Toronto-Dominion Bank

The stable outlook reflects our expectation that over our two-year outlook horizon, TD Bank will maintain strong operating performance, consistent revenue growth and expense management discipline, and manageable credit losses; and will rebuild its S&P Global Ratings RAC ratio. We could lower our assessment of the bank's stand-alone credit profile (SACP) if the RAC ratio were to fall below 7% and remain there or if credit losses were to exceed our expectations and be meaningfully higher than the peer average. An upgrade is less likely because we do not expect TD Bank to significantly outperform large domestic peers despite some comparative strengths and advantages. Our anchor for a bank operating mainly in Canada is 'a-', based on an economic risk

...Toronto-Dominion Bank benefits from leading market share positions in domestic consumer lending. Toronto-Dominion bank (TD Bank) has leading market shares (along with Royal Bank of Canada [RBC]) across a range of largely retail-oriented business categories; diversified revenue streams; and an extensive retail banking network in the eastern U.S. from Maine to Florida. In our view, the planned acquisition of Memphis-based First Horizon Corp. (almost US$90 billion in assets), expected to close in first-quarter 2023, will provide TD Bank with additional scale in attractive adjacent markets in the U.S. S&P Global Ratings risk-adjusted capital ratio will fall after the close of the acquisition. At the close of the US$13.4 billion all cash-transaction of First Horizon, the bank's Common Equity Tier 1 (CET1) ratio is expected to remain above 11%--a sharp drop from 15.2% at first-quarter 2022. Its S&P Global Ratings risk-adjusted capital (RAC) ratio (8.7% at year-end 2021) will also fall meaningfully...

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