The ratings on The Toronto-Dominion Bank (TD Bank) reflect the bank's formidable domestic retail operations, which continue to be the core growth engine with a substantial base of stable earnings, opportunistic discount brokerage position, and a conservative risk culture including very modest exposure to U.S. subprime-related risks. The U.S. retail strategy continues to be the bank's biggest challenge with rising credit costs and low returns on cost of capital. Despite this important challenge, we believe that TD Bank is more solidly positioned than some Canadian peers to weather continuing credit challenges. What differentiates TD Bank from some of its Canadian peers is its lower tolerance for risk and higher proportion of retail in the business mix. This has translated into
