Update: Toronto-Dominion Bank

The stable outlook reflects our expectation that over our two-year outlook horizon, TD Bank will remain well positioned to absorb any remaining fallout from the pandemic due to its substantial earnings power. We also expect operating performance will continue to strengthen. We expect the S&P Global Ratings forecast RAC ratio (9.1% at second-quarter 2021) will remain comfortably within our adequate range of 7%-10%; however, benefits from higher profitability in 2021 due to a significant decline in provisions for loan losses are likely to be somewhat offset by the resumption of dividend payments and share repurchases early fiscal 2022. We could lower our assessment of TD's stand-alone credit profile if credit losses were to exceed our expectations and be meaningfully higher

...We expect the bank will maintain its dominant domestic and U.S. retail franchise. Toronto-Dominion Bank (TD) benefits from leading market shares across a range of largely retail-oriented business categories, diversified revenue streams, and an extensive and more successful retail banking franchise in the U.S. (the east coast from Maine to Florida) than some large domestic peers operating south of the border. In our view, the bank's strategy and risk appetite are well articulated and permeate throughout the organization, as evidenced by its stronger-than-peer average asset quality metrics. Net charge-offs (NCOs) and nonperforming assets (NPAs) are 21 basis points (bps) and 38 bps, respectively, versus peer averages of 26 bps and 50 bps, respectively. They include a higher reserving level (242% as a percentage of NPAs versus the peer average of 159%), and smaller exposure to capital markets (representing 12% of revenues versus the peer average of 20%)....

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