Toronto-Dominion Bank Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gabriel Dechaine - National Bank Financial Inc - Analyst : Hey, good morning. First question, just to follow up on that one. So you've -- the loans you're talking about, in the US, the exits, runoffs, $17 billion to date $18 billion, thanks for that number identified for similar treatment. Is that contemplated? And is that the full program as you see it now, because there's what you do this year? And then it sounds like more beyond or beyond 2026 or whatever? Is this capturing all that outlook? Leo Salom - Toronto-Dominion Bank - Group Head, US Retail, TD Bank Group & President and CEO, TD Bank, America's Most Convenient Bank Thanks for the question, Gabe. I'd say that is the entirety of the program. That reflects not only what we announced back in October but it also includes the product of the strategic reviews that we've conducted over the past two quarters.

Question: Gabriel Dechaine - National Bank Financial Inc - Analyst : Okay. Next question is on expenses, expense management. So just so I'm crystal clear, I mean I should know this now, but the USD500 million of AML remediation costs, the direct stuff, that's in the US P&C segment, correct? Leo Salom - Toronto-Dominion Bank - Group Head, US Retail, TD Bank Group & President and CEO, TD Bank, America's Most Convenient Bank Correct.

Question: Gabriel Dechaine - National Bank Financial Inc - Analyst : I'm sure we'll dive into that in greater detail on the September -- in a month or so. Last one, buyback, the pace -- I mean, I know there's the number of shares and the dollar amount the stock price has gone up since you announced the buyback program. So -- but if I look at the number of shares, it was [30-some-odd million] in the last quarter, 15-or-so this quarter, unless I'm mistaken. Are you committed to the full USD8 billion amount?

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Hey, good morning. I guess, just a few questions around expenses. And maybe, Leo, with you on the US side. Just making sure I'm hearing you correctly, there's another, I guess, $18 billion of loans that are going to run off next year. Expense growth is going to be mid-single digits in the US segment. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : That's helpful, Leo. And I think if I heard correctly, you said you expect to have all the work done by the end of the year as far as the AML mediation stuff is concerned? And if that is, in fact, the case, my understanding of kind of how the US regulators work is you've got sort of products lined up.

Question: Sohrab Movahedi - BMO Capital Markets - Analyst : Okay, thank you. I wonder if I could just ask Tim a little bit more on Wholesale Bank. I think you mentioned, Tim, that there are some investments that are taking place to accommodate a top-10 type, I suppose, aspiration in North America. I see a big increase in, for example, full-time equivalent or employee count. Some of it, I suppose, is seasonal. But can I get a sense of as you think about whether you're trying to go, how much more investing and spending needs to take place? And when do we expect to see the fruits of that, so to speak, on a sustained basis? Tim Wiggan - Toronto-Dominion Bank - Group Head, Wholesale Banking and President and Chief Executive Officer - TD Securities Yeah. So I would say thanks very much for the question. I would say with regard to FTEs, that is absolutely seasonal. So as you look out over the next year-over-year or over the medium term, we don't expect a material increase in our complement of FTEs, and I would say, just generally, we'll be able to share more color in terms of the shape of the investment profile at the Investor Day. But you're really seeing all elements of expense hitting in the current year. And so to give you tangible examples, our convertible platform didn't exist 1-year ago and is a meaningful contributor to the league table rankings that you're seeing in equity and equity linked that requires investment. We've been quite open that we are expanding our US Prime business. You're seeing growth in Prime overall, 20% plus, but more to come as we roll out incremental strategies. So that's hitting. The employees that we've added, which again, I would say, on a net-basis, are neutral, our subject matter expertise and leaders in their field. But as you know, there's a Ajai curve there. And then finally, all of this has to happen within our risk appetite. And so there's a material investment in our risk and control platform, and we're a year into a 2- or 3-year program on upfront. So essentially, over the medium term, as revenue growth continues and those expenses normalize, I'm confident that we'll hit our targets that we'll speak more about next month.

Question: Doug Young - Desjardins Securities Inc - Analyst : Hi, good morning. I guess, it's for Ajai, two kind of things of credit, higher gross impaired loan formations in US. Commercial. I think you talked about, then in the US, there's a release of performing loan allowances. And so I'm just trying to connect to and maybe walk through where the release came from? And then if you can I think you said about $600 million of expert credit judgment. I think it's in your performing loan allowances related to risks around trade policies. Can you put a little more meat around that? Like was that zero last year? How has that evolved? And then I have a follow-up.

Question: Doug Young - Desjardins Securities Inc - Analyst : And so just to follow up on that, the $600 million and the $410 million. How much of that is Canada, how much is -- I would assume most of this is Canada, but --

Question: Doug Young - Desjardins Securities Inc - Analyst : And then just in a real life example, like what is that $600 million. So if we had a breakdown in USMCA. Like that is what this is there for doesn't cover, obviously, everything that would happen, but it provides you a cushion in anticipation of that? Is that how to think of that $600 million?

Question: Doug Young - Desjardins Securities Inc - Analyst : Yeah. And then just second, Leo, you talked about ROE improvement in the US I guess it's kind of -- there's two parts of the equation. Obviously, the numerator and the denominator. How much of this is driven numerator versus denominator. And then can you give kind of context to where you started and where you think you can get to with that US, ROE? Leo Salom - Toronto-Dominion Bank - Group Head, US Retail, TD Bank Group & President and CEO, TD Bank, America's Most Convenient Bank Well, Doug, thanks for the question. I we will be providing more clarity with regards to return on equity target at the Investor Day. So I won't front run that discussion at this point. But it's been a combination of both, right? So if you look at -- we are clearly contracting portions of the portfolio that we believe are not accretive to our return on equity profile. But the reality is a lot of the benefit because that RWA reduction is still funneling through the balance sheet. So where you're seeing the improvement right now has been the improvement in overall operating results. We've had three sequential quarters of NIAT growth from fourth quarter of last year at present. And that has allowed us to be able to post cumulatively 140 basis points worth of improvement when you exclude Schwab. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Shalabh Garg - Veritas Investment Research Corp - Analyst : Good morning and thank you for taking my question. I'm referring to Slide 42. Now there was a sharp year-over-year improvement in the canadian commercial credit performance, whereas US was a bit elevated. Now when I look at the size of the loan portfolios, they look pretty similar in terms of size and mix. Now does this highlight a difference in underwriting standards? Or is it more of a function of balance sheet positioning in the US and the relative size in the two countries?

Question: Paul Holden - CIBC Capital Markets - Analyst : Hi, thank you. Good morning. I'll try to keep it quick in the interest of time. So a question for Sona. So kind of a two part question, but trying to get to the major point, which is sort of maybe NII outlook on Canadian P&C banking. So if I look at loan growth in the quarter, I see residential mortgage is down a bit, but strong growth in what I think are higher-margin products, HELOC, cards. So maybe you can talk through that a bit in terms of the outlook and why residential mortgage is down in the quarter, but good growth on the other side? And then the second part of the question is really on deposit mix. I know in the past quarter, you've talked about benefit of GICs going off and demand deposits growing. Is that ongoing? And do you expect it to be ongoing? And then again, that really leads to like sort of what's the NIM and NII outlook for the segment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Paul Holden - CIBC Capital Markets - Analyst : Okay. And I guess really where I'm going with that is I get the guidance is stable. But if I put all everything together, it certainly benefited the quarter and would that suggest to me it probably benefit Q4, but you're guiding to stable. So are you just being conservative in that guidance? Or do you expect a change in trend?Again, just trying to square everything up here.

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Thank you. Good morning. I'll be really quick as well. Ajai you gave great detail on the $600 million reserve. So maybe just to boil this down, I'd like to understand sort of what would it take to release them, right? Would it be USMCA is left alone for example, would that be better than anticipated and caused a release of substantially those reserves, if tariffs equal what Europe got, would that be better than what you've anticipated and released those reserves. Would those be two sort of outcomes that would result in substantially most of those reserves being released? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.