Q2 2020 Earnings Call

[music].

Please standby you I'm eating is about to begin good afternoon, ladies and gentlemen, welcome to the TD Bank Group Q2, 2020 earnings Conference call.

Not turn the meeting overcoming Gillian Manning head of Investor Relations. Please go ahead midnight.

Thank you operator.

Good afternoon, and welcome to TD Bank groups second quarter 2020 investor presentation.

We will begin today's presentation with remarks from environments, Ronnie the bank CEO after which we as I'm at the bank CFO will present, our second quarter operating result.

Jay Brown with White, Chief Risk Officer will then offer comments on credit quality after which we will invite questions from prequalified analysts and investors on the phone.

Also present today to answer your questions on Rytary Curry group had Canadian personal banking, Greg Braca, President and CEO TD Bank America's most convenient bank and Bob Dorrance group had wholesale banking.

Please turn to slide two.

At this time I would like to caution our listeners that this presentation contains forward looking statements that there are risks that actual results could differ materially from what is discussed and that certain material factors or assumptions replied and making these forward looking statements.

Any forward looking statements contained in this presentation represented use of management and our presented for the purpose of assisting the banks shareholders and analysts and understanding of Inc.'s financial position objective and priorities and anticipated financial performance forward looking statements may not be appropriate for other purposes.

I would also like to remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results to assess each of its businesses into measure overall bank performance.

The bank believes that adjusted results provide readers with a better understanding of how management views. The banks performance Barrett, we'll be referring to adjusted results in his remarks.

Additional information on items of note the banks reported results and factors and assumptions related to forward looking information are all available in our Q2 2020 report to shareholders.

With that let me turn the presentation over to better it.

Thank you Jillian and thank everyone for joining us today.

Last few months, having an extraordinary done we're all over on April 2nd.

We conducted the first ever virtual annual meeting.

It's hard to believe that would June 1st just around the corner, the sweeping restrictions and economic and social activity implemented to contain recorded 19 been Danny.

Our still largely in place.

No. It is encouraging to see reopening measures beginning to take shape in some geographies.

Before I go into our Q2 results I want to talk about how we're meeting that goal that 19 challenge at TD.

The total exacted might this crisis in lives lost in activity disrupted will reveal Barry for years to come.

Economies around the world had been plunged into recession, and unemployment rates have risen to levels not seen in decades.

But was the scale of this graces still has the power to shock the responses as listed that.

Is inspiring.

Dedicated frontline workers in so many different industries, including financial services venturing out each day to keep critical services running.

From businesses that nonprofits fighting to maintain their operations and support their staff.

From central banks, and regulators, who launched new liquidity facilities to keep financial markets functioning and ease the supply of credit to the economy and from governments, we implemented by all measures and support to date households, and businesses through this unprecedented suspension of activity.

We have been proud at TD to contribute to this collective effort.

We've been working hard to support our people. So they can keep them. So safe we're looking after our customers I want to thank them for their exceptional service. This includes the many colleagues we're keeping our branches stores in contact centers open and performing services vital to our customers.

And the banks core operations, we've adjusted their work environments to help protect their wellbeing judging schedules reconfiguring floors there.

And investing in protective equipment and enhance cleaning.

You recognize the sacrifice they and their families have made with additional compensation and vacation days.

We quickly enable 60000 of our colleagues to work from home equipment equipping them with the tools and technology to work productively, while prioritizing security.

And for all our.

And for all of our colleagues, we committed that there will be no job losses. In Twentytwenty is the result of Colgate 19. We know this is a stressful time. This assurance is important for our colleagues as well as our customers who are depending on them for support and financial advice in this difficult times.

At PD, our people our greatest asset their hard work and dedication has enabled us to deliver swift and comprehensive assistance for our customers through a TD health program in Canada, and TV cares program in the U.S., we've connected with thousands of customers and bring their to serve them in their momentum.

This need.

Across our Canadian and US retail businesses, we provided financial support to over 800000 customers and accounts differing payments on approximately $62 billion a loan balances as of April thirtyth, extending other forms of relief, including premium reductions and deferrals to more than 102.

35000, TD insurance clients and facilitating the flow billions of dollars in government funds to businesses through the programs like see by in Canada, and the Paycheck protection program in the U.S.

We're also helping the federal government deliver income support to Canadian households to the third program with 1.4 million direct deposits facilitated during the quarter.

In our wholesale bank, we increased total gross lending exposures by $23 billion, providing a corporate institutional and government clients with critical funding and liquidity support during a period of severe market dislocation.

Did you asset management is contributing to stabilize in capital markets, having being selected by the bank of Canada to manage its commercial paper and corporate bond purchase programs.

We've also taken decisive action to support our communities as part of the TD ready commitment we've announced the de community resilience initiative, which is allocating $25 million to strengthen our communities and support organizations involved in the core with 19 recovery effort.

I'm very proud of the response, we mounted over the last few months our people have demonstrated their ability to adapt to new ways of working almost overnight and we wish we reshaped the banks operations Justice quickly supported by the investments we've made to enhance our technology infrastructure and network capacity.

City build new lending platforms and launched scalable end to end customer journeys.

These investments in our infrastructure and capabilities enabled us to meet a surge in digital traffic of more than 25% across our banking and insurance businesses managed record trading volumes in our direct investing business and stay connected to customers across our footprint from virtual trading desks to video community.

Occasions to new online and mobile tools, delivering payment relief and advice to our more than $14 million. The active digital customers Tdrs remains strong active and fully operational from the first year of this crisis and we're well positioned to continue supporting our customers and colleagues on the road to recovery.

These purposeful investments have been made possible by the strength of our model a diversified business mix backed by North American scale underpinned by a strong risk culture. It has demonstrated its resilience over time and through a variety of challenging operating environments and is proving its metal again.

Now.

This quarter, we earned through tremendous headwinds earnings were $1.6 billion and EPS was 85 cents as we absorb a substantial increase in provisions for performing loans as well as margin pressure from the steep drop in interest rates.

Our PD one capital ratio was 11% down 70 basis points from the prior quarter on higher RWS, reflecting both the deterioration in the economic environment and the balance sheet growth as we continue to support our clients.

A tough quarter no question, but one that demonstrates the resilience of our model and our strategy everything you know about TD has been born out by Disgraces, We will long term relationships with customers in standby them in good times and bad risk appetite is our campus.

We have the ability to execute with speed and purpose when the world shifts around us and the earnings power and balance sheet strength to play a role in the recovery.

That recovery will come up though it is not clear how long it will take the revenue picture is likely to remain challenging given the lower for longer interest rate environment and provisions for credit losses may remain elevated the downturn is more prolonged but the hallmark of TD is our ability to adapt to any operating and why.

And and sees the opportunities. It presents today, we are firmly focused on the way forward examining our workplaces and making plans to reopen locations with a focus on continuing to provide safe spaces, where our customers and colleagues as we begin the hard work of rebuilding.

Banking is a critical service and engine of economic growth in a pillar of the financial system.

For 165 years TD has been privileged to play this role given the power of our model the strength of our balance sheet and our distinctive culture I'm confident that we will emerge from this crisis stronger and better position to continue serving our customers colleagues and communities.

I will wrap up with two thoughts first I'm very proud of how we responded to this challenge as an industry. We are fierce competitors, but with a strong tradition of mutual respect for each other as well as our counterparts in government and the supervisory agencies, drawing on our long experience and our color.

Active expertise, we've been working to deliver the right outcomes for our customers and clients as well as the economy and society.

I also want to thank our 90000 people will be in bringing the best cells to work each day under very trying circumstances, you embody our purpose to enrich the lives of our customers colleagues and communities and give meaning to our vision to be the better bearing with that I'll turn it over to reserves.

Thank you Barbara Good afternoon, everyone. Please turn to slide nine.

This quarter the bank reported earnings of $1.5 billion and EPS of 80 cents adjusted earnings were $1.6 billion and adjusted EPS was 85 cents.

Revenue increased 3%, reflecting volume growth across our businesses and record wholesale revenues, partially offset by margin compression and lower fee income as a result of reduce customer activity in the banking businesses.

Provisions for credit losses increased to $3.2 billion, largely reflecting higher performing PCL.

Expenses decreased 2% year over year, notwithstanding approximately $75 million indirect costs incurred this quarter related to Colgate 19.

Declining expenses, primarily reflects higher PCL for the U.S. strategic cards portfolio, which is offset in corporate noninterest expenses.

As you know the partner share after revenue and Tcl for the U.S. strategic card portfolio program is held in the corporate segment with an offsetting entry representing the partner share of the net profits recorded in corporate noninterest expenses, resulting in no impact on corporate or total bank net income.

Higher PCL this quarter, including for the retailer program partners resulted in a smaller net profit share and therefore lower charge to expenses.

We have included an illustrative example on slide 27 to help clarify that gross to net accounting requirement for this portfolio.

Please turn to slide 10.

Canadian retail net income was $1.2 billion down 37% year over year, reflecting higher PCL and expenses, partially offset by revenue growth.

On an adjusted basis net income decreased 36%.

Revenue was up 1%, reflecting volume growth in deposits and loans and higher insurance premiums and wealth fees, partially offset by margin compression.

Average loans rose, 5% and deposits rose, 10% year over year, reflecting growth in both personal and business volumes.

Wealth assets were down 2%, reflecting declining in market values.

On a spot basis loans and deposits for Canadian PNC were up 4% and 13% respectively as at quarter end.

Margin was 2.83% a decrease of 11 basis points from the prior quarter, reflecting lower interest rates and competitive pricing in term deposits.

Total PCL increased by $762 million quarter over quarter, primarily reflecting higher performing PCL.

Total PCL as an annualized percentage of credit volumes was 107 basis points up 71 basis points quarter over quarter.

Expenses increased 4%, reflecting higher spend supporting business growth, including investment in frontline staff and changes in pension costs and volume driven expenses adjusted expenses were up 5%.

Please turn to slide 11.

US retail net income was us $261 million.

US retail bank net income was you at $87 million down 666 US dollar million slowdown U.S. dollar 666 million, reflecting higher PCL lower revenue and higher expenses.

Average loan volumes increased 7% year over year, reflecting growth in the personal and business customer segments.

Deposit volumes, excluding the TD ameritrade sweep deposits were up 10%, including 8% growth in the core consumer checking accounts.

Media Metrix sweep deposits were up 24%.

On a spot basis loans were up 12% and deposits, excluding TD ameritrade were up 19% as at quarter end.

Spark TD ameritrade deposits were up 37%.

Net interest margin was 2.93% down 14 basis points sequentially, primarily reflecting lower deposit margins.

Total PCL, including only the banks contractual portion of credit losses in the strategics card portfolio was us $814 million up $571 million from the prior quarter.

The us retail net PCL ratio was 2.03% up 144 basis points from last quarter.

Expenses increased 6% year over year, reflecting increases in legal provisions, partially offset by productivity savings.

We had a U.S. 82 million dollar tax recovery this quarter, primarily reflecting lower pre tax income.

Partially offset by higher provisions related to changes in tax law.

The contribution from Kiedis investment in TD, Ameritrade decrease to use $174 million, primarily reflecting reduced trading commissions and higher operating expenses, partially offset by increased trading volumes.

Please turn to slide 12.

Net income for wholesale banking was $209 million, a decrease of $12 million, reflecting higher PCL, partially offset by higher revenue.

Revenue was nearly $1.3 billion, reflecting higher trading related revenue from interest rate and foreign exchange trading and higher debt underwriting fees.

Partially offset by losses in equity trading in very volatile markets.

PCL was $374 million, an increase of $357 million from the prior quarter.

PCL impaired was $194 million, reflecting credit migration largely in the oil and gas sector.

50, outperforming was $180 million, primarily related to a significant deterioration in the economic outlook, including its impacted credit migration.

Expenses or $616 million up 3%, reflecting higher volume related expenses.

Please turn to slide 13.

Corporate segment reported a net loss of $202 million in the quarter compared to a net loss of $161 million in the second quarter last year.

Reported net loss increased primarily reflecting a lower contribution from treasury items and higher net corporate expenses.

Partially offset by lower amortization of intangibles.

Adjusted net loss was a $143 million compared with an adjusted net loss of $95 million in the second quarter last year.

Please turn to slide 14.

Our common equity tier one ratio ended the quarter at 11% down 69 basis points from Q1.

Organic capital generation added 20 basis points to capital this quarter, including 19 basis points from a reduction in our expected loss shortfall.

As you know when losses calculated for regulatory capital purposes exceed accounting provisions. This excess is deducted from capital.

With this quarter's increase in allowances the gap has narrowed and we re group some of the capital previously deducted.

We also saw an 11 basis points benefit from off these transitional arrangements for expected credit loss provision.

We also saw losses on fair value through OCI Securities and we completed the repurchase of 7.8 million common shares in mid March.

The 80 basis points declining cc, one attributable to risk weight growth was primarily a function of higher credit risk risk weighted assets, reflecting volume growth in our commercial and wholesale banking businesses as we support and our customers with new and increased credit facilities.

A decline in asset quality, reflecting negative credit migration in this challenging environment, which are Jay will discuss shortly.

And as you know we have been migrating our us bank assets from standardized to add RB.

And this particular quarter, we transitioned a credit card portfolio, which cost us.

Nine basis points.

While this particular transition was negative.

We expect that the.

Sorry, while this particular portfolio transition was negative migration to AI RB has generally been positive to the capital calculation.

And we expect it to continue to be positive with ongoing migration through the second half of this year.

We saw market risk risk weighted assets increased by $5 billion in our wholesale business, reflecting the volatility in interest rates and credit spreads this quarter.

Leverage ratio was 4.2% and our LCR ratio was 135% both well above regulatory minimums.

Effective this quarter, we have reduced the rate of tier one capital allocated to our business segments from 10.5% to 99.0%.

In addition for Prudence, we have also introduced a 2% discount on our dividend reinvestment plan for the dividend declared today.

With that I'll turn the call over to Roger.

Thank you realize and good afternoon, everyone.

Please turn to slide 15.

Gross impaired loan formations were 1.7 billion.

Stable quarter over quarter 24 basis points.

Please turn to slide 16.

Cross impaired loans ended the quarter 3.6 billion of 47 basis points up two basis points quarter over quarter and down one basis point year over year.

Quarter over quarter, increasing gross impaired loans was driven by.

Again retail segment in both consumer and commercial lending portfolios.

The wholesale segment largely reflected in the oil and gas sector and the impact of foreign exchange.

Please turn to slide 17.

Recall that our presentation reports ratios.

Both gross and net of partner's share of the USA strategic card credit losses.

We remind you that credit losses recorded in the corporate segment are fully absorbed by our partners and do not impact of banks net income.

Thanks, Pcls in the quarter were $3.2 billion or 176 basis points.

Pcls were up across all segments and all major asset classes and was primarily related to the ongoing core with 19 pandemic.

Please turn to slide 18.

The fact impacting sales increased 160 million quarter over quarter, mainly due to credit migration in the wholesale segment largely in the oil and gas sector.

Performing PCL increased by 2.1 billion quarter over quarter, and I will address this momentarily.

Please turn to slide 19.

I would now like to take a few minutes to discuss the impact of over 19 on our allowance for credit losses.

The allowance for credit losses increased by 2.6 billion this quarter.

Raising the banks total allowance coverage of cost loans, and acceptances from 74 basis points to 103 basis points.

This increase is primarily due to higher performing allowances, including the impact of credit migration.

Reflecting a significant deterioration in the economic outlook related to the over 19 pandemic.

Partially offset by the mitigating impact of a variety of deferral and government assistance programs available to our clients.

The change in the economic outlook incorporates a material increase in unemployment.

Substantial near term GDP contraction and assumes a gradual recovery where economic activity does not returned to pre crisis levels for an extended period.

The allowance increase was across the Canadian and us geographies.

And by asset class due to a billion dollar increase for our business and government portfolios.

Reflected across multiple industries, including oil and gas.

1.6 billion increase.

Across consumer lending portfolios.

Primarily for the auto other personnel and credit card portfolios.

438 million off the increase in the credit card portfolios is attributable to the us strategic our partner share.

I'm satisfied with the banks current allowance coverage considering the provisions added this quarter at our portfolio and geographic mix.

The potential for further provisions will largely depend on the magnitude and duration of the ongoing over 19 Pandemics.

Please turn to slide 20.

Given the expectation of sustained lower oil and gas prices I will now take a moment to discuss the banks exposure to this sector.

The banks pipeline oil and gas loans amounted to 12.2 billion.

And our nearly evenly split.

Across the Canadian and us geographies at 28% are investment grade.

Our concentration to the oil and gas producer services segments, which have generally most exposed to low energy prices is relatively small continuing to represent less than 1% of the banks across loans and acceptance.

Furthermore, in response to lower commodity prices.

Selling gas producers have taken a number of risk mitigating measures.

Such as reduced Capex temporary production curtailments.

Other liquidity bolstering activities.

Excluding real estate secured lending consumer lending and small business banking exposures.

Alberta, Saskatchewan, and new founder Labrador represents 2% of total gross loans and acceptances.

Add have remained stable at that level in recent years.

The humor delinquency and impairment levels. These provinces are elevated.

We expect there may be more impacted moving forward given the combined impacts of the corporate banking pandemic and lower oil and gas prices as we have incorporated this in our allowance for credit losses this quarter.

Overall oil and gas exposures represent a small portion of the bank lending portfolios. We will continue to regularly perform detailed assessments of our oil and gas exposure as the challenges facing this sector payout.

And further losses are expected to remain manageable.

Now moving back to total bank results, let me briefly summarize.

We are operating through challenging conditions, given the unprecedented impact on Mccormick 19, pandemic and while the duration of the pandemic and guarantee of economic impact remain uncertain. We are well prepared to manage through these difficult times with that.

Operator, we're now ready to begin accumulate session.

Thank you.

We will now take questions from the telephone lines. If you have a question and using it speakerphone. Please pick your handset before making your selection.

Do you have a question. Please press star one on your telephone keypad.

To cancel the question. Please press the pound sign dispatch star one at this time, if you have a question there'll be a brief pause for participants register thank you for your patience.

And your first question is from John Aiken from Barclays. Please go ahead.

Good afternoon, I'm, sorry, I was a bit of the detailed question for you. If you wouldn't mind Tom on the balance sheet, we saw a significant increase in the job on interest bearing deposits with banks is you see a transitory impact that happened right at quarter end or is this was going to be a sustained balance it's going to be fairly high.

The case can you give us some sense as to what that would need to work overall net interest margins.

Yes, John Thank you as you know throughout the period of Cup pandemic and as you mentioned closer to quarter end.

I have been level of deposits that are being Ah accumulated their rose quite significantly, which obviously has a starting point goes into a net cash balances and then we're able to invest some of it didnt.

Shorter or longer term securities so you're quite right in pointing out that it wave it may well be temporary as.

Clients and customers, who have access to customer relief programs as well as government relief programs and that have.

Accumulated some cash and their accounts.

May see that a has as as they utilize that cash to meet their needs and their obligations. We may see some of that come back.

How much are fit that we're able to.

Extend into longer term yield bearing investments will just depend on R&D, a customer behavior that we're able to observe in a in in the country utilization of that cash I'd say, one another significant contributor to those cash balances wasn't as I mentioned earlier the rise in deposits.

Coming out of sweep deposits coming out of TD ameritrade.

As a number of.

Clients took money out of the market and we're holding cash for some period of time, so I think that to the impact on.

Aggregate margins or would be and really not forecastable in the short trends here until we see a little bit of stability returning to.

Our clients are managing their finances.

I guess, you're putting the ball back on my quick thanks for us over Q.

Thank you.

Your next question, if some Gabriel Duchaine from National Bank Financial Please go ahead.

Good afternoon first question on ER on earnings I mean, we're hearing that so this quarter earnings.

Matter, but eventually people hear about.

Earnings are paying the dividend and.

Sure It's your capital generation.

I wanted to kind of talked in the earnings outlook to your stress scenarios your internal stress tests, but I'm sure you've done it like other banks and their own whatever scenario your core tier one doesn't fall below ex whatever those.

One of the components of that type of production would be earnings I'm, just wondering what kind of burning the.

While boulder generation or growth do you have been.

So the scenario on the scenarios.

April we are as you would expect a so first of all I'd answer by saying that earnings always matter I think.

At this quarter, they don't but that's not how we see it a earnings always matter.

And.

What's important though is that you should know that.

We run a variety of stress tests.

And using a different scenarios that are applicable and clearly this particular pandemic has been probably come come come about more rapidly and risk duration and severity that are I think we can all easily agree is unprecedented.

Look I think our we continue to stress test, our liquidity and capital positions and.

You can always come up with very severe adverse.

Scenarios and richer earnings may be pressured even more but on the other hand that as they are reopenings become a bit more around Uh huh.

Ill start kicking holds more my with with more confidence then we should also started seeing out.

The banks results set reactor that so are clearly it is a function of the unprecedented economic environment. We're in.

I gave this is Barry so.

Ill add to that.

I mean, there's that unprecedented times. Another reason earnings at the breadth is because of the them alone or the level of allowances. The bank is taken and that is based on you know our current view of you know what the future looks like and it's hard to predict it perfectly, but we will be.

Checking in a very very regularly to see how that plays out.

The other thing I would add is that in a one of the hallmarks of TD and one of the strength of TD is the real adapted environment, we find ourselves in and I know, we will then I know we will thrive in whatever operating environment do you know turns out to be a the reality. So so yes, you know earnings as we had said matter even this quarter's earnings matter, but eggs.

The bank to adapt to the environment, we find ourselves in over the next little oil.

I guess, what am I off too though is.

Hi, Jay said, you know you've got an extended period for when you expect a.

Economic activity the returned to normal levels or what does that.

What are your what are your earnings projections.

They come up sort of scenario is that a you know back to.

2019 sort of profitability by 2020 to 23 or or or something other than that it's hard to give out a specific you gave room.

Interest rates Oh, you mean, you told me when interest rates will start to move you told me, where you know where the economy opens up a completely so it's hard to pin down a particular factor here I mean, we are an unprecedented times, but as I've said.

Notwithstanding the time that we're going through a Tds business mix, you know given our scale or north American scale wouldn't even able to do how we manage through this graces today and I would expect us to adapt going forward and I see the banks trend. So like I said in my remarks, we I expect us to be coming out of this stronger.

When we entered it.

Okay and then my other question or maybe a quick on credit.

Some banks have talked about no Q3, Q4 expect performing provisions to decline from from this quarter's level.

Perform and doing the operative word.

What about the impaired provisions were gonna be picking up.

Is there going up.

You'll have movements out in stage two into stage, three or they're going to offset each other or could you know there the pickup in stage three provisions keep doing what we're seeing today you know what that produced at that level for a number of quarters.

Yeah, Let me, let me take Thats a good question. So as you know weve built a material amount.

And I'll allowances this quarter most of it is performing so future quarters.

We do expect to see high level of impairments pick the fact that Vince.

Allowances is going to help but it wouldn't be some incremental allows for particular goes from performing to impact, but the fact that weve held.

You know a material amount this quarter I think there's going to help.

[noise] follow up on though.

Thanks, Kevin.

Thank you.

Question incident, Ebrahim Poonawala from Bank of America. Please go ahead.

Hi, if I could tell just still very quickly follow up on it and Sydney getting all the impact Pcls <unk>.

You didn't you can just help me or help us walk through this is it safe to assume that the reserve levels are unlikely to decline anytime soon so you're going to maintain definitely those loss as things might today than you see credit migration you could all those are some PCL tied to those loans as he moves forward.

The resulting in a period of Intubated Pcls is that that I talked about since even if the macro backdrop your assumptions around the unemployment don't change we should see Intubated BC has just by the Mike Nationals, all the loan book.

Okay.

Good question.

To answer that as you know we have felt.

General amount of Pcls this quarter.

Hey tremendous amount.

With respect integration and sit here is crisis the shape of the recovery.

What I would say.

Outlook remains.

Changed.

This would be the high watermark.

However, as one caveat has changed from performing to impaired. Thank you could see some increased because of impact however.

Okay improves you could even see on reduction already.

Oh no lessons.

Yes, So I think you guys keep in mind that the whole environment. We are dealing here is very uncertain, but the key messages like we have felt a substantial amount of PCL this quarter and that's based on our forward looking.

That will change only if our forward looking to change.

Got it so that it sounds a lot more like.

You will you know pcls reflect your life of loss expected genes for them. So.

Yes, that's the IRS nine principles. So we are following our accounting standards.

Well, yes, and I guess, just a surplus easier so all in terms of capital. So if you can just talk about in terms of your capital outlook or.

What our balance sheet growth might do you know as you move forward and you mentioned Oh continued transition to me I'll be should be positive. If you could just those two when he was a central there the seat even goes from here.

It for him as you know a we.

Entered into this crisis carrying a tremendous balance sheet and strengthen capital and liquidity and this is a hallmark of TD that you're well familiar with that we.

I do carry plenty of capital and liquidity, sometimes we have ER remark in a folks the way that we make a every one to be able to make our loans during bad times as well and so as you can see from the growth in our balance sheet. We are clearly doing knock down we're standing by our clients or when they need us.

And we intend to continue to do so and as the economy reopens and demand materialize. This four or additional credit a we will be.

Extending that credit or within the risk appetite of T.D. that you are well familiar wet so I I think carrying a strong amounts of capital in this.

Environment to take advantage of opportunities is a prudent thing to do.

Got it so should we expect like should we must be surprised if the cap initial eat into depends on what next quarter or too as you extend credit Oh, that's some oh the nation I took that it is that a reasonable assumption going so.

Well in in ordinary course times, there you know that a we continue to generate a capital and then reinvested in the business to create growth as it RJ just indicated the we are in a period of or no uncertainty and a if the economy recovers well we will.

Continuing to ER to extend credit to our clients send me if it turns out that things are go. The other way then you will remain regret well see additional allowances and more migration. So you really not into up period right. Now that is we have put our forecastable with any degree of a high degree of confidence.

Well thank you.

Yeah.

Thank you.

Next question is from Steve care yields from each capital. Please go ahead.

Thanks, very much first I just wanted to circle with reality is really you talked about some positives on a or b migration in the second half a year. So the U.S. banks can you just give a bit as you tell her on what portfolios and the level of materiality either.

Oh, well the one that you know the biggest portfolio that remains to be a migrate it is our U.S. non retail portfolio and you know that it is a large an immaterial portfolio, which we were working hard to say how true to complete the the work to habitat implemented hopefully by the end of this year.

And do you have a ballpark of materiality to it or.

Or is it too and that is something that are not a really are prepared to disclose right now Steve as you know with that number of moving parts between a shortfall calculations and.

The implementation of fit or will be yeah, we will will need to be quite careful and I'd be low to really quantify that for you right now.

Okay, and then thanks for that and Barry you mentioned in your opening remarks coming out better positioned a this pandemic could open up some opportunities to expand inorganically in the U.S., mostly TV has been on pause. The last few years in terms of deal flow in the United States do you think what are your thoughts.

Sort of early innings do you think this has the potential to turn into a meaningful opportunity to scale up or filling your footprint.

Well just firstly, let me add to your first question to realize you know I'm sure you. If you look at our history at TD in a strong capital levels and the need to maintain strong capital levels. A is just part of a character to those who that's what we do we think.

It's important to manage capital you know very closely and that's what do you would expect Ltd. So Israel's is gosh isn't in telling you what do you did leave and rightly so given the environment, but I can tell you that you know.

You should expect D D.

To do have a cautious view in a prudent view on how we manage capital regarding your second question in <unk>.

We are through the cycle type of lenders you know we have a particular this discipline in the bank.

Very proud off you know the being performs in different environments. The business mix we have.

It is is something that you know we worked hard to have in and we have no great scale in both sides of the border ER and the good news here is that the D is not required to do the to do a an M&A type of transaction because we have strategically challenge, we're not but having said that is.

And we are in you know is an interesting one it is unprecedented and I am sure you know given the type of the situation. We are facing that there maybe opportunities out there and if there are a then of course, you would expect us though.

Due to look at them, but seriously, but we will only do that if a you know to do have we would have to make sure that we have a better understanding or what does environment may turn out you know how bad it might get a we have no interest in everything anybody else's problems and we love to look at whether it makes strategic.

Since makes financial sense, and timings and so it's all those things don't know to be well aligned and of course will look at it seriously.

[noise] thanks for that.

[noise]. Thank you.

Your next question is from Meny Grauman from Cormark Securities. Please go ahead.

Hi, Good afternoon, a question on your cards business.

With your cards business in kind of focused on travel rewards and then the U.S.

The exposure to all of your big retailers is there need to rethink the bank card strategy right now.

So this is better than again, it'll why don't I pass on firstly, the Canadian part a two Terry current Terry.

Absolutely. Thank you.

So I would say, we're very comfortable with the line of credit cards that we have available to Canadian we'd like to say we have a card for every to meet every Canadian needs. Then obviously those are the travel card.

Hi, Dave, but also cashback card across a variety of category clearly in this quarter odd given the circumstance Oh, yeah, we probably had.

5 billion or more in spends that didnt materialize, but you know we still feel if you look forward.

Well positioned to cross category.

And looking forward to the Air Canada partnership and loyalty program launching hi upcoming later.

Yes.

Thanks, Terry and Greg did you want to pick up the U.S. side of it.

So thanks for the question I'd, just add that as we've been talking about for the last several years. We spent a lot of time and energy building our card platforms in the U.S. from scratch and as includes not only the partnership programs that you talk about with a large retailers and certainly if one comes up that makes sense and its the right partner.

And we understand the dynamics and the economics makes sense, we're interested in expanding those.

But also our de Novo bank card business or you know our own branded bank card for our own customers. We spent time building that and obviously, we will continue to to continue to leverage that with our own customer base going forward.

Yeah, Thanks, Greg and many just to add this is better to again I think we've talked about this in previous calls they think about a year ago two years ago, Terry talked about the investment we've made or we were making at the time to expand a card offerings in Canada, and all with the cashback card and the entry level card and all that and the timing does.

Though to be excellent for that in order to diversify our card portfolio and as you know in a a or Ah our approach a full four four unsecured lending is to go with you know the prime side of the.

The FICO scores and all that so, but I wanted to add that and in the U.S.

No. This has been a.

Lots of questions around it'll wise to be more interested in partnership deals in a Greg did say that did provide us a foundation to build a card portfolio, but I think now the been emeka showing that those partnership deals have done though to be terrific.

As you know Lions share of these losses, if they happen to two due to materialize well before the account or the partner. So these things worked out in different ways in different circumstances, but given where we are we're very happy that the big portion of our U.S. portfolio is in our partnership deals.

Thanks for that and just a follow up on the.

Partnership with it but there cannot do you have the ability to change any terms of that agreement then I think if more importantly, do you foresee having any of those kinds of discussion.

Hi, My name is night.

Sorry to go ahead, sorry, sorry about that there and you know as.

You would expect that we would have a contract with their Canada that we would honor and have more excited over the long term.

Partners.

Thank you.

Thank you. The next question is from Sumit Malhotra from Scotiabank. Please go ahead.

Thanks, Good afternoon start with relies on the capital slides. Please so you a you show us here that the.

Market risk component of the portfolio had an 11 basis point impact on C.T., one and we can see a in some of your capital disclosure the.

Var was up quite significantly this quarter end and that's reflected in the movement in risk levels. The offset that you haven't methodology was this the implementation of distressed.

ER stress var, or sorry relaxation of the stress for.

Relief or was there other components I plan I asked because most of your competitors actually had market or WH decline this quarter and obviously the impact is different for you. Just wondering if this is something specific to this quarter that may reverse going forward.

No I think you've got it right that are with the promotion of the data which includes a volatile periods you see the rise in the risk weights and then that line item you're referring to include the a relief and the modification that that came from Aussie during this period of time.

And with the with the relief and plays in the data updated so is this for lack of a better term a run run rate level for the for the back now or as market conditions at east how quickly does not get reflected in how are the the risk, but moving their risk levels is captured here.

No I think as a as you see market share starting to stabilize and the volatility coming in and spreads coming in you. We would expect to see market risk now numbers start migrating back down.

And just talk just to add to that.

I have this test data as part of your data sets. So.

I think the water and that's why when it comes out of that helps when it's going to remain elevated from what it used to be before right.

And people that want it in on days bus Tonight.

So all right. So there's this movement this quarter as first credits can their credit is concerned I think we all know that there was a heavy level of.

I have drawn on activity and Android, maybe all but this one do I'm a bit surprised with the bank sitting at 11% and perhaps at least on the on the draws perspective, there should be some relief on that going forward.

Putting the discounting in on the on the drip here at least the way I look at it effectively a equates to 25 million shares going going out the door over the next year if it remains in place.

Are you concerned that without this this capital uptick that the bank may move below or some of the the thresholds.

That regulators look out or the market looks at a in terms of capital adequacy. Why did you think this this was the time to put this in place.

So maybe you know this will describe this is really has used the term you know that and then traditionally this is what the bank has been you've known us for many years.

Do you know prudent capital management is the right phrase a T.D. I mean, these are unprecedented times and and you know you you do want to just make sure that you're doing the prudent thing here and if it turns out that you know our expectation of where Oh.

Oh, whether its economy might be and this is a might be a short term issue. Then we can always a switch it off.

Okay and the other question somebody had asked me you know.

Who knows they know they might be other opportunities available in the market.

We might want to take advantage of that you know given our scale given our.

You know ability to do to integrate and convert you know acquisition. So so we're looking at it and it's not only by the way on it on an M&A front, but traditionally de de through through any downturn has also been able to take market share and at least my urging to <unk> dollar door business leaders is that we.

Not lose that muscle as we go through this Ah Ah. This particular event because it will throw off opportunities in the marketplace to organically grow our franchise as well. So we'll have all that flexibility I think it's important to love you know very prudent capital management in place.

And I'll finish with one for Terry if it's okay.

As this week is going on I think most of US we're ready for the uptick in provisions were ready for the pressure on them.

I think one that probably we are at least from my seat should have been more more prepared for is just the pressure we're seeing on some of the fee income lines that we normally take for granted in Europe and the PNC segments. So from for both you and Greg obviously weighing on the revenue lines, we've talked a lot about some of the changes that might happen in terms of real estate and how.

As always work when the bank considers some of the waivers that have been put in place whether it's you know service charges in some cases creditor insurance, we're obviously seeing weaker card revenues.

You feel there are aspects in either of your businesses from from these reductions that could have a longer lasting impact on how.

Customers expect their banks to behave when it comes to the fee income lines within PNC.

There's a lot in last question, let me start my Ah that's the other income growth.

Ben and then move to perhaps there's not a change and so you know.

Free the pandemic Ah you would've seen kinda low to mid single digit range <unk> growth in other income so.

Again, it's been said earlier in the call it very I'm certainly the side can shape.

What happens going forward I am so yeah, we're gonna be very careful let me think through any decisions, we might make about the business moving forward.

Clearly the big impacts the Ben Ben.

That didnt materialize cards business as I mentioned, and then FX revenue for both cards in everyday banking you would've seen airline spend in the quarter down over 90% as an example, but you know danley essentially held up well in that sort of speaks to that spot card offering in the breadth of our lineup.

If you sort of taking Oh, you know if they came to sustain that thinking the question you're asking them. How do we think about you know our business moving forward.

Yeah, I feel like as we came into this situation incredibly well positioned strong market share.

Missions across many of our businesses you also saw the benefit of the diversification in the Canadian retail business with the strong wealth and insurance performance.

Clearly right now our focus is on safety, enabling business.

Be done a and continuing to carefully manage our distribution <unk> Oh, but he had been up through our teacher ready strategy.

Working toward the you know sort of inevitability of more migration of simple transactions to digital and that need for customers on the more complex pieces of their financial life I couldn't be able to meet with advisors and to get it bitumen omni channel away and you can see.

You bet, but you know investments we've made in our business in omni channel has paid off with industry, leading digital results I'd be seen our digital adoption and engagement continue to grow almost 8 million active digital users, 72%. Good feel my mobile active and digital adoption up 323 basis.

[laughter] quarter, so I'm, saying, a you know it's possible as we work forward and we consider a the flexibility that work from home has allowed in particular for our contact center and the opportunity that that my I guess, but in terms of talent.

You know joining the bank you know in a full time way across branching phone channel is an example versus part time in one part of the business.

The ability for folks to be redeployed, we've been temporarily redeploying them to collections work to help work at the customer care as well.

To fraud work and so that that ability for our people to work more seamlessly and our customers to engage with us more conveniently, yes, we've made more automation available or things that I think we'll have lasting impacts to the business, but as we think about oh, how many new branches, we wouldn't have what we will do.

In those four walls.

Very carefully guided by how customer behavior evolves over time.

And I would just say Hey, you know this has been set by many of my colleagues, but you know what we found is just the power of the culture and the power of our people are working at TD. They have been dedicated in innovative compassionate and supportive many of them still face to face with client a and very actively busy in Alabama.

<unk>.

[noise], so unless a I think Terry answers, it's Greg I think Terry perfectly even from the south side of the border and anything you want specifically on the on the U.S. I'm happy to go into but I would just leave you with you know at least on the other income side to the story, yeah, we're going to be guided in the short run.

By the markets open back up as the economy went back up again, and we certainly saw after the last half of Ah Ah Q2, a dramatic decrease in U.S. in terms of activity in volumes.

And the obviously, we're we're seeing state. So you know begin to reopen in real time, and we're going to watch is very very closely but happy to pick up anything specifically on the U.S. you want to call.

I think a I didn't carry gave me a lot my interest was really fee income, but we got a some some infill on the future of of how you plan to interact with your customers as well. So I think I'll take the two for one and a and leave it there. Thank you very much.

It's a it's Chilean we have about six questions left and so if I could just ask everybody can stick to one question. Please so we don't keeping for too much of the rest of the afternoon.

Thank you. Your next question is from Merrill Mendonca from TD Securities. Please go ahead.

Yeah. This from probably Korea is not as this earning season has has played out how many time understand what I didnt understand at the very beginning of it.

So what would be helpful to me too if you could take me through.

How you contemplated a risk migration essentially the movement EDI and.

Expected losses, you follow all that stuff, how did that come into the calculation of your performing loan losses, specifically was it.

Overlay or did you.

The new supply the model retail, but then look at the individual corporate loans, how did you actually go about that.

Net migration perspective [noise].

Okay. Thanks.

Let me, let me describe the process.

Yes.

Substantial into allows process.

Our in an unprecedented seconds.

We started by selecting our scenarios on cost for him different scenarios are waiting and then we are running them through audience.

What I would say that's the starting that was the starting point for us.

Yeah. So we actually I always say, hey, overtly basically considering a few things first as we did a number of portfolio assessments across the bag.

Some of them, one borrowing level assessments as well so that kinda inform what only reported.

As you know we looked at macro changes since the time, we selected our sundar. So we added.

Over there for that hurt as we have to reflect the benefits of the T.D. These programs. We have to also reflects the benefit on the government programs. When we consider all of that and then added an overly there was a modern results.

Just on BD, specifically its stuff.

Basically the macro that drove the BT.

Changes in the case of retail I'd say in the case from non deal. It's a combination of the macros plus the various bottom up and portfolio reviews that we did.

So I think.

Yes, you're not suggesting you looked at every single commercial loan and corporate loan I don't think that's possible. So are you, saying you did more of like I, a sampling of it implies something from the sample.

Looked at it on a pretty broad basis, and we've been looking at it over an extended period of time surface pretty deep.

Yes.

[laughter].

Thank you.

Your next question, if some sohrab movahedi from BMO capital markets. Please go ahead.

That mines are pretty quick one when I look at the oil and gas disclosure.

To me was surprising that proportion that was noninvestment grade we did have been broadly speaking reflection of that credit quality I'd.

I'd point, you nation as well or is this after you've taken.

Alan wage set up taking them into non investment grade territory.

Maybe first that allow us Bob to comment and then perhaps you can comment on on on the migration part of it a ajay.

Bob you want to comment on strategically you know on normal apparently are the would've been a combination of both from the.

The non investment grade Ah portfolio is primarily a the.

<unk> portfolio on both sides of the border books and counted in the U.S. and that's the a reserve based lending book that we have.

And ER you know in Canada.

As a result from the 2016.

Oh, well shock Oh, that's enough spokesman ER.

Slowly working its way through a you know we've been in difficult times in Alberta for a period of time, whereas in the U.S. It. So the reserve based lending has been.

You know more challenge just too, but just more recently so that.

Not that has a little less history.

Perhaps being more conservative and then we did have some migration as well from investment grade and anonymous.

Are you going up again, just just to add so.

Recollect backing 16, we ran a number of stress test in the sector. So we actually repeated that exercise.

For the quarter actually looked at WD Guy from 20 to $30 gradually increasing we made assumptions around the heavy oil differentials certainly met some assumptions around natural gas starting with $1.20 $5 75 range gradually building. So we use that information.

What kind of downgrade actions, where appropriate but the reason why you're seeing such little investment grade producers that we have proactively gone and downgraded.

More of names, having said that as Bob said, you know one of the non investment grade produces a subject to borrowing base. So that helped also a lot of the logic Canadian plastic can be diversified.

They have liquidity they still have access to capital. So they can withstand the more volatility and then in my prepared remarks, I want to talk about the mitigating measures that produces themselves or taking and now the fact that oil prices have picked up as well.

But overall I think you can look it up or do you say exposure like it.

And one presenter gross loans and be a.

Oh, Hi, Jay if I could just how bad quick follow up on that when you look at that portion that was downgraded.

It can you give me a sense of how much of those that were downgraded would've been originated in the last 12 to 18 months.

I wouldn't know that I can we kind of looked at everything but I didn't I did I didn't I just want to know if there was a skew towards the more recent vintages.

Pretty good growth in box business I, just want to have a feel for how much of it has been.

Hey, maybe late into that late cycle, so to speak I think because that's a very little of that in Canada.

And Oh, you know some part of that we would have originated in 17 and 18.

Some of the but some of the we've been in the business for a long period of time, a sub sets are there definitely are some new names or the vintage would be a 17 and 18, but there are a lot of pre existing names as well. Thank you.

Thank you.

Your next question is from Doug Young from Deutsche Bank Capital markets. Please go ahead.

Hi, Good afternoon, just going back to the strategic card book and I, just noticed that you know targets.

Indicated that they're ramping you share from the profit sharing income from the credit card program actually increased year over year and just struck me is strange given the sizable P.C.L. you took that you ran through corporate and that I see and I haven't had a chance to go look at to be examples that are at the back in I understand that I think the profit shares based more on onshore.

Our job then pcls, but just trying to understand a bit of the nuance there or just in case I'm missing something thank you.

No doubt it the differences are exactly as you point out a number one that that retailers are not financial institutions or subject to a I as far as nine in the way that we are and their timing differences in the a in Indian determination and payment on a cash flows under the waterfall agreements.

So essentially that provision you've set up as it rolls through from a charge off that would hit wouldn't it you, obviously, but it would hit them and that would come through the allowances that you've set up for that.

Well that did you see if you can think of it that didnt ER in into corporate segment, we carry that partners' share of their revenue at a partner shares are for I'll start with the credit losses, and then a.

A a crude payments to the partners over time gets charged to noninterest expenses. So that's essentially how it works out is that.

At a somewhat the recoveries or payments may come at different points in time under the waterfalls.

Okay got it okay. Thank you.

[laughter].

Thank you.

Next question is from Nigel This is a secondary time. Please go ahead.

Oh, Thank you good afternoon.

So I wanted to touch on.

Where do you have any deferral loans and when I look at the balances your levels of deferrals seem to be a better than some of your peers have reported so far especially on commercial lending side. I was just wondering if you could provide some color on how you administered a deferral programs, where you more selective on who you granted.

Those two and is there any relation between lowber lower levels of deferrals, we see your book God.

The higher performing PCL sort of been taken this quarter or those two items.

Completely unrelated.

Maybe first Terry you might want to take it as to how the before it's worked out.

Sure. Thank you I'm I'll start with a realistic secured lending and Ah indicate because that's the majority my personal perspective, the way that that occurred is that across our channels, we have advice and tool available to customers to help them understand not only the benefit.

And then taking a deferral, but also the cost to them of doing selling so we don't know for every individual customer a their circumstance.

What I would say it's that our goal is to ensure they really understands the deferral when they take it for those applications for those that secured lending deferral that came through and more decision the approval right close to 100% I.

So I think we're meeting customers needs to get them. The deferral, if it's appropriate they just keep topic for them and we and we still get it I would say we've had about 8000 account roll off a one month Berlin, so far though that seems to be performing well.

From a commercial standpoint, it would be more oh business by business decision and that it'd be a range across the consumer lending categories. Most of the other consumer lending and auto finance.

Other finance.

Yeah, that's really help on the second part of that question about performing loans for these deferred loans. You know are the majority of them still stage. One are you waiting so I guess they roll off the deferral period before you decide on.

Well to migrate those two or three or they wouldn't be class.

I'll take that.

I can take that that Terry so we changed the problem or do you have deep water tool or the four or risk rating, where were you know loans closed before that was.

Yes, the show fact with regard to protect drives the PD or the.

Our.

But what I will say about different is that no deferrals and existing it'll be hadn't made any deferrals I would actually be building a higher labs like I view that different programs.

And one thing.

No risk, reducing what I would assume that it's completely anecdotally risk, reducing we've given some benefit.

For the risk production like we have built reserves for these different programs.

Our view it as a matter of time before some become and then what others may become impaired as well.

That's really helpful. Appreciate the comments thanks.

Thank you.

Your next question some Scott Chan from Canaccord Genuity. Please go ahead.

Hi, Good afternoon my questions on the on the NIM and maybe for the Greg and carries perspective.

I thought pretty I guess down a margin sequentially again now that rates are low I don't know if they go much lower hopefully not on both sides of the border does that signal that maybe we should see more stabilization on the margin into these fine. Thanks.

Yeah, So I'm really on the overall NIM and then maybe you can go dairy and Greg Yeah, Scott as you know because the very rapid their rate reductions in the second quarter in response to central banks responds to cope with it.

You get the or short term impact a almost a immediately and then the long term comes in as that tractors or a rollout and depending on the longer term yield curves. So I'm really from a quarter to quarter perspective. They those rate cuts came in the middle of the quarter.

And so they'll they'll be a full quarterization impact going into the next quarter. So we would see further ah.

Further our margin compression into Q3, just from the short term rates.

[noise] sounds like Terry <unk> is the only thing I would add to what really sad because he but given that you know will have the full Q3 Ah that's starting to impact so that should have further about margins probably things being equal the only thing I would I be.

That's a religion in Canadian retail a big portion about what that had for about half the quarter the difference between pine state or compressing quickly, notably at it restored.

More normal levels by the end of April, but that promote real secured lending perspective.

Well for all of our Prime based loan I did.

<unk> some compression so that doesn't mean.

So the only thing I'd add from the U.S. I think a that was covered well.

I would be the other things we talk about every quarter would be you know did the factors such as mix of the business and and all of that.

Yeah that'll play into it from quarter to quarter, but the other item is that if in the U.S. would have known that we effectively had a six rate cuts in two sessions in early March and that wasn't completely or for a full quarter. So we'll see the before quarterization of that in Q3 as well as the fact because of.

Market disruption lie bore was a lot higher than fed funds. After the rate cuts a and now that lie bores returning to a more normalized levels a you'll see a further effect of that in the NIM in Q3 as well.

Thank you very much.

Thank you.

Next question, if some dark called me Leach from RBC capital markets. Please go ahead.

Hi, Thank you I just wanted to follow up on the deferral programs and Youve given pretty good disclosure on the difference between the U.S. one candidate in terms of a mountain it seemingly looks like it's a bit shorter in the U.S. in terms of different though the length of the deferral.

No longer in Canada.

And then just tying in Roger just said about the risk reduction.

So when I look at this from from the outside looking in in the U.S., you're gonna have a wall of People's required to pay again.

Three months on average looks like.

The later in Canada.

Would you consider at that point in time differing again, yes.

You find circumstances warranted or from where you sit today you consider that this was enough.

And and we won't have to have deferrals again.

Greg Greg you ought to start off and then maybe Ireland, Oh, I'm happy to and Ah. Thanks for the question I would just say that in the U.S. first of all our lenses around you know, what's the regulatory guidance and.

What are we seeing as far as the general market conditions. Obviously also guided you know our view about how we went out because ER and you're right for the most bought the deferral programs, whether was consumer programs across a wide range of products, including mortgage and home equity or unsecured lending or auto book as well as small business.

And those are the more standardized programs and the general tenure was a 90 day extension.

But each of those programs was meant to have those you about what the conditions are like what the environment is like and what may be needed 90 days out when you look at the mortgage book, specifically it gets a little bit more complicated because obviously mortgages that are sold because the secondary market. The G.S. Cesar involved in some guidance around that.

That allows for restructuring after the 90 days are the to the back into the loan or a complete restructuring of the of the loan small business has its own nuance and then the rest of the consumer categories. So I'd say, yes, we'll certainly look at conditions.

As well as what we can do from an accounting standpoint, and a regulatory standpoint as well.

The Darko. This is Barry just to add you know when when does differ programs, particularly in the U.S. you know what Greg just thought about who T.D. carriers that we introduce him and those who have done.

Immediately when the locked down started and since then you've seen lots of other programs introduced in the U.S. market. The Triple B program. This mainstreet lending program is just about to be introduced you sold his direct payments going to two to two Americans as well from the U.S. Treasury. So I think the the.

View there is that this this programs are meant to date people over until there's other programs.

It'll come into play and hopefully all of them worth because the triple B program is geared towards folks getting their jobs back because that's how the program works.

So fully all those things work out a hard to predict precisely you know exactly what might happen 90 days, we'll know a and as Greg said that other nuances here in the U.S. that will lead to take into consideration. So hard to give you a definitive answer or at this stage.

Okay. Thank you.

Thank you there no further questions at this time I'd like to turn the meeting back over to Mr. bear out and that's right.

Thank you operator, and thank you all for joining us a a tough border no doubt.

But given the circumstances I thinking it was the right thing for us to two to two booked a the allowances that I just talked about.

And I do want to taken up with did this opportunity. You think are 90000, you know colleagues around the world I mean, we have changed they know how we operate this bank overnight folks have been working from home others are being you know looking out for customers that were used to de location. So I could not be more broke as to what they continue to do.

And deliver for all of us stakeholders, including all shareholders. So thank you for that and folks hopefully you know we will meet in different circumstances 90 days from no and I wish it all of you well and your families as well stay safe Bye bye.

Thank you. The conference has now ended teeth disconnect. Your lines at this time and thank you for your participation.

This conference is no longer being recorded no. He's put modest single family homes. It does that won't be.

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Office people.

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Okay opinion.

Okay, I don't sit down meaning see consumer spending.

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Your opinion I guess.

I mean.

Cushy one penny.

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Okay opinion, that's good for technical fallacy Tammy.

Yeah, she was trending.

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Okay fair enough because it had been.

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Okay fair enough processed FIFA. Please note that this conference call has ended please disconnect. Your line at this time. Thank you.

Your opinion.

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Good afternoon, ladies and gentlemen, welcome to the TD Bank Group Q2, 2020 earnings Conference call I'll now turn the meeting over to MS. Gillian Manning head of Investor Relations. Please go ahead midnight.

Thank you operator, good afternoon, and welcome to TD Bank Group second quarter 2020 Investor presentation.

We will begin today's presentation with remarks from viruses, Ronnie the bank CEO after which we as I'm at the bank CFO will present, our second quarter operating results.

RJ level, while I Chief risk Officer will then offer comments on credit quality after which we will invite questions from prequalified analysts and investors on the phone.

Also present today to answer your questions are Terry Curry group head Canadian personal banking, Greg Braca, President and CEO TD Bank America's most convenient bank and Bob Dorrance group head wholesale banking.

Please turn to slide two.

At this time I would like to caution our listeners that this presentation contains forward looking statements that there are risks that actual results could differ materially from what is discussed and that certain material factors or assumptions replied in making these forward looking statements.

Any forward looking statements contained in this presentation represented use of management and our presented for the purpose of assisting the banks shareholders and analysts and understanding of Inc.'s financial position objectives, and priorities and anticipated financial performance forward looking statements may not be appropriate for other purposes.

I would also like to remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results to assess each of us businesses and to measure overall bank performance. The bank believes that adjusted results provide readers with a better understanding of how management views the banks performance.

It will be referring to adjusted results in his remarks.

Additional information on items of note the banks reported results and factors and assumptions related to forward looking information are all available in our Q2 2020 report to shareholders.

With that let me turn the presentation over to Barrett.

Thank you Jillian and thank everyone for joining us today.

Last few months have been an extraordinary done rollover on April 2nd.

We conducted the first ever virtual annual meeting.

It's hard to believe that with June 1st just around the corner, the sweeping restrictions and economic and social activity implemented to contain recorded 19 Ben damages.

Our still largely in place.

Though it is encouraging to see reopening measures beginning to take shape in some geographies.

Before I go into our Q2 results I want to talk about how we're meeting that goal that 19 challenge at TD.

The total exacted by this crisis in lives lost selectivity disrupted will receive over a four years to come.

Economies around the world had been plunged into recession, and unemployment rates have risen to levels not seen in decades.

But was the scale of this graces still has the power to shock the responsive as illicit that.

Is inspiring.

Dedicated frontline workers in so many different industries, including financial services venturing out each day to keep critical services running.

From businesses that nonprofits fighting to maintain their operations and support their staff.

From central banks, and regulators, who launched new liquidity facilities to keep financial markets functioning and ease the supply of credit to the economy and from governments will implemented by all measures and support to date households, and businesses through this unprecedented suspension of activity.

We have been proud at TD to contribute to this collective effort.

We've been working hard to support our people. So they can keep themselves safe. We're looking after our customers I want to thank them for their exceptional service. This includes the many colleagues we're keeping our branches stores in contact centers open and performing services vital to our customers.

And the banks core operations, we've adjusted their work environments to help protect their wellbeing judging schedules reconfiguring floors that.

And investing in protective equipment and enhance cleaning.

You recognize the sacrifice there and their families are married with additional compensation and vacation days.

We quickly enable 60000 of our colleagues to work from home equipment equipping them with the tools and technology to work productively, while prioritizing security.

And for all our full and for all of our colleagues we committed that there will be no job losses in Twentytwenty as the result of coal with 19.

We know this is the stressful time. This assurance is important for our colleagues as well as our customers who are depending on them for support and financial advice in this difficult times.

At PD, our people our greatest asset their hard work and dedication has enabled us to deliver swift and comprehensive assistance for our customers through a TD health program in Canada, and our PD cares program in the us well connected with thousands of customers and bring their to serve them in their momentum grid.

This need.

Across our Canadian and US retail businesses, we provided financial support to over 800000 customers and accounts differing payments on approximately $62 billion a loan balances as of April thirtyth, extending other forms of relief, including premium reductions and deferrals to more than 100.

35000, TD insurance clients and facilitating the flow billions of dollars in government bonds to businesses through the programs like see by in Canada, and the Paycheck protection program in the U.S.

We're also helping the federal government deliver income support to Canadian households through the third program with 1.4 million direct deposits facilitated during the quarter.

In our wholesale bank, we increased total gross lending exposures by $23 billion, providing our corporate institutional and government clients with critical funding and liquidity support during a period of severe market dislocation.

And did you asset management is contributing to stabilize in capital markets, having been selected by the bank of Canada to manage its commercial paper and corporate bond pours purchase programs.

We've also taken decisive action to support our communities as part of the TD ready commitment we've announced the de community resilience initiative, which is allocating $25 million to strengthen our communities and support organizations involved in the core with 19 recovery effort.

I'm very proud of the response, we mounted over the last few months our people have demonstrated their ability to adapt to new ways of working almost overnight and we should we reshaped the banks operations Justice quickly supported by the investments we've made to enhance our technology infrastructure and network capacity.

Bill new lending platforms and launch scalable end to end customer journeys.

These investments in our infrastructure and capabilities enabled us to meet a surge in digital traffic of more than 25% across our banking and insurance businesses managed record trading volumes in our direct investing business and stay connected to customers across our footprint from virtual trading desks to video communicate.

Asians, two new online and mobile tools, delivering payment relief and advice to our more than $14 million. The active digital customers Tdrs remained strong active and fully operational from the first do you have this crisis and we're well positioned to continue supporting our customers and colleagues on the road to recovery.

These purposeful investments have been made possible by the strength of our model a diversified business mix backed by North American scale underpinned by a strong risk culture. It has demonstrated its resilience over time and through a variety of challenging operating environments and is proving is metal again.

Now.

This quarter, we earned through tremendous headwinds earnings were $1.6 billion and EPS was 85 cents as we absorb a substantial increase in provisions for performing loans as well as margin pressure from the steep drop in interest rates.

RCD, one capital ratio was 11% down 70 basis points from the prior quarter on higher RW Baird, reflecting both the deterioration in the economic environment and the balance sheet growth as we continue to support our clients.

A tough quarter no question, but one that demonstrates the resilience of our model and our strategy everything you know about TD has been born out by this graces, we build long term relationships with customers and standby them in good times and bad risk appetite is our campus.

We have the ability to execute with speed and purpose when the world ships around us and the earnings power and balance sheet strength to play a role in the recovery.

That recovery will come though it is not clear how long it will take the revenue picture is likely to remain challenging given the lower for longer interest rate environment and provisions for credit losses may remain elevated if the downturn is more prolonged but the hallmark of PD is our ability to adapt to any operating and why.

Drummond and see the opportunities. It presents today, we are firmly focused on the way forward examining our workplaces in making plans to reopen locations with a focus on continuing to provide safe spaces, where our customers and colleagues as we begin the hard work of rebuilding.

Banking is a critical service and engine of economic growth and a pillar of the financial system.

For 165 years TD has been privileged to play this role given the power of our model the strength of our balance sheet and our distinctive culture I'm confident that we will emerge from this crisis stronger and better position to continue serving our customers colleagues and communities.

I'll wrap up with two thoughts first I'm very proud of how we responded to this challenge as an industry. We are fierce competitors, but with a strong tradition of mutual respect for each other as well as our counterparts in government and the supervisory agencies, drawing on our long experience and again.

Active expertise, we've been working to deliver the right outcomes for our customers and clients as well as the economy and society.

I also want to thank our 90000 people we've been bringing the best sales work each day under very trying circumstances, you embody our purpose to enrich the lives of our customers colleagues and communities and give meaning to our vision to be the better bearing with that I'll turn it over two years.

Thank you Barbara Good afternoon, everyone. Please turn to slide nine.

This quarter the bank reported earnings of $1.5 billion and EPS of 80 cents adjusted earnings were $1.6 billion and adjusted EPS was 85 cents.

Revenue increased 3%, reflecting volume growth across our businesses and record wholesale revenues, partially offset by margin compression and lower fee income as a result of reduced customer activity in the banking businesses.

Provisions for credit losses increased to $3.2 billion, largely reflecting higher performing PCL.

Expenses decreased 2% year over year, notwithstanding approximately $75 million indirect costs incurred this quarter related to covert 19.

Declining expenses, primarily reflects higher PCL for the U.S. strategic cards portfolio, which is offset in corporate noninterest expenses.

As you know the partner share of the revenue and PCL for the U.S. strategic card portfolio program is held in the corporate segment with an offsetting entry representing the partner share of per net profits recorded in corporate noninterest expenses, resulting in no impact on corporate or total bank net income.

Higher PCL this quarter, including for the retailer program partners resulted in a smaller net profit share and therefore and lower charge tricks sensors.

We have included an illustrative example on slide 27 to help clarify that gross to net accounting requirement for this portfolio.

Please turn to slide 10.

Canadian retail net income was $1.2 billion down 37% year over year, reflecting higher PCL and expenses, partially offset by revenue growth.

On an adjusted basis net income decreased 36%.

Revenue was up 1%, reflecting volume growth in deposits and loans and higher insurance premiums and well fees, partially offset by margin compression.

Average loans rose, 5% and deposits rose, 10% year over year, reflecting growth in both personal and business volumes.

Wealth assets were down 2%, reflecting declining in market values.

On a spot basis loans and deposits for Canadian PMC were up 4% and 13% respectively as at quarter end.

Margin was 2.83% a decrease of 11 basis points from the prior quarter, reflecting lower interest rates and competitive pricing and term deposits.

Total PCL increased by $762 million quarter over quarter, primarily reflecting higher performing PCL.

Total PCL as an annualized percentage of credit volumes was 107 basis points up 71 basis points quarter over quarter.

Expenses increased 4%, reflecting higher spend supporting business growth, including investment in frontline staff and changes in pension costs and volume driven expenses adjusted expenses were up 5%.

Please turn to slide 11.

US retail net income was us $261 million.

US retail bank net income was you at $87 million down 666 US dollar million slowdown U.S. dollar 666 million, reflecting higher PCL lower revenue and higher expenses.

Average loan volumes increased 7% year over year, reflecting growth in the personal and business customer segments.

Deposit volumes, excluding that TD ameritrade sweep deposits were up 10%, including 8% growth in the core consumer checking accounts.

Key ameritrade sweep deposits were up 24%.

On a spot basis loans were up 12% and deposits, excluding TD ameritrade were up 19% as at quarter end.

Spark TD ameritrade deposits were up 37%.

Net interest margin was 2.93% down 14 basis points sequentially, primarily reflecting lower deposit margins.

Total PCL, including only the banks contractual portion of credit losses in the strategics card portfolio was us $814 million up $571 million from the prior quarter.

The us retail net PCL ratio was 2.03% up 144 basis points from last quarter.

Expenses increased 6% year over year, reflecting increases in legal provisions, partially offset by productivity savings.

We had a U.S. 82 million dollar tax recovery this quarter, primarily reflecting lower pre tax income.

Partially offset by higher provisions related to changes in tax law.

The contribution from Tt's investment in TD, Ameritrade decrease to use $174 million.

Similarly, reflecting reduced trading commissions and higher operating expenses, partially offset by increased trading volumes.

Please turn to slide 12.

Net income for wholesale banking was $209 million, a decrease of $12 million, reflecting higher PCL, partially offset by higher revenue.

Revenue was nearly $1.3 billion, reflecting higher trading related revenue from interest rate and foreign exchange trading and higher debt underwriting fees.

Partially offset by losses in equity trading in very volatile markets.

PCL was $374 million, an increase of $357 million from the prior quarter.

PCL impaired was $194 million, reflecting credit migration largely in the oil and gas sector.

50, outperforming was $180 million, primarily related to a significant deterioration in the economic outlook, including its impacted credit migration.

Expenses or $616 million up 3%, reflecting higher volume related expenses.

Please turn to slide 13.

Corporate segment reported a net loss of $202 million in the quarter compared to a net loss of $161 million in the second quarter last year.

Reported net loss increased primarily reflecting a lower contribution from treasury items and higher net corporate expenses.

Partially offset by lower amortization of intangibles.

Adjusted net loss was $143 million compared with an adjusted net loss of $95 million in the second quarter last year.

Please turn to slide 14.

Our common equity tier one ratio ended the quarter at 11% down 69 basis points from Q1.

Organic capital generation added 20 basis points to capital this quarter, including 19 basis points from a reduction in our expected loss shortfall.

As you know when losses calculated for regulatory capital purposes exceed accounting provisions. This excess is deducted from capital.

With this quarter's increase in allowances the gap has narrowed and we re recoup some of the capital previously deducted.

We also saw and 11 basis points benefit from Rcs transitional arrangements for expected credit loss provision.

We also saw losses on fair value through OCI Securities and we completed the repurchase of 7.8 million common shares in mid March.

The 80 basis points declining siti, one attributable to risk weight growth was primarily a function of higher credit risk risk weighted assets, reflecting volume growth in our commercial and wholesale banking businesses as we support and our customers with new and increased credit facilities.

A decline in asset quality, reflecting negative credit migration in this challenging environment, which are Jay will discuss shortly.

And as you know we have been migrating our us bank assets from standardized to add RV and this particular quarter, we transitioned a credit card portfolio, which cost us.

Nine basis points.

This particular transition was negative.

We expect.

At the.

Sorry, while this particular portfolio transition was negative migration to our be has generally been positive to the capital calculation.

And we expect it to continue to be positive with ongoing migration through the second half of this year.

We saw market risk risk weighted assets increased by $5 billion in our wholesale business, reflecting the volatility and interest rates and credit spreads this quarter.

Leverage ratio was 4.2% and our LCR ratio was 135% both well above regulatory minimums.

Effective this quarter, we have reduced the rate of 51 capital allocated to our business segments from 10.5% to 99.0%.

In addition for Prudence, we have also introduced a 2% discount on our dividend reinvestment plan for the dividend declared today.

With that I'll turn the call over to Roger.

Thank you realize and good afternoon, everyone.

Please turn to slide 15.

Gross impaired loan formations were 1.7 billion.

Stable quarter over quarter 24 basis.

Please turn to slide 16.

Crossing loans ended the quarter 3.6 billion of 47 basis points up two basis points quarter over quarter and down one basis point year over year.

Quarter over quarter, increasing gross impaired loans was driven by the Canadian retail segment in both consumer and commercial lending portfolios.

The wholesale segment largely reflective in the oil and gas sector and the impact of foreign exchange.

Please turn to slide 17.

Recall that our presentation reports Pcr ratios.

Both gross and net of partner's share of the U.S strategic card credit losses.

We remind you that credit losses recorded in the corporate segment are fully absorbed by our partners and do not impact of banks net income.

The banks Pcls in the quarter were $3.2 billion or 176 basis points.

Pcls were up across all segments and all major asset classes and was primarily related to the ongoing core with 19 pandemic.

Please turn to slide 18.

The fact impact these here increased 160 million quarter over quarter.

Mainly due to credit migration in the wholesale segment.

Lastly, in the oil and gas sector.

Forming PCL increased by 2.1 billion quarter over quarter, and I will address this momentarily.

Please turn to slide 19.

I would now like to take a few minutes to discuss the impact of over 19 on our allowance for credit losses.

The allowance for credit losses increased by 2.6 billion this quarter.

Raising the banks total allowance coverage across loans and acceptances from 74 basis points to 103 basis points.

The increase is primarily due to higher performing allowances, including the impact of credit migration.

Reflecting a significant deterioration in the economic outlook related to the over 19 pandemic.

Partially offset by a mitigating impact of a variety of deferral and government assistance programs available to our clients.

The change in the economic outlook incorporates a material increase in unemployment.

Substantial near term GDP contraction and assumes a gradual recovery where economic activity does not return from pre crisis levels.

An extended period.

The allowance increase was across the Canadian and us geographies.

And by asset class due to a billion dollar increase for our business and government portfolios.

Flex it across multiple industries, including oil and gas.

And 1.6 billion increase across consumer lending portfolios, primarily for the auto other personnel and credit card portfolios.

438 million off the increase in the credit card portfolios is attributable to the us strategic our partner share.

I'm satisfied with the banks current allowance coverage considering the provisions added this quarter at our portfolio and geographic mix.

The potential for further provisions will largely depend on the magnitude and duration of the ongoing over 19 Pandemics.

Please turn to slide 20.

Given the expectation of sustained lower oil and gas prices I will now take a moment to discuss the banks exposure to this sector.

The banks pipeline oil and gas loans amounted to 12.2 billion.

And our nearly evenly split.

Across the Canadian and us geographies at 28% are investment grade.

Our concentration to the oil and gas producer and services segments, which are generally most exposed to low energy prices is relatively small continuing to represent less than 1% of the banks cross loans and acceptance.

Furthermore, in response to lower commodity prices.

Selling gas producers have taken a number of risk mitigating measures.

Such as reduced Capex.

Gary production curtailments.

Other liquidity bolstering activities.

Excluding real estate secured lending consumer lending and small business banking exposures, Alberta, Saskatchewan, and new founder Labrador represents 2% of total gross loans and acceptances.

Add have remained stable at that level in recent years.

The consumer delinquency and impairment levels. These provinces are elevated.

We expect there may be more impacted moving forward given the combined impacts of the corporate banking pandemic and lower oil and gas prices at we have incorporated this in our allowance for credit losses this quarter.

Overall oil and gas exposures represent a small portion of the bank lending portfolios. We will continue to regularly perform detailed assessment of our oil and gas exposure as the challenges facing this sector payout.

And further losses are expected to remain manageable.

Now moving back to toggle back results. Let me briefly summarize we are operating through challenging conditions, given the unprecedented impact of Mccormick 19 pandemic.

And while the duration of the pandemic and guarantee of the economic impact remains uncertain, we are well prepared to manage through these difficult times.

With that operator, we're now ready to begin.

Culinary session.

Thank you.

We will now take questions from the telephone lines. If you have a question I knew you speakerphone. Please pick your sense that people are making your selection and you have a question. Please press star one on your telephone keypad.

To cancel the question. Please touched upon fine. Please press star one at this time, if you have a question there'll be a brief pause for participants register thank you for your patience.

And your first question is from John Aiken from Barclays. Please go ahead.

Good afternoon, Brianna, so there's a bit of the detailed question for you. If you wouldn't mind Tom on the balance sheet, we saw a significant increase in the armed interest bearing deposits with banks is you see a transitory impact that happened right at quarter end or is this was going to be a sustained balance that's going to be fairly high.

That's the case can you give us some sense as to what that would need to overall net interest margins.

Yes, John Thank you as you know.

Throughout the period of the pandemic and as you mentioned closer to quarter end.

I've been level of deposits that are being Ah accumulated their rose quite significantly, which obviously has a starting point goes into.

Cash balances and then we're able to invest some of it didnt.

Shorter or longer term securities.

So you're quite right in pointing out that it a wave it may well be temporary as.

Clients and customers, who have access to our customer our relief programs as well as government relief programs and that have a.

Accumulated some cash and their accounts may see that a as as as they utilize that cash to meet their needs and their obligations. We may see some of that come back.

How much are fit that we're able to.

Extend a into longer term yield bearing investments will just depend on R&D customer behavior that we're able to observe in a in in the into utilization of that cash.

I'd say one another significant contributor to those cash balances wasn't as I mentioned earlier the rise in deposits coming out of sweep deposits coming out of TD ameritrade.

As a number of.

Clients took money out of the market and we're holding cash for some period of time, so I think that fit the impact on.

Aggregate margins.

I would be and really not forecastable and a short run here until we see a little bit of stability returning to.

However, our clients are managing the finances.

I guess, you're putting the ball back on my quick. Thanks, we are sold in Q.

Thank you.

Your next question, if some Gabriel Duchaine from National Bank Financial Please go ahead.

Good afternoon, or first question on ER on earnings I mean, we're hearing that go to score the Ernie.

Matter, but eventually people hear about.

Turning to page the dividend and a superior capital generation.

I wanted to kind of talked in the earnings outlook to your stress scenarios your internal stress tests, but I'm sure you've done it like other banks and their own whatever scenario you're course, your one does it fall below ex whatever those.

One of the components Oh, the type of production would be earnings I'm, just wondering what kind of earnings or.

You know leveled or generation or growth do you have been no types of a scenario on scenarios.

Gave front we are as you would expect a so first of all I'd answer by saying that earnings always matter I think.

It this quarter, they don't but that's not how we see it earnings always matter.

And.

What's important though is that you should know that.

We run a variety of stress tests.

And using a different scenarios that are applicable.

And clearly this particular Panda America has been probably come come come about more rapidly and recent duration and severity that are I think we can all easily agree is unprecedented.

Look I think our we continue to stress test, our liquidity and capital positions and.

You can always come up with very severe adverse.

Scenarios and richer earnings may be pressured even more but on the other hand or as they are reopenings become a bit more around Uh huh.

Ill start kicking holds more might rate with more confidence then we should also started seeing a.

The banks results set react to that so are clearly it is a function of the oh unprecedented economic environment where in.

I gave this is Barry so.

Ill add to that.

I mean, there's that unprecedented times. Another reason earnings are depresses because of the alone or the level of allowances. The bank is taken and that is based on you know our current view of you know what the future looks like and it's hard to predict it perfectly but we will be you know checking in a very very regularly to see how that.

Please note.

The other thing I would add is that in a one of the hallmarks of TD and one of the strength of T.D. that real adapted environment, we find ourselves and and I know we will then I know we will thrive in whatever operating environment do you know well it turns out to be a the reality. So so yes, you know earnings as we as a matter even this quarter's earnings matter, but eggs.

The bank to adapt to the environment, we find ourselves in over the next little oil.

I guess, what am I off do though is a.

Hi, Jay said, you know you've got an extended period for when you expect a.

Economic activity to return to normal levels or what does that.

And what are your what are your earnings projections are like in that sort of scenario is that no but too.

No 2019 sort of profitability by 2020 to 23 or or or something other than that it's hard to give out a specific your gabriel.

Interest rates a little you May you told me when interest rates will start to move you tell me, where you know where the economy opens up a completely so it's hard to pin down no particular factor here I mean, we had an unprecedented times, but as I've said it'll notwithstanding the time that we're going through.

TV business mix, you know given our scale or north American scale wouldn't even able to do how we manage to disgraces today, and now expect us to adapt going forward and I I see the being strength Oh like I said in my remarks, we I expect us to be coming out of this stronger than we entered it.

And my other question I'll make a quick on credit.

Some banks have talked about no Q3, Q4 expect performing provisions to decline from from this quarter's level.

Performing doing the operative word.

What about the impaired provisions were going to be picking up.

Is there going to huh.

You'll have movements out in stage two into stage, three or they're going to offset each other or could you know they pick up in stage three provisions keep the you know what we're seeing today you know what that permit at that level for for a number of quarters.

Yeah, It's hard to me I think Thats a good question. So as you know weve built a material amount.

And I'll allowances this quarter most of it is.

So in future quarters it on.

We do expect to see high level of impairments in the fact that Vince is performing allowances is going to help.

It could be some incremental allowance for particular cargos from performing to impact, but the fact that weve held.

You know a material amount this quarter I think there's going to help.

Yeah.

Maybe I'll follow up on though.

Thanks, Kevin.

Thank you. Your next question it shouldn't be Ebrahim Poonawala from Bank of America. Please go ahead.

Hi.

So just still very quickly follow up on that and said he got a lot the impact Pcls <unk>.

If you can just help me or help us walk through this is it's fair to assume that the reserve levels are unlikely to decline anytime soon so you're going to maintain that reserves loss as things might today than you see credit migration, you can all whose oh, some PCL tied to those loans as you move forward.

Yes, it's helping in a period of elevated Pcls is that did I talked about us even if the macro backdrop your assumptions around the unemployment don't change we should see elevated pcls just by the migration lost all the loan book.

Okay. So very quick question then.

Okay. That's to answer that as you know we have built.

Material.

This quarter.

Hey, tremendous amount of uncertainty with respect to integration and sit here. This crisis the shape of the recovery.

I would say is.

Outlook remains unchanged they get this would be the high watermark.

How about what is one caveat.

It's changed from performing to impaired. Thank you could see some increased because of impact however.

Okay improves you could even see got reduction already.

I'll come lessons they couldn't be it. So I think you have to keep in mind that the whole environment, where dealing here is very uncertain, but the key messages like we have built a substantial amount of PCL. This quarter. That's based on our forward looking people. So that will change only if our forward looking to change.

Got it so that it sounds a lot more like you will you know pcls reflect your license loss expected gyms wasn't as well.

Yes, that's the IRS nine principles. So we are following our accounting standards.

Got it and it gives us a southern Louisiana. So all in terms of capital. So you can just talk about in terms of your capital outlook well into what our balance sheet growth might do well actually move forward and you mentioned Oh continued transition to me I'll be should be positive if you could adjust those to win.

Central there the CD one goes from here.

It bring him as you know a we entered into this crisis carrying a tremendous balance sheet and strength in capital and liquidity and this is a hallmark of TD that you're well familiar with that we.

I do carry plenty of capital and liquidity is sometimes we have ER remark in a folks the way that we make a every one to be able to make a loans during bad times as well and so as you can see it from the growth in our balance sheet. We are clearly doing knock down we're standing by our clients or when they need us.

And we intend to continue to do so and as the economy reopens end demand materialize. This for additional credit a we will be.

Extending that credit or within the risk appetite of TD that you are well familiar wet so I I think carrying our strong amounts of capital in this.

Environment to take advantage of opportunities is a prudent thing to do.

Got it so should we expect less need not be surprised to pick out the initial.

In two depends on what next quarter or to have you extend credit Oh, there's some oh the peak season due credit if that's a reasonable assumption going so.

Well in in ordinary course times, there you know that a we continue to generate a capital and then reinvested in the business to create growth or as Jay just indicated we are in a period of or no uncertainty and if the economy recovers well we will.

Continuing to ER to extend credit to our clients and if it turns out that things are go. The other way then I'll get you will remain well see additional allowances and more migrations. So we're really not into a period right now that is separate our forecastable with any degree of a high degree of confidence.

Well thank you.

Thank you.

Next question is from Steve care yields from each capital. Please go ahead.

Thanks, very much first I just wanted to circle with three hours really you talked about some positives on a or b migration in the second half a year. So the U.S. banks can you just give a bit as you teller on what portfolios and the level of materiality there.

Oh, well the one that you know the biggest portfolio that remains to be a migrate it is our U.S. non retail portfolio and you know that it is a large an immaterial portfolio, which we were working hard to.

True to complete the the work through habitat implemented hopefully by the end of this year.

And do you have a ballpark of materiality to it or.

There's a too and that is something that are not really are prepared to disclose right now Steve as you know with that number of moving parts between a lot the shortfall calculations and.

The implementation of fit or will be a near where it will will need to be quite careful and I'd be load to really quantify that for you right now.

And then thanks for that and Barents you mentioned in your opening remarks coming up better positioned a this pandemic could open up some opportunities to expand inorganically in the U.S., mostly TV has been on pause. The last few years in terms of deal flow in the United States do you think what are your thoughts.

Early innings do you think this has the potential to turn into a meaningful opportunity to scale up or filling your footprint.

Well just firstly, let me add to your first question do realize you know I'm sure you. If you look at our history at TD, you know strong capital levels and the need to maintain strong capital levels. A is just part of a character I know those with that's what we do we think.

It's important to manage capital you know very closely and that's what do you would expect out of TD. So it's rias is cautious in telling you what do you did win and rightly so given the environment, but I can tell you that you know.

You should expect TD to do have a cautious view in a prudent view on how we manage capital regarding your second question.

You know the we oughta through the cycle type of lenders you know we have a particular this discipline in the bank a very proud off you know how the being performs in different environments. The business mix. We have is is something that you know we worked hard to have then and we have no great scale in both sides of the border.

ER and the good news here is that the the D. is not required to do the to do a an M&A double transaction because we have strategically challenge, we're not but having said that the environment will remain you know is an interesting one it is unprecedented and I'm sure you know given the type of ER.

Situation, we are facing that there maybe opportunities out there and if there are a then of course, you would expect us though.

Due to look at them, but seriously, but we will only do that if a you know to do whatever we would have to make sure that we have a better understanding of what does environment may turn out.

Know how bad it might get a we have no interest in everything anybody else's problems.

And we love to look at whether it makes strategic sense makes financial sense and timings and so it all those things don't know to be well aligned then of course, we look at it seriously.

[noise] thanks for that.

[noise]. Thank you.

Your next question is from many grounding from Cormark Securities. Please go ahead.

Hi, Good afternoon, a question on your cards business.

With your cards business been kind of focused on troubled rewards and then the U.S. Oh the exposure to all of your big retailers is there need to rethink the bank card strategy right now.

So this is battered again.

Why don't I pass on firstly, the Canadian part a two Terry Curry Terry.

Lee. Thank you. So am I would say, we're very comfortable with the lineup of credit cards that we have available to Canadian we'd like to say we have a card for every.

To me every Canadian needs. Then obviously those are the travel card and you cited but also cashback card.

Across a variety of category clearly in this quarter odd given the circumstance Oh, yeah, we probably had.

5 billion or more than that Didnt materialize.

But yeah, we still feel if you look forward.

Well positioned to cross category.

And looking forward TB Air, Canada partnership and loyalty program launching hi, upcoming later Oh, yes.

Thanks, Terry and Greg do you want to pick up the U.S. side of it.

So thanks for the question I'd, just add that as we've been talking about for the last several years. We spent a lot of time and energy building our card platforms in the U.S. from scratch and as includes not only the partnership programs that you talk about <unk> with a large retailers and certainly if one comes up that makes sense and its the right partner.

And we understand the dynamics and the economics makes sense, we're interested in expanding those.

But also our Denovo bank card business or you know our own branded bank card for our own customers. We spent time building that and obviously, we will continue to continue to leverage that with our own customer base going forward.

Yeah, Thanks, Greg and many just to add this is better. So again I think we've talked about this in previous calls they think about a year ago two years ago, Terry talked about the investment we've made or we were making at the time to expand the card offerings in Canada, you know with the cashback card and the entry level card and all that and the timing there.

Though to be excellent for that you know in order to diversify our card portfolio and as you know in a a or or approach a full four four unsecured lending is to go with you know the prime side of the.

The FICO scores and all that so but I wanted to add that and then the U.S. I know this has been a.

Lots of questions around it always to be more interested in partnership deals in a Greg did say that did provide us a foundation to build a card portfolio, but I think now the been nemacur showing that those partnership deals have done though to be terrific.

As you know Lions share of these losses, if they happen to two due to materialize well before they come to the partner. So these things worked out in different ways in different circumstances, but given where we are we're very happy that the big portion of our U.S. portfolio is in our partnership deals.

Thanks for that and just a follow up on the.

Partnership with it but they're kinda do you have the ability to change any turns of that agreement then I think it's more importantly, do you foresee having any of those kinds of discussion.

Hi, it's only Tonight.

Sorry to go ahead, sorry, sorry about that there and you know Oh, you would expect that we would have a contract with their Canada that we would honor and have more excited over the long term bought the Paul.

Yes.

Thank you.

Thank you.

Our next question is from Sumit Malhotra from Scotiabank. Please go ahead.

Thanks, Good afternoon.

Start with areas on the capital slides. Please so.

You a you show us here that the.

Market risk component of the portfolio had an 11 basis point impact on.

See T. One and we can see a in some of your capital disclosure the.

Var was up quite significantly this quarter and that's reflected in the movement in risk levels. The offset that you haven't methodology was this the implementation of distressed.

ER stress var, or sorry relaxation of the stress for.

Relief or was there other components I plan I asked because most of your competitors actually had market or WH decline this quarter and obviously the impact is different for you. Just wondering if this is something specific to this quarter that they may reverse going forward.

No I think you've got it right that a with the promotion of the data which includes a volatile periods you see the rising the risk weights and then that line item you're referring to include the relief and the modification that that came from Aussie during this period of time.

And with the with the relief in place when the data update and so is this for lack of a better term a run well run rate level for the for the back now or as market conditions at east how quickly does that get reflected in how are the the risk, but moving there was wearables is captured here.

No I think as a as you see market share starting to stabilize and the volatility coming in and spreads coming in you. We would expect to see market Triska and numbers it start migrating back down.

And just talk just to add to that.

What happens fast data as part of your data sets. So.

I think the water and that's why wouldn't come down and that helps when it's going to remain elevated from what it used to be before right.

On people to 211 days by Us Tonight.

So all right. So there's this movement this quarter as far as credits can or credits concern I think we all know that there was a heavy level of.

I have drawn out activity and borrowed maybe all but this one do I'm a bit surprised with the bank sitting at 11% and perhaps at least on the on the draws perspective, there should be some relief on that going forward.

Putting the discounting on the on the drip here at least the way I look at it effectively a equates to 25 million shares going going out the door over the next year if it remains in place.

Are you concerned that without this this capital uptick that the bank may move below or some of the the thresholds.

The regulators look out or the market looks at a in terms of capital adequacy. Why did you think this this was the time to put this in place.

So maybe you know this way to describe this is really has used the term you know that and then traditionally this is what the bank has been you you've known us when many years.

Do you know prudent capital management is the right phrase at.