Toronto-Dominion Bank Q4 2024 Earnings Call Transcript

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

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : Good morning. Just a quick one. There's a lot of moving pieces in this balance sheet optimization. I'm going back to the presentation, I think around Q3 whatever. And it was said you were going to dispose of $50 billion of securities and that would generate the nearly mid-range, USD400 million benefit to NII. If I look at what you've disclosed so far, I've got about $6 billion, including what happened after December 4. And we're at around half of that NII benefit. What am I missing here? So you're -- you've sold a lot less than $50 billion, but you're already at half of the expected benefit.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : Okay. So it's just a matter of the nature of what you've sold not some weird thing that I overlooked. And then professional fees, I guess just to get a -- you did highlight -- Bharat and Kelvin, you both highlighted expense items like the real estate stuff and then there's the Nordstrom costs and then professional fees and that one jumped out at me a bit. You popped up over $1 billion this quarter. And I'm wondering how much of that increase is related to the already disclosed remediation costs and how much of that is, call it, ad hoc? And is this something that we could be bearing for a while? Because I think a lot of people, myself actually, are wondering about unintended or unexpected indirect costs related to this remediation program and AML issue because I appreciate you can't isolate everything, but there's bound to be stuff that comes out of nowhere.

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : Okay. So this increase that I saw, they went over $1 billion. Does that include the remediation costs and then other costs that may have not been anticipated?

Question: Gabriel Dechaine - National Bank Financial, Inc. - Analyst : Okay. And a quick one, just on the securities repositioning again. The losses that you're recording on disposition that's being adjusted out of earnings, but then the benefit, the $400 million or so to NII, that's going to be kept in your adjusted figure or retain -- remain in your adjusted figure? Is that what we're doing here? 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: Meny Grauman - Scotiabank Global Banking and Markets - Analyst : Thanks. Good morning. A few questions on the strategic review. First off, just wanted to understand when you actually began this strategic review. That would be helpful to know.

Question: Meny Grauman - Scotiabank Global Banking and Markets - Analyst : Understood. I guess the reason I'm asking is that I was a little surprised that it wouldn't have started earlier. I mean, the bank is known about these issues for a while. So I'm just trying to understand, maybe don't fully appreciate the timeline here. Were you waiting for something specific in order to kick this strategic review off? How do we understand the timeline here?

Question: Meny Grauman - Scotiabank Global Banking and Markets - Analyst : And then, when you talk about everything is on the table, does that include divestitures? And does that include potential divestitures in the US?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Good morning. I guess maybe just following up on the strategic review. So I think the messaging is right, Raymond, around everything is on the table. You're going through all of this. At the same time, as we think about you've been at the bank for 30-plus years, as a shareholder, is the takeaway that we could have even stronger ROE medium-term targets when we come out of all of this? Or is the message that there are things that you've identified as not quite performing as well, which may impede your ability to achieve those prior targets? I'm just trying to figure out and align your messaging around foundation is strong, get even stronger? Does it mean that even though you suspended these targets, our expectation should be things will be even stronger and better when you've completed this process? Is that the right takeaway?

Question: Ebrahim Poonawala - BofA Securities - Analyst : That's fair. And I guess, maybe, Kelvin, just following up, two things, if you don't mind clarifying, I just want to make sure the 5% to 7% expense growth is relative to the 29.148 full year adjusted expense number, is that right?

Question: Ebrahim Poonawala - BofA Securities - Analyst : Got it. And just similarly on NII, to the extent given all the moving pieces, if you can give us a sense of what you expect NII growth to look like based on whatever your rate assumptions are for '25?

Question: Paul Holden - CIBC Capital Markets - Analyst : Thank you. Sorry, I might have missed a little bit of that last question, but I think it's an important one just in terms of the growth expectation for Canada, obviously, you held a big Investor Day, not that long ago, focusing on the growth opportunities in Canada. I want to make sure there's no message that any of that has changed, maybe the targets end up changing a bit, but that all those growth opportunities you highlighted back in '23, you're still on the table?

Question: Paul Holden - CIBC Capital Markets - Analyst : Okay. Good to hear. And then last question for me. I just want to drill down on the expense guidance a bit of 5% to 7%. When I go back to your -- the slide deck you provided not that long ago, I think you expected roughly CAD800 million of expense savings versus roughly USD550 million of risk and control expenses. So call it roughly awash, maybe a little bit net favorable. 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: Darko Mihelic - RBC Capital Markets - Analyst : A couple of questions. The first a mechanical one on the AML issue. And apologies I've never dealt with this before. So I just want to understand the mechanics behind the dividend or in other words, cash coming out of the US up to the Canadian Holdco. It's my understanding that you have to provide evidence that you've sort of done what you want to do. But what I don't understand is why they would ever give you permission. If you have a three- and four-year monitorship, on the go, presumably, they wouldn't be satisfied until you complete that. So why would they next year or whenever on an early basis, give you the go ahead to dividend of cash. So maybe if you can just understand -- just to understand the mechanic of maybe it's something more rudimentary and I'm just missing it. Bharat Masrani - Toronto-Dominion Bank - Group President, Chief Executive Officer, Non-Independent Director Darko, this is Bharat. The main entity we have in the US is the company that owns all the banks and what we call our intermediate holding company. Any dividends declared from that requires a certification from the Board that we have allocated enough funds to our remediation, et cetera. And if we are able to certify that, then you can declare the dividend.

Question: Darko Mihelic - RBC Capital Markets - Analyst : Okay. Thank you. And my second question relates to the Schwab deposits. They're now down to USD83 billion. And again, I just want to understand the mechanics of this program. That fell $17 billion from last year, actually from a peak of $153 billion. And in my mind, the way this might work is if interest rates keep going down and equity markets keep performing well, these deposits could grow. And so what goes down could go up. 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: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : Okay. I just wanted to clarify, as you do this strategic review, I assume you've put any capital allocation, for example, buybacks on hold. Is that the right way to think about it, Ray?

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : And so you have -- I mean you yourself are the Chief Operating Officer now, I think a number of the business heads around the table are embarking on new opportunities and challenges, so when you are doing this strategic review, what are they doing as far as the base business? What is Tim Wiggan doing as far as TD Securities is concerned? Is he in a holding pattern? Or if they want to deploy capital, they are allowed to do that in advance of the strategic review being done? 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: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : So Tim, you're not worried that as that two-year passes on retaining people will be a problem for your business?

Question: Darko Mihelic - RBC Capital Markets - Analyst : Hey, thank you. All right. My last question is for Leo. Leo, can you give me a sense of how we should expect your non-interest income to behave over the course of the next year? It's been under pressure. If you can just give me any view on that, that would be helpful. Leovigildo Salom - Toronto-Dominion Bank - Group Head U.S. Retail, TD Bank Group and President and Chief Executive Officer, TD Bank, America's Most Convenient Bank Darko, I think -- I think in a previous quarter, we talked a little bit about the fact that we had really weathered most of the overdraft pricing changes, and now that's fully baked into the run rate. That had been a significant drag for us. Cumulatively, between both retail and small business overdraft fee reduction, that was nearly $0.5 billion reduction in terms of overall annual revenues, and that has now fully cycled through. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.