earnings growth expectations for the year, while maintaining a strong capital position and returning capital to shareholders. Management expressed confidence in achieving FY26 targets, supported by business momentum and strategic execution, though acknowledging ongoing macroeconomic and trade uncertainties.

    Highlights

    5

    • Achieved 5% earnings growth in FY25, exceeding initial expectations of a challenging transition year.

    • Delivered positive operating leverage in Q4 FY25, with expense growth moderating.

    • Q4 CET1 ratio of 14.7% with strong capital generation, and over $6 billion of the $8 billion share buyback completed.

    • Canadian Personal and Commercial Banking delivered record revenue, deposits, and loan volumes, with loans up 5% YoY.

    • Wholesale Banking achieved record $2.2 billion revenue and over 12% ROE in Q4, driven by broad-based growth.

    Concerns

    3

    • Continued high degree of uncertainty around tariffs and Canada-U.S. trade dynamics, impacting industries like steel and aluminum.

    • U.S. BSA AML remediation program remains a top priority with significant work ahead in 2026 and 2027, with $507 million invested in FY25.

    • Balance sheet restructuring included selling $32 billion notional of lower-yielding investment securities for an upfront loss of $1.6 billion pretax.

    Guidance & targets

    17
    CategoryTargetConfidence
    Expense growth
    3% to 4%
    high materiality
    High
    Adjusted EPS growth
    6% to 8%
    high materiality
    High
    ROE
    13%
    high materiality
    High
    Current share buyback completion
    complete
    medium materiality
    High
    New share buyback program
    $6 billion to $7 billion
    high materiality
    High
    AI use cases incremental value
    $200 million
    medium materiality
    High
    U.S. Retail expense growth
    mid-single-digit range
    medium materiality
    Medium
    U.S. Retail ROE
    9.5%
    high materiality
    High
    U.S. Retail NIAT
    USD 2.9 billion
    high materiality
    High
    NII benefit from investment portfolio repositioning
    $550 million
    medium materiality
    High
    PCLs
    40 to 50 basis points
    high materiality
    Medium
    U.S. BSA AML remediation and governance & control investments
    similar investments
    medium materiality
    High
    Canadian P&C NIM
    relatively stable
    medium materiality
    Medium
    U.S. Retail NIM
    moderately expand
    medium materiality
    Medium
    Restructuring program additional charges
    $125 million
    medium materiality
    High
    Restructuring program annual run rate savings
    $750 million
    medium materiality
    High
    U.S. Retail deposit growth
    mid-single-digit growth rates
    medium materiality
    Medium

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Canadian Personal and Commercial Banking
    Delivered record revenue, deposit and loan volumes. Strong loan growth across businesses, record year in RESL proprietary channel originations and retail auto finance. Expenses increased YoY due to higher employee-related and other operating expenses.
    Average deposits: 4% YoY growthPersonal deposits: 3% growthBusiness deposits: 5% growthAverage loan volumes: 5% YoY growthPersonal volumes: 5% growthBusiness volumes: 6% growthSmall business checking account openings: 10% YoY growth
    		record revenue——Net interest margin was relatively stable quarter-over-quarter
    U.S. Retail
    Sustained business momentum and executed against critical deliverables. NIM driven by higher deposit margins, higher loan margins from balance sheet restructuring, and normalization of elevated liquidity. Expenses increased 5% YoY, reflecting higher governance and control investments and employee-related expenses.
    Revenue growth: 7%Deposits (excluding sweeps): down 1% YoYDeposits (excluding targeted runoff): up 1%Core loans: 2% YoY growthU.S. bank card balances: 14% YoY growthROE: 9.3% (Q4)ROE: just over 62% (full year)Positive operating leverage: 232 bps
    		—16% year-over-year—Net interest margin was 3.25%, up 6 basis points quarter-over-quarter
    Wealth Management
    Served almost 2.7 million clients. Revenue net of ISE was up 39% for the combined Wealth Management and Insurance segment. Expenses up YoY due to higher variable compensation, technology spend, and employee-related expenses.
    Total client assets: 10% YoY growthMass affluent client assets: 21% YoY growthDirect investing new accounts: 27% growthTrades per day: 37% YoY growthRecord flows from direct investing to advice: $3.9 billionRecord sales in ETFs: $1.6 billionETF market share: up 48 basis points
    		record earnings and assets39%——
    Insurance
    Continued to build position as Canada's leading digital direct insurer. Record digital adoption. Revenue net of ISE was up 39% for the combined Wealth Management and Insurance segment. Strategically rebalanced portfolio in Q4 by moderating concentration in high severe weather regions to improve profitability and resiliency.
    General Insurance gross written premiums: 10% growth (FY25)Quotes: more than 3.5 million
    		—39%—ROE: 24.2% (full year)
    Wholesale Banking
    Driven by broad-based growth across Global Markets and Corporate and Investment Banking. Benefited from a constructive backdrop, especially in capital markets. Executed on RWA optimization opportunities. Adjusted expenses increased YoY due to higher variable compensation and technology spend.
    ROE: 12.4% (Q4)ROE: up close to 500 basis points (Q4)Revenue growth vs RWA growth: 2.6x (Q4)Revenue growth vs RWA growth: 1.6x (FY)NIAT: $375 million to $425 million (average per quarter, target)Revenue: $1.8 billion (average per quarter, target)
    		record $2.2 billion——record net income and ROE over 12%
    Corporate
    Higher net corporate expenses were offset by higher revenue from treasury and balance sheet management activities.
    		———net loss for the quarter was $195 million, largely flat year-over-year.

    Operational metrics

    37
    AI use cases value generated
    $170 million
    FY25

    Generated from approximately 75 AI use cases.

    Fraud losses
    26%YoY decrease
    FY25

    Driven by ongoing investments in fraud modernization across capabilities, data, systems and processes.

    U.S. BSA AML remediation and governance & control investments
    $507 million
    FY25

    In line with guidance.

    Total assets
    $382 billion
    Q4 FY25 end

    Reflecting continued runoff of noncore lending portfolios.

    Asset reduction capacity
    $52 billion
    Q4 FY25

    Created versus the asset limitation, exceeding the 10% asset reduction announced on October 10, 2024.

    Investment portfolio repositioning notional sold
    $32 billion
    FY25

    Sold lower-yielding investment securities.

    Investment portfolio repositioning upfront loss
    $1.6 billion
    FY25

    From selling lower-yielding investment securities.

    Investment portfolio repositioning NII benefit
    $500 million
    FY25

    Generated from the repositioning.

    Restructuring program total expected size
    $825 million
    FY25-Q1 FY26

    Includes approximately $125 million in additional charges for Q1 FY26.

    Restructuring program annual run rate savings
    $750 million
    Annual

    Higher savings estimated from the program.

    Revenue net of ISE growth
    12%YoY growth
    Q4 FY25

    Total bank PTPP was up 25% YoY after removing impact of U.S. strategic card portfolio, FX, and insurance service expenses.

    Revenue net of ISE growth
    15%YoY growth
    Q4 FY25

    Reflecting growth across all businesses.

    Expenses growth
    10%YoY increase
    Q4 FY25

    Delivered positive operating leverage.

    Dividend per share increase
    $0.03
    Q4 FY25

    Bringing dividend to $1.08 per share.

    Total payout ratio
    93%
    FY25

    Reflecting commitment to return value to shareholders.

    Digital sales
    record year
    FY25

    Continuing momentum in mobile leadership.

    Cards acquisition
    best year in nearly a decade
    FY25

    Strong momentum.

    U.S. Bank Card account acquisition
    strongest in 7 years
    Q4 FY25

    Part of continued momentum.

    Small Business Administration lending rank
    #1ninth year in a row
    Q4 FY25

    Continuing to serve communities.

    Client assets
    2.7 million
    Q4 FY25

    Wealth Management business serves almost 2.7 million clients.

    Flows from direct investing to advice
    $3.9 billionrecord flows
    FY25

    Direct investing is an acquisition engine.

    Digital adoption
    record
    Q4 FY25

    Continuing to build position as Canada's leading digital direct insurer.

    U.S. corporate access rankings
    #6rose to
    Q4 FY25

    Demonstrates strength of relationships across corporate and institutional clients.

    Gross impaired loan formations
    $256 million$256 million decrease QoQ
    Q4 FY25

    Decrease largely across wholesale banking and U.S. commercial lending, partially offset by Canadian P&C.

    Performing PCL
    $39 million$28 million decrease QoQ
    Q4 FY25

    Reflects model update in Canadian credit card portfolio, partially offset by economic forecast improvement.

    Allowance for credit losses
    $40 millionQoQ increase
    Q4 FY25

    Reflects various factors.

    Uninsured Canadian RESL portfolio with LTV > 75% and FICO < 650
    less than 1%
    Q4 FY25

    Indicator of strong customer profile.

    Uninsured Canadian RESL current LTV
    56%
    Q4 FY25

    Low LTV.

    Canadian RESL impaired PCLs increase
    $6 million
    Q4 FY25

    Very low increase.

    Canadian RESL gross impaired loans increase
    $55-60 million
    Q4 FY25

    Coming largely from the marginal segment.

    Deposit margins expansion
    5 bps
    Q4 FY25

    Result of selective pricing and balance sheet restructuring.

    Assets from referrals
    $31 billion
    FY25

    Closed referred business.

    Assets from referrals
    $7 billion
    Q4 FY25

    Strong momentum.

    Efficiency ratio improvement
    250 bpsYoY improvement
    FY25

    Sets up nicely for next year.

    Frontline bankers added
    200
    FY25

    To accelerate growth, with more small business bankers expected in FY26.

    NIAT target
    $375 million to $425 million
    per quarter

    Average per quarter, exceeded expectations.

    Revenue target
    $1.8 billion
    per quarter

    Average per quarter, exceeded expectations.

    Industry KPIs

    12
    MetricValueDetails
    Loans5% YoY growth%
    Deposits4% YoY growth%
    Rotce ROE13%%
    Cet1 ratio14.7%%
    Capital returns$1.08USD per share
    Fee income lines$2.2 billionUSD
    Allowance reserves$40 millionUSD
    Net interest margin3.25%%
    Net charge offs npls23 basis pointsbps
    Total operating expenses10% year-over-year%
    Provision for credit losses41 basis pointsbps
    Efficiency ratio operating leveragepositive operating leverage

    Deals & partnerships

    2
    National Fuel GasTD Securities acted across advisory and financing products for National Fuel Gas' recent acquisition of the CenterPoint business.

    Leveraging TD Securities platform to provide a full suite of services to clients.

    NordstromExtension of the Nordstrom strategic card program agreement.

    Costs associated with the extension partially offset U.S. Retail expense increase. Conversion of Nordstrom strategic card customers onto TD's servicing platform is planned for the first half of fiscal 2026.

    Risks & headwinds

    5
    Tariffs and Canada-U.S. Trade DynamicsOngoing

    High degree of uncertainty, particularly impacting industries facing highest tariffs such as steel and aluminum.

    Mitigation: Canada prepares for CUSMA renegotiations; new government actions (e.g., Canadian Mutual Recognition Agreement, defense spending, major projects office) to incentivize private sector and foreign investment.

    Economic UncertaintyOngoing

    Impacted business and consumer confidence.

    Mitigation: TD is well positioned to manage through this period; Canadian economy and employment remain largely resilient; U.S. economy continues to perform with pickup in investment activity in some sectors.

    U.S. AML Remediation Program2026 and 2027

    Significant work ahead and important milestones to come in 2026 and 2027.

    Mitigation: Deployment of next-generation transaction monitoring system, improved technology for investigation practices, implementation of AI-powered financial crimes automation platform and machine learning case triage model, enhanced system for submitting unusual transaction referrals.

    Potential Rate DeclinesFY26

    Will obviously add some degree of uncertainty for next year.

    Mitigation: U.S. Retail is being more selective around pricing and has implemented much more pricing discipline around higher-priced deposit categories to manage healthy deposit margins.

    Higher Severe Weather Regions (Insurance)Q4 FY25 (addressed)

    Higher concentration in some high severe weather zones.

    Mitigation: Rebalanced portfolio to moderate concentration in high severe weather zones while accelerating growth in geographies with less CAT exposure.

    What to watch in Q1 FY26

    5

    Completion of current share buyback

    End of Q1 FY26
    CurrentOver $6 billion of $8 billion completed
    Target$8 billion completed

    Why it matters

    Demonstrates commitment to capital return and frees up capacity for the next buyback program.

    We continue to expect to complete this share buyback by the end of the first quarter of 2026.

    Q&A highlights

    6

    Inquiring about the dynamics behind degradation in residential mortgages but not HELOCs, and when residential mortgage impairments might impact HELOCs.

    Management stated that Canadian housing outlook is slightly better due to pent-up demand and a better job market. Customer profile remains strong across RESL, HELOC, and residential mortgages. Delinquencies are stable across both, with >90-day delinquencies at 15 bps (pre-COVID levels). Impaired PCLs are slightly higher ($6 million), and gross impaired loans are up $55-60 million, primarily from 2022-2024 vintages originated at higher rates. Management is not concerned about the portfolio.

    “If you look at some of our stats, and I'm very focused on what's the distribution and what's in the tails, we have less than 1% of our uninsured Canadian RESL portfolio which scores less than 650 and LTV greater than 75%.”

    asked by John Aiken · answered by Ajai Bambawale

    3 min read7 chapters

    Detailed Narrative

    01

    Strategic Pillars and AI Adoption

    TD is executing on strategic pillars to deepen relationships, simplify operations, and execute with discipline. AI is a significant opportunity, with 75 use cases implemented in FY25 generating $170 million in value, and an expected $200 million incremental value in FY26. These applications span customer acquisition, insights, and risk management, contributing to a 26% YoY reduction in fraud losses. The bank is prioritizing AI investments with a focus on customer acquisition, insights, and risk management, while maintaining disciplined governance and controls.

    02

    U.S. AML Remediation Progress

    Significant progress has been made on the U.S. AML remediation program, including the deployment of next-generation transaction monitoring systems and AI-powered financial crimes automation. The majority of U.S. management remediation actions for FY25 are complete, with $507 million invested in the segment. The program remains a top priority with further milestones in 2026 and 2027, focusing on improving efficacy, accuracy, and creating an efficient and sustainable program.

    03

    U.S. Balance Sheet Restructuring

    The bank has achieved and exceeded its 10% asset reduction target, creating $52 billion of capacity against the asset limitation. This included selling $32 billion notional of lower-yielding investment securities for a $1.6 billion pretax loss, which is expected to generate $550 million in NII benefit in FY26. The restructuring aims to improve ROE, targeting 9.5% for U.S. Retail, and deliver approximately $20 billion of RWA release to support core loan growth and the medium-term 13% ROE target.

    04

    Canadian Banking Performance

    Canadian Personal and Commercial Banking delivered record revenue, deposits (up 4% YoY), and loan volumes (up 5% YoY). Digital sales for day-to-day banking products reached a record high, and real estate secured lending showed robust sequential growth with higher origination margins. The Business Bank saw loans up 6% YoY and small business checking account openings up 10% YoY, supported by the addition of 200 incremental frontline bankers in FY25.

    05

    Wholesale Banking and Wealth Management Strength

    Wholesale Banking achieved record revenue of $2.2 billion and ROE over 12% in Q4, driven by strong performance in Global Markets and Corporate and Investment Banking. Wealth Management delivered record earnings and assets, with total client assets up 10% YoY and mass affluent client assets up 21% YoY. Direct investing saw new accounts up 27% and trades per day up 37% YoY, contributing to record flows of $3.9 billion from direct investing to advice.

    06

    Expense Management and Restructuring

    The bank's restructuring program is reducing structural costs and creating capacity for investment. It is expected to conclude next quarter with an additional $125 million in charges, bringing the total to $825 million pretax. Annual run-rate savings are now estimated at $750 million pretax, supporting the FY26 expense growth target of 3-4%. The bank is committed to disciplined cost management and delivering positive operating leverage.

    07

    Insurance Business Rebalancing

    The insurance business saw strong gross written premiums growth of 10% in general insurance for FY25, with an ROE of 24.2% for the full year. In Q4, the bank strategically rebalanced its portfolio by moderating concentration in high severe weather regions to improve profitability and resiliency. This rebalancing aims to accelerate growth in geographies with less CAT exposure, aligning with the goal to double the home and auto business by 2029.

    AI-generated summary of the company’s earnings call. Not investment advice.