Toronto-Dominion Bank

The stable outlook reflects our view that TD Bank's strong balance sheet and diversity in its businesses position the bank well for a slowing economy, and that the bank will post still-reasonably strong operating performance despite pressure from rising provisions for loan losses and elevated expenses. We believe that the bank will maintain manageable NCOs and its S&P Global Ratings RAC ratio around the high end of our adequate range of 7%-10%, over our two-year outlook horizon. We also expect the bank will maintain similar funding and liquidity metrics to those of large peers. We could lower our assessment of the bank's stand-alone credit profile (SACP) if the RAC ratio fell below 7%, due to a large acquisition or performance

... mortgages and other unsecured consumer loans is slightly higher than the peer average. Elevated household debt and shrinking consumer savings, against the backdrop of sharply higher interest rates, place the bank in a slightly more vulnerable position than some peers due to its modestly higher exposure to consumer lending. We expect that the slowing economy and weakening credit environment will result in higher net charge-offs (NCOs); however, we believe these will remain manageable owing to the bank's sound underwriting. Furthermore, we expect the unemployment rate will rise only modestly in 2024 (from 5.8% to 6.1%), which is key to the level of NCOs we expect. S&P Global Ratings risk-adjusted capital ratio will be around 10% Over our two-year horizon and barring acquisitions, we expect Toronto-Dominion Bank's (TD Bank) S&P Global Ratings risk-adjusted capital (RAC) ratio (10.9% at second-quarter 2023) will be at the high end of our adequate...

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