Q2 2021 Toronto-Dominion Bank Earnings Call

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This conference is being recorded so it's gonna stay home if they don't go as you say.

All participants please standby your meeting is ready to begin.

Good afternoon, ladies and gentlemen, welcome to the TD Bank Group Q2, 'twenty 'twenty 1 earnings conference call I would now like to turn the meeting over to MS. Gillian Manning. Please go ahead mismanaged.

Thank you operator, good afternoon, and welcome to TD Bank group's second quarter of 'twenty 'twenty, 1 investor presentation.

We'll begin today's presentation with remarks from Pirating, that's Romney the bank CEO.

After which rehab for them at the bank CFO will present, our second quarter operating results.

I'll tell you about the Walid 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 to answer your questions today are Teri Currie group head Canadian personal banking Greg.

Broadcom, President and CEO TD Bank America's most convenient bank and Bob Dorrance group head of wholesale banking.

Let's turn to slide 2.

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 are applied in making these forward looking statements.

Any forward looking statements contained in this presentation represent the views of management and are presented for the purpose of assisting the bank's shareholders and analysts in understanding the bank'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 its businesses and to measure overall bank performance. The bank believes that adjusted results provide readers with a better understanding of how management views. The bank's performance Barrett will be referring to adjusted results in his remarks the.

Additional information on items of note the bank's reported results and factors and assumptions related to forward looking information are all available in our Q2.2021 report to shareholders with that let me turn the presentation over to Barrett.

Thank you Julian and thank you everyone for joining us today.

Q2 was the strong order of with Didi as we continued to benefit from a recovering economy and rising consumer and business confidence.

Earnings Rose to 3.8 billion and EPS to $2 and for more than twice last year's levels as an improving outlook led us to release the portion of the performing allowances, we built last year.

Our wealth insurance and wholesale businesses had another strong quarter as clients continued to bring us more of their business and our personal and commercial banking business has gained momentum has increased customer activity helped offset continued margin pressure from the low rate environment. Our CET 1 ratio ended the quarter at 14, 2%.

Reflecting these favorable trends.

The year after the COVID-19 pandemic took hold in North America. It continues to have a significant impact from the economy and our financial results unprecedented fiscal and monetary support for households, and businesses has led to a significant increase in cash balances limiting borrowing needs driving delinquency rates of historic lows.

And keeping our W of growth muted.

We have navigated this complex environment, well, thanks to our diversified business model and the adaptability and resilience of our people.

As I reflect on our performance over the last year I'm, most proud of them through this long period of.

Well they have continued to deliver for our customers communities and each other and live our share commitments.

As we look around today, we know the battle against Covid is not over the devastation we are witnessing in India, and Brazil, as the heart wrenching and will have far reaching consequences of those regions.

But in North America, we see encouraging signs of the recoveries on solid growth and gathering momentum.

Rapid start to vaccination in the U S is permitted and easing of restrictions across much of our footprint and broadening the vaccine availability in Canada should support similar trends here.

TD will continue to play a key role in driving forward the recovery as the purpose driven organization, we know the bank thrives when our customers colleagues and communities thrive our recoveries must go hand in hand that was the core message of R..22 at the ESG and DCF day reports, which we.

Released this quarter.

Invite you to read them and learn more about what we are doing to build a more inclusive and sustainable future debt.

That includes our approach to achieving the goals of our climate action plan is the first Canadian bank to set of net zero target by 2050, we are accelerating our efforts have mobilized leaders and experts across the bank and are working closely with clients in multiple sectors to support the transition plans and create positive.

Change.

We also discuss our progress on inclusion and diversity or the per.

Last year, we have seen what any quality looks like across our communities and start terms in the black Asian indigenous and other communities.

TD will never rest on our past success, we will work to increase our own representation and contribute to the fight against the bias discrimination and racism.

And because we know what gets measured gets done our ESG report provides expanded and detailed reporting so all stakeholders can track our progress.

I wrote in my CEO of message Didi will meet the biggest challenges of our generation with determination and purpose. We will continue to invest in what matters and leverage our resources and the talent of our 90000 colleagues around the world to help build the better bank that better bank is powered by a proven business model and sustain.

And strengthened by the investments we continue to make in our business is in operations.

And this year of accelerated digital take up and changing customer needs the gateway abilities and infrastructure, we put in place of enabled us to support a dramatic increase in adoption and engagement.

We are winning with customers by delivering innovative solutions customized to their needs. This.

This quarter crossing the 10 million Mark for mobile users across our North American footprint.

Our Canadian banking App was honored by the business Intelligence group for AI powered insights developed by layer 6 are in house.

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In the U S. We were recognized by Celent for a partnership on the virtual assistant that provided advice and support the customers digitally at the height of the lockdown.

And we continue to maintain a strong base of innovation is the number 1 financial institution Battened filer in Canada.

These accomplishments have been matched by continued growth and strong customer acquisition in each of our businesses.

Our Canadian retail segment earned $2.2 billion this quarter.

<unk>, lower PCL, and lower insurance claims and higher volumes and fee income activity accelerated in our banking business with continued strength in mortgage volumes and a pickup in credit card spend we also extended our lead in personal deposits and continue to lead in payments ranking number 1 and interact.

<unk> and <unk>.

We delivered record wealth earnings on the on a strong trading volumes and net asset growth and impressive insurance earnings including substantial customer premium relief.

We also achieved several milestones this quarter.

And the business Bank TD auto finance ranked highest in dealer satisfaction, among non captive retail lenders by J D power for the fourth year in a row following DD auto finance the U S. As J D power with the last quarter.

And just after quarter end, we closed the acquisition of wells Fargo's Canadian direct equipment finance business.

Wealth business, we launched the TD wealth family office of multidisciplinary growth that will leverage our 1 TD model to deliver bespoke advice and solutions will ultra high net worth families and entrepreneurs.

And TD insurance continued to take market share rising to the number 3 position for home and auto General insurance.

Our U S retail bank delivered 853 million U S dollars of net income this quarter with another strong sequential recovery in earnings mainly on lower PCL.

We reported peer leading consumer deposit volume growth as customers entrusted us with more of their savings.

We saw a further increase in customer transaction activity with the return to near record levels of debit card spend and rising credit card transactions.

We're also seeing good early take up of our new double of credit card 1 of the best cashback offerings on the market.

We continue to support small business customers with PPP financing ranking of the top 10 nationally as we originated some 45000 triple B loans in the second round of the program and help customers access over $1 billion and forgiveness under the program.

Together with the 194 million U S dollar contribution from our ownership stake in Schwab U S. Retail segment earnings exceeded $1 billion U S dollars.

Our wholesale bank earned $383 million of good result, with lower PCL.

The thing offset of normalization in trading activity from last year's elevated levels.

This quarter, we continued to build our U S franchise with the announcement of our agreement to acquire Headlands Tech global markets expected to close in the second half of calendar 2021.

The transaction will expand our capabilities in fixed income electronic trading and accelerate the TD securities innovation and technology strategy.

We were also proud to act has joined lead for the International Finance facility for immunization companies 750 million U S. Dollar 5 year vaccine bonds, which will provide garvey the vaccine alliance with the immediately available funding the support routine immunization and lower income countries, reaching the.

Early half of the world's children.

At the midpoint of fiscal 2021, TD Bank remains strong and our business is well positioned positioned for the future while the COVID-19 related impacts we saw last year, including margin pressure from low rates high savings rates delaying loan growth and PCL will continue to affect the year over year comparison.

We will maintain our disciplined approach to investing for the long term. It has served us well through the pandemic and as the recovery progresses. It will support our continued readiness to meet changing needs adapt the shifting dynamics and build for growth.

We are also supported by a very robust CET, 1 ratio, which affords us strategic flexibility to invest in our competitive position to grow organically to pursue acquisitions that add capabilities and to build our franchise to return capital to our shareholders when that becomes possible or a combination of.

Of those things as always we will use our capital responsibly and be part of all about making the right investments for the long term.

Our investments also support how we operate the bank as we plan for a future where more of less can return to TD premises. We know that flexibility will remain critical and that our people need the capabilities and infrastructure to continue to serve customers.

Backed by a clear strategy and strong balance sheet. We look ahead with confidence our bank has grew and resilient. Our brand is among the strongest in the industry and our unique and inclusive culture remains a distinct competitive advantage our people bring debt culture to life and I'll finish by thanking them for the continued hard work.

And dedication with that I'll turn it over to <unk> Bank.

Good afternoon, everyone. Please turn to slide 8.

This quarter the bank reported earnings of $3.7 billion and EPS of $1.99, and adjusted earnings of $3.8 billion and adjusted EPS was $2 for.

The revenue decreased 3%.

We saw strong volume growth and higher fee income in our retail segments, which this quarter of more than offset lower margins.

Onward pressure came from premium rebates for insurance customers for which I will discuss in a moment lower wholesale revenue and the impact of foreign currency translation.

Provision for credit losses for the recovery of $77 million lower by $690 million sequentially, reflecting a recovery in performing PCL and lower impaired PCL.

Expenses increased 12% year over year, mainly reflecting an increase in the retailer program partners' share of the net profit from the U S strategic cards portfolio, primarily on lower PCL.

Absent the partner's share expenses increased 1% as higher employee related expenses and U S store optimization costs were largely offset by foreign currency translation and lower legal provisions for this quarter.

Because of the large euro rate your change in PCL this quarter of the accounting for the U S. Strategic card portfolio of program had a significant impact on expenses as well as total bank pretax pre provision earnings and operating leverage.

Slides 21, and 'twenty 2 of this presentation show, how we calculate PTP and operating leverage at the total bank level by removing the impact along with the impact of foreign currency translation, which is also a significant this quarter.

These adjustments showed at the total bank PTP and operating leverage each declined approximately 3% year over year.

It is mostly a reflection of lower revenue and higher expenses in wholesale.

Please turn to slide 9.

Canadian retail net income was $2.2 billion up 86% or $1 billion year over year on an adjusted basis net income increased 82% year over year.

The revenue increased 1% higher transaction and fee based revenue in the banking and wealth businesses and higher volumes were largely offset by lower margins and premium rebates for insurance customers, reflecting reduced driving activity.

Average loan volumes rose, 5%, reflecting growth in business and personal volumes.

Average deposits rose, 20%, reflecting double digit growth in personal business and wealth volume growth.

Growth assets increased 21%, reflecting market appreciation and new asset growth.

Margin was 261% of decrease of 4 basis points from the prior quarter, reflecting changes in asset mix and the ongoing impact of the low interest rate environment.

Total PCL was the recovery of $37 million lower by $179 million sequentially.

Mainly reflecting a recovery in performing PCL.

Total PCL as an annualized percentage of credit volume was negative 0.0% to 3% of decline of 15 basis points quarter over quarter.

The insurance claims decreased 34%, primarily reflecting lower current share claims of decrease in the fair value of investments supporting claims liabilities and more favorable prior year's claims development.

The reported expenses increased 4%, reflecting higher volume driven and employee related expenses, partially offset by prior year of charges related to greystone.

Adjusted expenses increased 5%.

Please turn to slide 10.

U S. Retail segment reported net income was approximately U S $1 billion.

Up U S $786 million.

U S retail bank net income was USD $853 million up U S $766 million, primarily reflecting lower PCL.

Revenue increased 2%, reflecting volume growth higher valuation of certain investments and fee income growth, partially offset by lower deposit margins.

Average loan volumes increased 1% year over year.

Deposit volumes, excluding sweep deposits were up 28%, including 37% growth in core consumer checking.

Sweep deposits were up 18%.

Net interest margin was 2.5% down 9 basis points sequentially, reflecting balance sheet mix.

Total PCL, including only the bank share of PCL for the strategic cards portfolio was the recovery of U S $173 million.

Lower by <unk> $276 million compared with the prior quarter, reflecting lower impaired PCL and a recovery in performing PCL.

The U S retail net PCL ratio was negative zero point for 1% down 66 basis points from last quarter.

Expenses increased 4%, primarily reflecting U S $49 million and store optimization costs.

And higher employee related expenses, partially offset by legal provision.

The contribution from Td's investment in chalk was use of $194 million as a reminder, amortization of acquired intangibles of an acquisition of the integration related charges associated with Schwab's acquisition of TD Ameritrade are reported in the corporate segment.

Slide 27 and for further details.

Based on to slide 11.

Wholesale net income was $383 million, an increase of 83%, reflecting lower PCL, partially offset by lower revenue and higher expenses.

Revenue was $1.2 billion down, 8%, primarily reflecting lower trading related revenue and lower debt underwriting, partially offset by higher advisory fees.

<unk> was lower by $83 million sequentially, primarily reflecting a recovery in performing PCL.

The expenses are up 14%, primarily reflecting higher variable compensation.

Please turn to slide 12.

The corporate segment reported a net loss of $186 million in the quarter compared with the net loss of $202 million in the second quarter last year. The year over year decrease reflects the higher contribution from treasury and balance sheet management activities and lower net corporate expenses.

Actually offset by acquisition and integration charges related to the sharp transaction.

Adjusted net loss for the quarter was $106 million compared with an adjusted net loss of $443 million in the second quarter last year.

Please turn to slide 13.

The CET 1 ratio ended the quarter at 14, 2% up 63 basis points from Q1.

We had strong organic capital generation this quarter, which added 47 basis points to CET 1 capital <unk>.

<unk> gains and employee benefit plans added another 17 basis points.

The risk weighted assets decreased by approximately $12 million in the quarter on lower retail and commercial balances in U S retail and the FX, which the bank hedges.

The impact of ex FX on our CET 1 ratio was therefore from Youtube.

Our sales transitional adjustments for ECL provisioning reduced our CET 1 ratio by 7 basis points this quarter.

Leverage ratio was 4.6% this quarter and the LCR ratio was 128% both well above regulatory minimums I will now turn the call over to Ajay.

Thank you <unk> and good afternoon, everyone. Please turn to slide 14.

Gross impaired loan formations were 14 basis points remaining at cyclically low levels.

Reflecting the impact of support programs customer of Brazilians and the continued economic recovery.

Please turn to slide 15.

Gross impaired loans were $2.8 billion decreasing $254 million quarter over quarter, primarily related to the resolutions outpacing formations in the Canadian and U S consumer lending portfolios and the impact of foreign exchange.

Please turn to slide 16.

Recall that our presentation reports PCL ratios, both gross and net of the partner's share of the U S strategic card PCI loans.

Mind you that these sales recorded in the corporate segment are fully absorbed by our partners and do not impact of the bank's net income.

This quarter the bank recorded a grasp PCL recovery of $373 million, reflecting a performance, allowing the allowance release.

Partially offset by cyclically low impaired provisions.

Please turn to slide 17.

The bank's impaired PCL was $385 million.

Doing at low levels, and decreasing 84 million quarter over quarter.

The decrease was primarily reflected in the U S consumer lending portfolio.

The performing PCL was the recovery of $758 million lower by 605 million quarter over quarter.

Largely due to allowance releases across all segments.

Please turn to slide 18.

The allowance for credit losses decreased $968 million to 8 billion quarter over quarter.

Reflecting a performing allowance released.

Largely related to the.

The improvement in our economic outlook and consumer credit attributes.

At 289 million impact of.

Foreign exchange.

Now to summarize the quarter.

Bank led deferral and ongoing government support programs have had the desired effect of helping our customers.

And reducing initial expectations for credit losses.

As reflected in our allowance release this quarter as well as cyclically low gross impaired loan formations and gross impaired loans.

Credit results May continue to vary by quarter as there is a wide range of possible outcomes.

The uncertainty associated with the ultimate credit impact remains elevated but has reduced over time.

As a result, Pcl's may continue to be relatively low through the remainder of 2021.

To conclude.

We remain well positioned to manage through the balance of the pandemic given we are adequately provision.

We have a strong capital position and we have of business that is broadly diversified across products and geographies.

With that operator, we're now ready to begin the Q&A session.

Thank you we will now take questions from the telephone lines. If you have a question and you're using a speaker phone. Please lift your handset before making your selection.

If you have a question. Please press star 1 on your devices keypad you make him for your question at any time by pressing Star 2 please press star 1 at this time. If you have a question there will be a brief pause for all participants register for questions. Thank you.

You for your patience.

And the first question is from Abraham Poon of Wala from Bank of America Securities. Please go ahead. Your line is now open.

Good afternoon.

I guess, maybe just to start out maybe.

Maybe at the consolidated net.

Just talk to us in terms of when you see NII.

The stabilizing what actually growing or have you hit that point the.

<unk> bottomed out this quarter and what's your outlook barring obviously of any type for the margin both in Canada and the U S.

Thank you for I mean look I.

Think of that.

When you look at the whole question of margins in the quarter over quarter comparison.

I think where it feels like we still have some moderated downward pressure from.

L. P speaking, particularly tight because of the amount of cash that is the overall in the system.

And the but however.

The the.

The level of interest rate since definitely starting to show some upward momentum so.

In addition to that I think our asset mix is an important factor I mean, obviously as our.

Deposit growth continues in the.

And.

More customers are trusting us with their deposits.

We are still at an all time of lower interest rates and therefore that is.

He is also a headline impact on non net interest margin and card balances have been coming down as you know, but we're very encouraged to see card spending.

Starting to return very smartly and as liquidity in the system.

Things are we expect to see some of the card balances as well as loan growth remaining so we remain quite optimistic that as the economy is starting to open here and and economic activities, taking on momentum that we are very well geared to.

Upward.

Interest rate so as you know.

We've disclosed our NII sensitivity in the MD&A.

But I should also tell you that 25 basis points increase in short term rates would mean Canadian $275 million to NII as well as U S $220 million in the U S segment.

Got it and.

Just on the range of separate note the.

In terms of capital obviously means you have most of the capital build over 14% CET 1.

Just talk to us if you could elaborate on the comments you made at the AGM around openness towards M&A.

We've talked a lot about M&A over the last few years will give us a sense of what is it that youre going after the in terms of inorganic.

Organic capital deployment does concern either in terms of the type of assets that you are looking or.

Are there new markets or new geographies that you could consider in the U S and relative to your existing footprint.

Yeah. So the.

The story has not changed the Brian It has been a consistent story.

That from a capital deployment perspective, and the acquisitions as an important part of that.

And we've said that we will not be shy.

To do of bank deal.

It could be in the southeast of the U S or any part of our footprint.

<unk> said that we would look for assets generating stable business as well you know, we like certain spaces and we've talked about it.

So we continue to monitor the situation of the U S is a very fluid.

There are some deals that have gotten done.

But for US you know.

Roche has been consistent we have said in the.

Any potential deal has to make strategic sense sales to make financial sense. It has to make sense with respect to our risk appetite and cultural and so you know as long as we can meet those thresholds then of course, we would look at anything very seriously we do have the flexibility.

But we are not forced to do anything that is out there because we are not strategically challenged to be able to scale business in the U S that continues to grow and as <unk> mentioned in the and I said in my remarks, the earlier on and we have a growing franchise and all we are taking share.

In the markets that we're in.

But should the compelling opportunity presented itself the way.

All of the flexibility to look at it very seriously and if it makes sense for us and obviously in the <unk> go ahead with the transaction. So nothing has changed.

Hey, Brian.

But you should expect us to be consistent with our approach going forward.

Got it thanks for taking my questions. Thank.

Thank you.

Thank you. The next question is from many Grumman from Scotia Capital. Please go ahead. Your line is now open.

Hi, good afternoon.

Given your interest in M&A does that mean that you will carry more excess capital going forward even through of recovery than you would normally how do you think about excess capital in relation to your M&A aspirations.

Well you know the.

We have always maintained good capital levels, where it's been the tradition of TD you looked at historical levels. You know, we've always had the good capital levels and I think the part that gets underestimated the with respect to our.

The diversified business mix proven business model is that we do generate capital on.

The regular basis as well so I don't think you should take my comments or the or the circumstances. We are in is a departure from what our normal capital deployment framework is and I'll remind you.

The framework consists of you know we always wanted to make sure that we have.

Adequate capital to invest in the strategy that we've laid out and we always want to make sure that we have flexibility around.

Capability builds either organically or inorganically.

Always look at from an M&A perspective of something compelling is going to be.

The emerging and the markets in which we operate that we wanted to of some flexibility.

And then we will also the inconsistency.

If the exhaust the all of those requirements and if you still have excess capital we will not be shy to do to return the door shareholders. So I think nothing has changed through this to suggest that we will change our framework in any anyway.

Thanks for that.

Thank you. The next question is from Paul Holden from CIBC. Please go ahead. Your line is now open.

Thanks. Good afternoon. So first of all I wanted to ask for point of clarification on the additional interest rate sensitivity you provided at the 275 in Canada plus 225 in the U S. So 500 total is that sort of.

Is that something you would expect to accrue in a very short order or is that something that would accrue.

Over multiple quarters of multiple here's is at 25 basis points works its way into margins.

Thanks, Paul for and that those particular numbers are on the basis of an immediate 25 basis points rise in the central bank rate and therefore would accrue.

Almost immediately.

And then the NII sensitivity table that is in the MD&A that talks to a 100 basis points that would take into account the date of considerations as well as the.

The tractor and concentrations over time, but this amount of 540 or on the Canadian dollar million would need comedian.

Got it. Thank you thanks for that.

And then the 1 additional question I had is with respect to U S auto loan growth and I guess particular to this quarter I was expecting a little bit more.

Given the volume of car sales as well as.

Some of the auto loan growth, we saw from the U S comps. So wondering why it wasn't better in the quarter and sort of maybe also an update.

An update of that work tied to that that loans segment as well.

Paul So its Greg and thanks for the question.

I would just say that.

This is a business that you know, we're pretty mature in and we.

We've been managing this for a number of years and we've said that.

Sure.

It's not just about the growth of the business for US. It's also about the margin of the business and it's about the quality of the growth and as you can imagine over the last year, we wanted to be obviously, particularly careful.

During the pandemic about how we were going to grow it and we were going to grow it smartly and obviously, we will also not just with an eye on margins, but with an eye on credit quality.

Things are forming up firming up including used car prices.

The ability in the in the consumer market from a credit in the liquidity standpoint, obviously.

This is a space and a lot of consumer asset classes that are quite favorable.

We've also seen that margins have been holding up quite strong as well and.

If this level of.

New car, but also used car sales continue.

We could see a little bit more moderation of the increased growth, but the other thing.

Juxtapose that against is we're also seeing record pay downs across all consumer categories. So.

Even though these are term loans facilities over anywhere from 48.

The 272 months, we're seeing some of these schedules paid down quicker than normal given the excess cash that's in the market. So I think theres a number of factors going on.

Clothing excess consumer liquidity, the applying to debt.

And certainly our mix of the business between the <unk>.

Prime Super Prime and some near Prime that we do.

And quite frankly, we like the margin for the volume that we're taking on right now.

Okay got it I'll leave it there thank you.

Thank you. The next question is from Scott Chan from Canaccord Genuity. Please go ahead. Your line is now open.

Good afternoon, maybe just sticking on the us side.

With housing and I noticed the residential mortgages in the HELOC were down quarter over quarter and we all we all know the story of in Canada, where it was up sequentially for <unk> as well.

We can for an update on maybe the housing market in the U S. If it's slowing a little bit more in Canada and.

All of that is affecting kind of those 2 TD buckets sure Scott its Greg and thanks for the question. The first I'd start with home equity that debt.

You've seen this trend going back over the last really year and a half of 2 years about pressure on home equity balances given the ultra low rates that we've been in for a while now and quite frankly, even though we're down which we don't like to see on a quarter over quarter of year over year basis, we're actually down a lot less than a lot of our.

Peter if you look at their home equity numbers.

We continue to originate home equity and.

This is the space, depending on where interest rates and market demand lives will be interesting and continuing to first stabilize and then grow it but.

I would just say that the across the entire industry people have been retiring of home equity in favor of <unk>.

Refinanced out the fixed mortgages and fixed term for extended period of time, given where rates are on the mortgage front.

What I would say is yes.

Yes over the last couple of quarters. There has been very very strong growth, although had led up a bit as you got into the second half of Q2.

Because it was just running so hot from a refinance standpoint.

Since 2020.

And and rates going so low.

So we're seeing.

A lot of the volume now on the purchase side and we're still seeing refinances are getting done but it has really moved to more of a purchase market.

And that's split between conforming and jumbo mortgages, so a little bit of of calling on the refinance side. As this has gone on for quite a while since last year.

But again.

Over the year up 4%. This also I should note includes of increasingly engaging in the conforming and for sale business.

And youre seeing that in our fee income lines as well as we're originating.

More than we have historically in the conforming for.

Our sales business so.

Little bit of of shifts in our mix as well as not just the jumbo for our own balance sheet, but also of conforming business that we would sell off the Fannie and Freddie.

Okay. Thanks for thanks very much.

Yeah.

Thank you for the next question is from Sohrab <unk> of the Heady. Please go ahead. Your line is now open.

Yes. Thank you.

Just wanted to go to Terry very quickly.

Within the Canadian personal and commercial banking segment, Terry I think you provided disclosure of that.

Wealth earnings were about $419 million. This quarter can you tell me how much of that was discount brokerage piece.

So I don't think we provide that level of detail but.

As you noted we do disclose.

The results in the well results.

What I would point to.

Given the platform as it was.

A very strong quarter.

For a while overall with the record volume record of account opening from market levels and strong net off the growth.

And also the work class of business for 1 for the.

The slight lockdowns, we're seeing the activity.

In terms of referrals across our business. Please.

And then the global.

The strong momentum to build upon that day.

But no disclosure on the dollar value associated with discount brokerage non.

The part of the wealth business.

Thank you.

Thank you. The next question is from Nigel D'souza from Veritas investment Research. Please go ahead. Your line is now open.

Thank you good afternoon, I wanted to touch on deposits from understanding.

Carrying excess deposits on your balance sheet weighs on your margins.

But when I look at it on a quarter of reported basis at the bank level looks like deposits actually decline I was wondering if you could provide an update on your outlook for the deposit runoff do you expect to retain a lot of of the excess deposits. You currently hearing or have you seen.

And off of the draws of those deposits to pick up as the economy reopens.

Maybe if you go U S and Canada separately range that would make sense, because we come back with the consolidated so maybe Terry do you want to start first and talk about Canada.

For sure Thanks, Derek and thanks for the question Lorenzo.

The overall deposits growth in Canada, obviously, both sequentially and year over year, we continued to grow our lead in.

In deposits.

Some of that.

We continue also to lead in money movement.

Both.

The transfer and flash as Ed mentioned in his remarks.

Moving in global transfer.

Okay.

And the capability.

We're also seeing debit.

Debit volume growth significantly through the pandemic for we're feeling very comfortable on across our business day in Canadian retail debt.

Deposit growth.

And customer acquisition continues to be an important factor, perhaps moving Portland on your question around retention of balances.

I think the.

Knowing what we know today, we would see.

Runoff in 2021, we project forward.

We're having great Charleston pudding.

The deposits at work for our customers.

Our mutual fund net sales results in the quarter.

For the strongest we've seen from.

2017, as an example, and still having really good success in terms of helping our customers too.

May be a segment of the stay at home favorites, who hadn't anticipated having the liquidity today.

Is now getting the advice they need from us for help make that.

The investments or planning for themselves for the loans that Sean.

So that's how we think about it in Canada, the maybe I'll turn it over to Greg.

Yes.

Yes, Nigel Thanks for the question, maybe I would just first clarify that if you look at <unk>.

Back out sweep deposits for a minute and just look at the core business of consumer and business deposits.

If you look at the year over year basis.

The consumer deposits are up 23% on a very large base year over year quite strong business deposits are up 33% year over year quite strong if you look at our quarter over quarter sequentially.

Personal deposits of spill up from Q1 to Q2 up over 6% another $7 billion came in.

From Q1 for Q2 and business deposits up nearly 3% at.

At around $2.8 billion Q over Q1 to Q1 over Q2, so still quite strong growth in my comment would be on this is that yes, we would have expected some smoothing out given the strong pace of growth over this past year, but between the government stimulus on PPP or the paycheck protection program on the.

The business side continue to fund more accounts customers were still raising cash and you saw quite robust balance sheets on the business side on the consumer side. Obviously, you had the $1.9 trillion stimulus on top of the $900 million stimulus at the end of 'twenty. So accounts continue to be flush on the consumer side.

We would expect some normalization at some point, depending on the shape of any additional government or support programs out there.

But what I would say is that as the economy begins to open up and some of this gets to be spent.

As we are seeing of real time, we're also seeing.

A record or near record volumes in terms of debit and credit card and interchange and things like that beginning to ramp up over the last couple of months.

Eventually this will turn into additional fees for the bank and lending opportunities as cash balances get spent down but for.

For right now we're actually quite happy.

Because we continue to open accounts.

Attract new households, and certainly if the quality of the deposits that matter to it's not like we're paying up or these are coming into.

High rate of accounts I mean, these are coming into the very low rate or no rate of accounts and their core checking accounts for new households, or added balances to existing checking households, So just to give you a little color on that.

Alright.

Nigel This is Barry just to add.

The Didi has traditionally been strong in the deposit business, particularly checking you should expect us to continue having debt strength through any cycle and we consider that business to be core to our model in the sense that it provides us with the key relationship from which we can deepen that relationship so the number.

It's going to go up and down as you heard from day again, Greg debt.

The do go up and down in the puts and takes it off the income goes up in deposits go down a bit.

So that given our diversified model you should see the strength ongoing.

But just wanted to leave you a message that this is a core strength of the bank, we like our strength in this area and you should expect us to continue having the strength going forward.

Because that's a very detailed and helpful for sports and if I could just quickly touch on the expense side.

It looks like your expenses are running a bit elevated and I was wondering if there's any factors you would.

Point to for that.

You mentioned real estate optimization in the past.

And it looks like your other expenses are running a little bit.

The elevated but is there anything specific that the.

Most of your expenses to run the little higher than you anticipated and do you see expenses.

Trending lower of what's your outlook on the expense side.

Nigel the main thing on expenses I called out in my remarks were debt.

Have to do around the share of the.

Retailers.

Share of their net profit and the strategic card portfolio, which makes that look particularly elevated.

And then the other than that at the top of the house expenses would have grown 1% and I would say to you that debt.

There are not.

Not any particular trends to call out day, rather than to just say that.

We continue this year to see higher employee related expenses.

And of course, the foreign currency translation.

An impact as well, but if.

If you look at the noninterest expense line that I've set out in the sub pack, you'll see that there are some fluctuations from quarter to quarter, but overall trends.

Seem to be fairly stable and we're making the investments that we need to make to.

<unk> continued to grow the business.

Okay I appreciate the color. Thanks.

Thank you the net.

Question is from Gabriel the Shane from National Bank Financial. Please go ahead. Your line is now open hey, good afternoon.

Wanted to ask about the.

Canadian banking segment I look at it on the.

The P&C basis from your appendix in.

These are the compare.

<unk> kind of a string here of the.

Pretax pre provision profit growth.

That's been down on the year over year basis. However, it looks like we're entering.

Of the backup.

For the comp or.

We're working pretty easy I'm, just wondering what your view is on the whether we can resume.

The positive growth of that segment of the due for in the Q4 on the <unk> basis.

So David Carey I think Tim I'll take the question. Thank you I think Kevin So as you can.

Mentioned.

We would've had actually positive.

If you take out the insurance customer remediation of the Canadian rate per level.

Quarter year over year.

And then at the P&C segment level I think for the.

Congress station, we've been having.

Certainly the.

The standing strong.

The growth and increases that we had seen in anticipating customer activity.

We do think there'll be margin pressure for the balance of 'twenty 1.

That's the kind of the conversation from.

Earlier.

<unk> said that if I look out for sure.

Thanks for boat.

The economy reopening and how we're positioned.

Some of the factors we've been talking about.

There is the potential for the interest rate.

Yeah.

The net sensitivity of that Hudson mentioned earlier.

Well over time.

Please see the on off.

The Doctor repricing.

Cool.

Become more favorable.

We're well positioned within the credit card and in Canada.

Q2 actually above retail sales were above Q2 of 2019.

In an environment, where problems from the down 80% from the industry and recreation and entertainment from 40% So with our breath of credit card offerings I feel very comfortable that we're well positioned the productivity.

Forward.

We've continued to show strength in real estate secured lending.

The bulk origination quarters back to back Adler.

And the 1 P D strength.

<unk> talked about and the mutual fund.

Sales that I mentioned earlier, where we're seeing the cash.

Being opposite the customer.

And that's for the long term.

Put all of that together.

Alright.

Very well positioned for.

For our customers to meet their needs going forward.

Over the terms of.

Good day.

Sure.

Like the timing wise I mean.

There's a lot of moving pieces in there.

Sounded like the.

The margin pressures are still going to be.

Weighing down on your degree of Q4 and the sufficiently enough Edwards.

We're going to have negative growth.

Debt.

Thank you for a while there moving parts of them. So it's very hard to call with the.

That's why I tried to give the color I do think that we will pull the margin compression for the balance of 'twenty, 1 as assets reprice, all other things being equal.

And then just.

Just the capital question for for Barrett.

I know.

The M&A question, you know or whatever of the answers there.

The sort of consistent 1 so I don't want to go down that path again, but I do want to ask about the <unk>.

The options that are of your disposal if and when.

Of the removes the distribution restrictions.

There is an acquisition mutually exclusive from.

So for like a non accelerated buyback program or.

A big dividend increase.

For the kind of the expectations from other banks or setting the once those restrictions are removed.

Maybe more so on the dividend front, we could figure of the norm.

The bigger than normal larger than normal increases because of the play sort.

The cash payout ratio of just wondering how are your are you of course do things are shaping up.

And Gabe it's hard to give you precise answers on something that may or may not happen in the.

Near term or whatever but the way of laid out the framework that we've used and that has been there for many many years does not change.

If we don't have use for the capital as I laid out earlier than we are not shy and returning capital to our shareholders and.

And we've done it previously and we will do it again if circumstances warrant.

Yes, the the level of zone as you said, you know pretty pretty lofty.

All of those.

Vehicles.

Available to US and then we would look at what makes sense.

From an ongoing basis, the expectations blades with word of what our since my view of the earnings potential in the future et cetera. So all of those inputs would be considered.

But like I said the framework.

It has not changed and I don't see changing again Rob.

Yeah.

The kind of touched upon that the numbers are so large that you could do a bit of everything.

The acquisitions buybacks of amendment.

And of course, the organic growth.

Yeah.

It's hard to pin down the specific formula here for you because there isn't 1.

And it didn't.

All of those the options that are available to us as they are to others.

And you would expect us to be prudent and use those options that make sense for the bank over the long term.

Alright.

We look forward for that thanks.

<unk>.

Thank you. The next question is from Darko <unk>. Please go ahead from RBC capital markets. Please go ahead. Your line is now open.

Great. Thank you the question centers around Canada, the P&C as well.

I just wanted to drill into the premium rebates.

Despite the premium rebates insurance put up very good earnings.

So maybe you can talk a little bit about how you're measuring I mean are you are you excluding the claims from the expense part when Youre doing.

Pre tax pre provision and operating leverage.

And as the premium rebate.

Is that like the 1 off just this quarter or do you anticipate the debt because more of that debt to bleed into Q3.

Hi, Thanks for the question, Doug Teri, So maybe on the premium rebates. So it was the $165 million per quarter.

And we have said.

And earlier.

The rebates.

It had been in non result in the prior period.

Yes.

The basis for Dorian lessons of.

Testimony.

Being lower.

During the pandemic and so given the uncertainty around helping from the forward hard to say, whether there will be another period, where.

More frequently than the aviation might make from but we'll obviously.

Pay close attention to how the situation is evolving the null.

When I talked about the Canadian repo.

Good day, what remediation you would get to a pause or does.

The ear.

Results for Q2 for Canadian lethal.

And then in terms of the performance of the business.

Feeling.

Really good about how.

How that business is performing.

Yeah.

Written written for.

The NIM would have been up double digits agenda for you.

The remediation.

Is the sales are strong with from Ciena is strong.

The digital capability.

We have in that business really simple.

In terms of the general insurance business, our auto claims.

Collision centers across the country provide a much better experience for CD customers if they become.

The need of repairs for there'd be appropriate for an accident.

And just overall good growth in the life and health business.

In particular, the dark place business.

So I would say.

Hard to say, whether we'll have more with maybe a small proposal.

From a core.

For a business that we've been investing in that business over time for really the of Premier direct insurance business in Canada.

Thank you for that and just to be clear on the expense side because.

Appreciate the answer to the previous question on.

At the top of the house expenses are well controlled but in Europe and your division of your segment sorry.

Terry.

We do see pretty good expense growth.

And even though I appreciate that excluding the premium rebate.

You would have positive operating leverage it still does seem outsized in terms of expense growth relative to what other banks for putting up so is there 1 or 2 specific initiatives that youre spending on that might ease off.

As we get into the back half of the year or into next year.

So maybe just to be clear the pizza he was high for the Canadian retail excluding the customer remediation I didn't comment from operating leverage just to be clear.

The expense.

Sorry, overall I think we have had mentioned.

You know for the premium.

Management over the full year for the.

The top of the house.

That would be the same.

Commentary from my perspective on the Canadian retail business. When you look at Q2 year over year.

And we have mentioned this as well.

Employee related expense growth.

If you look back to 2.

Q2 sort of lost Peter.

And then the particular employee incentive comp and then Q2.

For this year the those 2 would be going in different directions. So that would be 1 item for the year over year, and then volume driven expenses with the strong.

Business activity.

And if I look quarter over quarter, it was a pretty modest sequential.

Increase of for Canadian retail.

Thank you.

As bad debt and when we look at the.

The business overall, we're making the investments we need to to grow the business.

To create efficiencies.

To generate cost savings.

Overtime, as well as customer efficiencies and capabilities from the colleague efficiencies and I think we're doing that in a way that also allows us over a 4 year period to manage expenses prudently.

Okay, great. Thanks for the color.

Thank you. The next question is from Mike Chris Van of Itch from Credit Suisse. Please go ahead. Your line is now open.

Hey, good afternoon, a couple of quick ones for Greg I'm wondering if you can comment on the Ida agreement the impact of of the balance of starting to come off in the back half of this year.

Can you can you quantify that for us at least ballpark.

Greg would you like net take that.

You can rate.

I could share react as you know under the.

The.

Agreement that we have.

With Schwab debt.

And they are able to reduce the balances that they have on.

The deposit with us by $10 billion of year, starting on July 1.

And then any excess debt went from the date, we closed up until.

Until.

Until June 30, so cash.

Yes to give you a hypothetical example, if sweep balances at closing were $145 million.

You can take them down to $135 million of July 1 starting from whatever the current for position is and then $10 million a year after.

Okay. So just just to get a sense of the magnitude.

I know you haven't disclosed the spread the tedious previously all of those balances, but can I look at something like the U S call reports just to get some color on what type of security you might be holding from.

From those deposits.

Yes, I think you're generally as you know we.

Absent the sweep deposits are bound loans and deposits are fairly balanced so I take care of our approach we will give you.

A decent.

View into the into.

Into the liquidity premiums that are available for the kinds of securities and equity purchase.

Okay. Thanks for that and then just quickly on the PPP loans I'm wondering if you can give us an update on maybe what's been of crude and what's left to be of crude.

Magnitude wise, just just it would be helpful to sort of look at it from the perspective of your NII in the U S going forward.

Okay.

So Mike happy to answer it in.

PPP has been a very successful program in the first round, we put on over $8 billion worth of PPP loans for 85000 small business customers and in the second round.

We've put on approximately $4 billion net roughly 3.6 to $3.7 billion extra outstandings for another 46.47000 customers. So you can get the average size of round 2 of each 1 of those loans is something just shy of $80000, obviously very very small business for the majority.

Alrighty.

So if you put those together.

Obviously over $12 billion between round, 1 which was really second into third quarter of last year, and then round 2 which just completed or is in the process of being completed right now.

Little over $12 billion and the way we would think about it is through the end of the second quarter, we probably have for given something in the order of.

The 20%.

Of that exposure and.

Half of that would have been.

Those fees would have been in the crude into NII during.

The prior quarters and the other half of that 20% would have been in the in the second quarter. Just completed so the way I think about it is we still about 80% more to go to accrue of those fees over obviously, the next year or 2.

And is that is that relatively straight line over the next 6 to 8 quarters.

It depends on the forgiveness program because the way they've done this is.

First if loans aren't forgiven over customer doesn't seek they have to actually apply for forgiveness. It would just accrual for the remaining for 5 years of Whatever's left on the term of the loan we would take it into the income, but I would suspect the vast majority would seek some sort of forgiveness and apply through it and and.

And then once those loans are forgiven they would immediately accrue in and we would think over the next several quarters. The majority of that would come into income.

Okay. That's very helpful. Thank you for that.

Thank you the net.

Question is from Doug Young from Deja debt capital markets. Please go ahead. Your line is now open.

Good afternoon, I'll try to keep this quick just on the expense side and wholesale just trying to get an understanding mix was up 14% year over year revenue was down 8%. So I mean.

What drove that discrepancy is there something unusual in there of additional staffing costs and is this a new run rate to think about.

I think June.

It's Bob.

The majority.

The majority of the increase year over year was in the variable comp line as you would recall less to the second quarter of.

2020 was a very challenging quarter.

When we took for the.

The vast majority of the PCL accrual that impacted the comp accrual.

And the.

So year over year.

It looks high but ex that.

Expenses are well controlled.

So I wouldn't say this is the new run rate now.

Okay.

Okay.

And then just lastly, I think we've heard this from other banks too and I think from yourselves is while there's and then there's a view of that with credit card balances, obviously being down maybe they stabilize and maybe the come back and that would be positive for many reasons, including NIM now what's the risk that credit card balances don't come back.

There has been the new adoption of things like buy now pay later, which is starting to ramp up quite quickly just curious your thoughts on that thank you.

Thanks Terry.

Go ahead.

Thank you for in Canada.

Hum.

My sense is that's not.

What we would anticipate happening.

Yeah.

Actually in the lab.

Period, we saw instead of a flattening of loans.

On balance the sort of month over month through the quarter, which we have and factually true.

<unk> been seeing a decline of previous to that.

So I feel like.

We've got pent up demand for home travel Recreation and entertainment as Ed mentioned earlier.

But those are kind of ticket items, our expectation is that we would start to see it's more of a timing of ship from our perspective, we'll know whether or not at the.

The point.

Yeah I'll leave it there thank you.

Yeah.

Okay.

Thank you.

The next question is from Mario Mendonca from TD Securities. Please go ahead. Your line is now open.

Good afternoon rate most.

Most of the car for you in the past the bank has pointed to.

The 5 year bank of Cat bond yield is a reasonable benchmark pieces when gauging what could happen as the banks margin in the domestic retail.

I guess the first of all of my partners is that still a reasonable.

Would you still recommend that is something we could track to give us some indication of where the margin might add over time.

Yes, I think Mario in Canada, we use for.

5 year swap rate and at the bank of Canada, but the swap rate.

And then in the U S ex the 7 year swap rate so both of those still remain.

Within the framework of how we manage our overall tractors.

Okay. So let me let me request with that let me just wrestling by so hypothetically if we were to see.

The 5 year swap rate move materially higher and again this is very much type of football.

But essentially back where it was before this all happened. So if you buy the notion that inflation could put some upward pressure on rates.

Is there any sort of structural reason why tds.

Margins in the domestic retail in the U S retail segment any structural reasons why they wouldnt get back to the levels, we saw pre crisis and by that I mean materially higher than where we are today the.

The domestic retail margin.

Pre pandemic like showed an 84 basis points and in the U S.

The year, while the air was a lot higher than where it is today. The are there structural reasons like changes in business mix or maybe extending ladder. The duration of the lives of some reason of why we won't get back there.

No Mario of there are no structural reasons, which would which would cause that to not materialize in the as you know.

Net interest sensitivity measures.

We do give you additional sensitivity that says if you.

100 basis points widening of margin the impact on NII would be plus $2.1 billion.

Yes, there are actually kind of from.

Okay, just on trends about business mix changes or you might see.

Certain liquidity requirements in certain at certain times of our or you may see that we've gathered from any.

The more deposits over the course of the last for 5 quarters that may make that jump around a little bit about the fundamentals of the sensitivity of the bank to interest rate upside remains very sound and we.

And very optimistic that those margins are coming back as rates rise.

Alright, thank you.

Thank you and the last question is from Sohrab <unk> from BMO capital markets. Please go ahead. Your line is now open.

Hey, Thank you very much for taking my question I, just wanted to come back to Teri.

Ask a little bit about the competitive dynamics that you may be seeing from non traditional sources.

Specifically well for simple the work that we do shows that you may be losing.

Customer interest to them.

Maybe 3 times more than.

And the next biggest Canadian bank.

Competitor or are you in a position to comment on how.

How much of how much transfers youre seeing in the positive fewer bank 12 simple.

Certainly not I wouldnt be end of the position to comment on that specifically.

I'd come back to the fact that we're seeing.

Well, it's account openings output levels.

And trade volumes at record levels this quarter.

And I think the comprehensive approach that we take to well.

Of course of of the direct capabilities that allow customers to.

Build portfolios or make decisions on the self service basis, but also the availability of advisors, even in our direct investing business and the comprehensive education and training that we make available for customers really stands out.

Okay.

Relative to the competition in the space and I think we still fully dressed to compete.

Against all competitors, both traditional and nontraditional.

So youre not seeing any need to spend any more money to retain your discount brokerage customers.

We would over time continue to look at any competitive threats and what would be the appropriate way to respond.

I think what we believe is that.

Well from the simple.

Brent the sort of.

The need and customers actually have exhibited best in our direct investing business pre <unk>.

Nick we might have seen more of meaning the account opening activity absolutely be.

It's true I went for off from the branch.

Personal banking.

Colleague.

And through the pandemic, obviously digital account openings has listen what we also have seen is that the digital account actually have more activity and higher balances when we subsequently reach out.

Specifically to customers with an advisor and so with multichannel opportunities for our customers the training and education.

The second to none of the video library of that is available to our customers.

<unk> position growth.

Debt to compete incredibly effectively.

Of course this info on the answer here.

Okay. Thank you so much.

Thank you.

There are no more questions in the queue at this time I would now like to turn the call to Mr. <unk> for closing remarks.

Thank you operator, and thank you everyone for joining us while it is premature to declare victory against the pandemic given what we're seeing around the world.

We are encouraged with the progress we've seen in North America.

In various parts of our footprint and as the economy recovers and we get to the other side of this we feel very good with the diversified business model of the value proposition, we provide and of course the famous legendary experiences at the bank is well known for.

So we feel that as the economy normalizes.

TD strength will come to for and looking forward to good.

The growth levels as we see that happening.

Also want to take the opportunity to once again, thank my 90000 colleagues around the world.

They've been the pillar of the anchor for the bank to manage through a very difficult period here and they continue to deliver for our shareholders for our customers.

For the communities as well as for each other so thank you for that and the folks that look forward to meeting some of you in person hopefully sooner.

And then later, but at a minimum we'd be talking 90 days from now thank you very much.

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

This conference is no longer being recorded since the <unk>.

Hosting the please also as you see.

Thank you once again the conference has now ended please disconnect your lines at this time and we thank you for your participation.

[music].

[music].

[music].

Good afternoon, ladies and gentlemen, welcome to the TD Bank Group Q2, 2021 earnings Conference call I would now like to turn the meeting over to MS. Gillian Manning. Please go ahead Ms Manny.

Thank you operator, good afternoon, and welcome to TD Bank group's second quarter 2021 investor presentation.

We will begin today's presentation with remarks from Barrett and that's wrong any of the bank CEO.

After which rehab for them at the bank CFO will present, our second quarter operating results.

All day by the Huawei 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 to answer your questions today are Teri Currie group head Canadian personal banking Greg.

Brock, our president and CEO TD Bank America's most convenient bank and Bob Dorrance group head of wholesale banking.

Let's turn to slide 2.

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

The forward looking statements contained in this presentation represent the views of management and are presented for the purpose of assisting the bank's shareholders and analysts in understanding the bank of 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 its businesses and to measure overall bank performance. The bank believes that adjusted results provide readers with a better understanding of how management views. The bank's performance Barrett will be referring to adjusted results in his remarks Adil.

Additional information on items of note the bank's reported results and factors and assumptions related to forward looking information are all available in our Q2.2021 report to shareholders with that let me turn the presentation over to Bert.

Thank you Julian and thank you everyone for joining us today.

Q2 was the strong quarter for TD, because we continued to benefit from a recovering economy and rising consumer and business confidence.

Earnings Rose to 3.8 billion and EPS to $2 <unk> for more than twice last year's levels as an improving outlook led us to release of portion of the performing allowances, we built last year.

Our wealth insurance and wholesale businesses had another strong quarter as clients continued to bring us more of their business and our personal and commercial banking business has gained momentum has increased customer activity helped offset continued margin pressure from the low rate environment. Our CET 1 ratio ended the quarter at 14, 2%.

Reflecting these favorable trends.

The year after the COVID-19 pandemic took hold in North America. It continues to have a significant impact on the economy and our financial results unprecedented fiscal and monetary support for households, and businesses has led to a significant increase in cash balances limiting borrowing needs driving delinquency rates the historic lows.

And keeping our debut of growth muted.

We have navigated this complex environment, well, thanks to our diversified business model and the adaptability and resilience of our people.

As I reflect on our performance over the last year I'm most proud of them through this long period of upheaval. They have continued to deliver for our customers communities and each other and live our share commitments.

As we look around today, we know the battle against Covid is not over the devastation we are witnessing in India, and Brazil is the heart wrenching and will have far reaching consequences on those regions, but in North America, we see encouraging signs that the recoveries on solid ground and gathering momentum.

The rapid start 2 vaccinations in the U S is permitted and easing of restrictions across much of our footprint and broadening the vaccine availability in Canada should support similar trends here.

BD will continue to play a key role in driving forward the recovery.

As the purpose driven organization, we know the bank cries when our customers colleagues and communities thrive our recoveries must go hand in hand that was the core message of our 2020, ESG and DCF. The reports, which we released this quarter I invite you to read them and learn more about what we are doing too.

Build of more inclusive and sustainable future.

That includes our approach to achieving the goals of our climate action plan is the first Canadian bank to set of net zero target by 2050, we are accelerating our efforts have mobilized leaders and experts across the bank and are working closely with clients in multiple sectors to support the transition plans and create positive.

The change.

We also discuss our progress on inclusion and diversity over the past year, we have seen what any quality looks like across our communities in stark terms in the black Asian indigenous and other communities.

TD will never rest on our past success, we will work to increase our own representation and contribute to the fight against the bias discrimination and racism.

And because we know what gets measured gets done our ESG report provides expanded and detailed reporting so all stakeholders can track our progress.

As I wrote in my CEO of message Didi will meet the biggest challenges of our generation with determination and purpose. We will continue to invest in what matters and leverage our resources and the talent of our 90000 colleagues around the world to help build the better bank.

That better bank is powered by a proven business model and sustained and strengthened by the investments we continue to make in our business is in operations.

And this year of accelerated digital pickup and changing customer needs the capabilities and infrastructure, we put in place of enabled us to support a dramatic increase in adoption and engagement.

We are winning with customers by delivering innovative solutions customized to their needs. This.

This quarter crossing the 10 million Mark for mobile users across our North American footprint.

Our Canadian banking App was honored by the business intelligence group or AI powered insights and developed by layer 6 are in house AI team.

In the U S. We were recognized by Celent for a partnership on the virtual assistant that provided advice and support to customers digitally at the height of the lockdown.

And we continue to maintain a strong base of innovation is the number 1 financial institution batten filer in Canada.

These accomplishments have been matched by continued growth and strong customer acquisition in each of our businesses.

Our Canadian retail segment earned $2.2 billion this quarter the loopnet.

<unk> low lower Bcl, lower insurance claims and higher volumes and fee income activity accelerated in our banking businesses with continued strength in mortgage volumes and a pickup in credit card spread. We also extended our lead in personal deposits and continue to lead in payments ranking number 1 and interact.

<unk> and <unk>.

We delivered record wealth earnings on the on a strong trading volumes and net asset growth and impressive insurance earnings including substantial customer premium relief.

We also achieved several milestones this quarter.

And the business Bank TD auto finance ranked highest in dealer satisfaction, among non captive retail lenders by J D power for the fourth year in a row following DD auto finance the U S. As J D power win last quarter.

And just after the quarter end, we closed the acquisition of wells Fargo's Canadian direct equipment finance business.

And our wealth business, we launched the DD wealth family office of multidisciplinary group that will leverage our 1 TD model to deliver bespoke advice and solutions will ultra high network families and entrepreneurs.

And TD insurance continued to take market share rising to the number 3 position for home and auto General insurance.

Our U S retail bank delivered 853 million U S dollars of net income this quarter with another strong sequential recovery in earnings mainly on lower Bcf.

We recorded peer leading consumer deposit volume growth as customers entrusted us with more of the savings. We saw further increase in customer transaction activity with the return to near record levels of debit card spend and rising credit card transactions.

We're also seeing good early take up of our new double double of credit card 1 of the best cashback offerings on the market.

We continue to support small business customers with PPP financing ranking of the top 10 nationally as we originated some 45000 triple B loans in the second round of the program and help customers access over $1 billion and forgiveness under the program.

Together with the $194 million contribution from our ownership stake in Schwab U S. Retail segment earnings exceeded $1 billion U S dollars.

Our wholesale bank earned $383 million of good result, with lower PCL, helping offset of normalization in trading activity from last year's elevated levels. This.

This quarter, we continued to build our U S franchise with the announcement of our agreement to acquire headlines Tech global markets expected to close in the second half of calendar 2021.

The transaction will expand our capabilities in fixed income electronic trading and accelerate DD securities innovation and technology strategy.

We were also proud to act as joint lead for the International Finance facility for immunization companies $750 million 5 year vaccine bonds, which will provide garvey the vaccine alliance with the immediately available funding to support routine immunization and lower income countries, reaching near.

Only half the world's children.

At the midpoint of fiscal 2021, TD Bank remains strong and our business is well positioned positioned for the future while the COVID-19 related impacts we saw last year, including margin pressure from low rates high savings rates delaying loan growth and PCL will continue to affect the year over year comparison.

We will maintain our disciplined approach to investing for the long term. It has served us well through the pandemic and as the recovery progresses. It will support our continued readiness to meet changing needs adapt the shifting dynamics and build for growth.

We are also supported by a very robust CET, 1 ratio, which affords us strategic flexibility to invest in our competitive position to grow organically to pursue acquisitions that add capabilities and to build our franchise to return capital to our shareholders when that becomes possible for a combination of.

Of those things as always we will use our capital responsibly and be part of all about making the right investments for the long term.

Our investments also support how we operate the bank as we plan for the future when more of less can return to the DD premises. We know the flexibility will remain critical and that our people need the capabilities and infrastructure to continue to serve customers.

Backed by a clear strategy and strong balance sheet. We look ahead with confidence our bank has grew and resilient. Our brand is among the strongest in the industry and our unique and inclusive culture remains a distinct competitive advantage our people bring debt culture to life and I will finish by thanking them for the continued hard work.

And dedication with that I'll turn it over to <unk> Bank.

Good afternoon, everyone. Please turn to slide 8.

This quarter the bank reported earnings of $3.7 billion and EPS of $1.99, and adjusted earnings of $3.8 billion and adjusted EPS was $2 for.

The revenue decreased 3%.

We saw strong volume growth and higher fee income in our retail segment, which this quarter of more than offset lower margins.

Onward pressure came from premium rebates for insurance customers for which I will discuss in a moment lower wholesale revenue and the impact of foreign currency translation.

Provision for credit losses for the recovery of $377 million lower by $690 million sequentially, reflecting a recovery in performing PCL and lower impaired PCL.

Expenses increased 12% year over year, mainly reflecting an increase in the retailer program partners' share of the net profit from the U S strategic cards portfolio, primarily on lower PCL.

Absent the partner's share expenses increased 1% as higher employee related expenses and use store optimization costs were largely offset by foreign currency translation and lower legal provisions for this quarter.

Because of the large year over year change in PCL this quarter of the accounting for the U S. Strategic card portfolio program had a significant impact on expenses as well as total bank pretax pre provision earnings and operating leverage.

Slides 21, and 'twenty 2 of this presentation show, how we calculate PTP and operating leverage at the total bank level by removing the impact along with the impact of foreign currency translation, which is also significant this quarter.

These adjustments showed at the total bank PTP and operating leverage each declined approximately 3% year over year.

It is mostly a reflection of lower revenue and higher expenses in wholesale.

Please turn to slide 9.

Canadian retail net income was $2.2 billion up 86% or $1 billion year over year on an adjusted basis net income increased 82% year over year.

The revenue increased 1% higher transaction and fee based revenue in the banking and wealth businesses and higher volumes were largely offset by lower margins and premium rebates for insurance customers, reflecting reduced driving activity.

Average loan volumes rose, 5%, reflecting growth in business and personal volumes.

Average deposits rose, 20%, reflecting double digit growth in personal business and wealth volume growth.

Growth assets increased 21%, reflecting market appreciation and new asset growth.

Margin was 261% of decrease of 4 basis points from the prior quarter, reflecting changes in asset mix and the ongoing impact of the lower interest rate environment.

Total PCL was the recovery of $37 million lower by $179 million sequentially, mainly reflecting a recovery in performing PCL.

Total PCL as an annualized percentage of credit volume was negative 0.0% to 3% of decline of 15 basis points quarter over quarter.

The insurance claims decreased 34%, primarily reflecting lower current care claims of decrease in the fair value of investments supporting claims liabilities and more favorable prior year's claims development.

Reported expenses increased 4%, reflecting higher volume driven and employee related expenses, partially offset by prior year charges related to greystone.

Adjusted expenses increased 5%.

Please turn to slide 10.

U S. Retail segment reported net income was approximately U S $1 billion.

Up U S $786 million.

U S retail bank net income was USD $853 million up U S $766 million, primarily reflecting lower PCL.

Revenue increased 2%, reflecting volume growth higher valuation of certain investments and fee income growth, partially offset by lower deposit margins.

Average loan volumes increased 1% year over year.

Deposit volumes, excluding sweep deposits were up 28%, including 37% of growth in core consumer checking.

Sweep deposits were up 18%.

Net interest margin was 2.5% down 9 basis points sequentially, reflecting balance sheet mix.

Total PCL, including only the bank share of PCR for the strategic cards portfolio was the recovery of U S $173 million.

Lower by <unk> $276 million compared with the prior quarter, reflecting lower impaired PCL and a recovery in performing PCL.

The U S retail net PCL ratio was negative 0.41% down 66 basis points from last quarter.

Expenses increased 4%, primarily reflecting U S $49 million and store optimization costs.

And higher employee related expenses, partially offset by legal provisions.

The contribution from Td's investment and Schwab was use of $194 million.

As a reminder, amortization of acquired intangibles of an acquisition of the integration related charges associated with Schwab's acquisition of TD Ameritrade are reported in the corporate segment.

Slide 27 for further details.

Based on to slide 11.

Wholesale net income was $383 million, an increase of 83%, reflecting lower PCL, partially offset by lower revenue and higher expenses.

Revenue was $1.2 billion down, 8%, primarily reflecting lower trading related revenue and lower debt underwriting, partially offset by higher advisory fee.

<unk> was lower by $83 million sequentially, primarily reflecting a recovery in performing PCL and the <unk>.

Expenses are up 14%, primarily reflecting higher variable compensation.

Turning to slide 12.

The corporate segment reported a net loss of $186 million in the quarter compared with the net loss of $202 million in the second quarter last year. The year over year decrease reflects the higher contribution from treasury and balance sheet management activities and lower net corporate expenses.

Partially offset by acquisition and integration charges related to the swap transaction.

Adjusted net loss for the quarter was $106 million compared with an adjusted net loss of $143 million in the second quarter last year.

Please turn to slide 13.

The CET 1 ratio ended the quarter at 14, 2% up 63 basis points from Q1, we.

We had strong organic capital generation of this quarter, which added 47 basis points to CET 1 capital.

Actuarial gains and employee benefit plans added another 17 basis points for us.

Risk weighted assets decreased by approximately $12 million in the quarter on lower retail and commercial balances in U S retail and the FX, which the bank hedges the.

The impact of ex FX on our CET 1 ratio was therefore from Youtube.

Our sales transitional adjustments for ECL provisioning reduced our CET 1 ratio by 70 basis points this quarter the law.

Average ratio was 4.6% this quarter and the LCR ratio of 128%, both well above regulatory minimums I will now turn the call over to Ajay.

Thank you and good afternoon, everyone. Please turn to slide 14.

Gross impaired loan formations were 14 basis points remaining at cyclically low levels.

Afflicting the impact of support programs customer of resilience and the continued economic recovery.

Please turn to slide 15.

Gross impaired loans were $2.8 billion decreasing $254 million quarter over quarter, primarily related to the resolutions outpacing formations in the Canadian and U S consumer lending portfolios and the impact of foreign exchange.

Please turn to slide 16.

Recall that our presentation reports PCL ratios, both gross and net of the partner's share of the U S strategic card PCI loans.

We remind you that the <unk> recorded in the corporate segment are fully absorbed by our partners and do not impact the bank's net income.

This quarter the bank recorded across PCL recovery of $373 million, reflecting a performance, allowing the allowance release, partially offset by cyclically low impaired provisions.

Please turn to slide 17.

The bank's impaired PCL was $385 million.

Continuing at low levels, and decreasing 84 million quarter over quarter.

The decrease was primarily reflected in the U S consumer lending portfolio.

The performing PCL was the recovery of $758 million.

Lower by $605 million quarter over quarter.

Largely due to allowance releases across all segments.

Please turn to slide 18.

The allowance for credit losses decreased $968 million to 8 billion quarter over quarter.

Reflecting a performing allowance released.

Largely related to the.

The improvement in our economic outlook and consumer credit attributes.

And at 289 million impact of foreign exchange.

Now to summarize the quarter.

Bank led deferral and ongoing government support programs have had the desired effect of helping our customers.

Reducing initial expectations for credit losses.

As reflected in our allowance release this quarter as well as cyclically low gross impaired loan formations and gross impaired loans.

Credit results May continue to vary by quarter as there is a wide range of possible outcomes. The.

The uncertainty associated with the ultimate credit impact remains elevated but has reduced over time.

As a result, Bcl's may continue to be relatively low through the remainder of 2021.

To conclude.

We remain well positioned to manage through the balance of the pandemic given we are adequately provision.

We have a strong capital position and we have a business that is broadly diversified across products and geographies with the.

Operator, we are now ready to begin the Q&A session.

Thank you we will now take questions from the telephone lines. If you have a question and you're using a speaker phone. Please lift your handset before making your selection. If you have a question. Please press star 1 on your devices key Pat you may come to your question of anytime by pressing Star 2 please press star 1 at this time of <unk>.

You have a question there will be a brief pause for all participants register for questions. Thank you for your patience.

And the first question is from Ebrahim <unk> from the Bank of America Securities. Please go ahead. Your line is now open.

Good afternoon.

I guess, maybe just to start out maybe at the consolidated.

Just talk to us in terms of when you see NII.

Stabilizing would actually growing or heavy weighted to hit that point, where you think the NII bottomed out this quarter and whats your outlook barring obviously of the tight for the margin both in Canada and the U S.

Thank you Brian.

I think that.

When you look at the whole question of margins in the quarter over quarter comparison.

I think.

It feels like we still have some moderated downward pressure from.

L. P speaking, particularly tight because of the amount of cash that is.

Overall in the system.

And but however, the.

The.

The level of interest rate.

Definitely starting to show some upward momentum so.

In addition to that I think our asset mix is an important factor I mean, obviously as our <unk>.

<unk> growth continues and.

And.

More customers are trusting us with their deposits.

We're still at an all time low interest rates and therefore that is.

Also our headline impact on non net interest margin and card balances have been coming down as you know, but we're very encouraged to see card spending.

Starting to return very smartly.

And as liquidity in the system.

Our range, we expect to see some of the card balances as well as loan growth remaining so we remain quite optimistic that as the economy is starting to open here.

And economic activities, taking on momentum that we are very well geared to.

Upward.

Interest rate so as you know.

We have disclosed our NII sensitivity in the MD&A.

But I should also tell you that the 25 basis points increase in short term rates would mean Canadian $275 million to NII as well as U S $220 million in the U S segment.

Got it.

Just on the range of separate note.

In terms of capital obviously means you have most of the capital budget of over 14% CET, 1, but just talk to us if you could elaborate on the comments you made at the AGM my own gut openness towards M&A.

We've talked a lot about M&A over the last few years total give us a sense of what is it that you're going after in terms of.

A lot of inorganic capital deployment does concern either in terms of the type of assets that you are looking or.

Are there new markets or new geographies that you could consider in the U S and relative to your existing footprint.

Yes. So the story has not changed the Brian It has been a consistent story.

That from a capital deployment perspective acquisitions as an important part of that.

And we've said that we will not be shy.

To do of bank deal.

Could be in the southeast of the U S or any part of our footprint.

We've said that we would look for assets generating stable of businesses as well, we like certain spaces and we've talked about it and so we continue to monitor the situation of the U S is a very fluid.

There are some deals that have gotten done but for us.

The approach has been consistent and we have said.

And any potential deal has to make strategic sense and the sales to make financial sense. It has to make sense with respect to our risk appetite and cultural.

And so you know as long as we can meet those thresholds then of course, we would look at anything very seriously we do have the flexibility.

But we're not forced to do anything that is out there because we are not strategically challenged to be able to scale business in the U S that continues to grow and as <unk> mentioned in the and I said in my remarks. The earlier on we have a growing franchise and we are taking share.

In the markets that we're in.

But should the compelling opportunity presented itself, we do have the flexibility to look at it very seriously and if it makes sense for us and obviously in the we would go ahead with the transaction. So nothing has changed.

Hey, Brian.

But you should expect us to be consistent with our approach going forward.

Got it thanks for taking my questions.

<unk>.

Thank you. The next question is from many Grumman from Scotia Capital. Please go ahead. Your line is now open.

Hi, good afternoon.

Eric given your interest in M&A does that mean that you will carry more excess capital going forward even through of recovery than you would normally how do you think about excess capital in relation to your M&A aspirations.

Well the.

We have always maintained good capital levels that it's been the tradition of TD looked at historical levels. You know, we've always had good capital levels and I think the part that gets underestimated the with respect to our debt.

The base business mix proven business model is that we do generate capital on a regular basis as well. So I don't think you should take my comments of the or the circumstances. We are in is a departure from.

What a normal capital deployment framework is and I'll remind you.

Net framework consists of we always want to make sure that we have adequate capital to invest in the strategies that we've laid out and we always want to make sure that we have flexibility around.

Capability builds either organically or inorganically.

Always look at the no from an M&A perspective of something compelling is going to be.

The emerging in the markets in which we operate the we wanted to of some flexibility.

And then we will also the inconsistency.

If the exhaust all of those requirement and if you still have excess capital we will not be shy to do to return the door shareholders. So I think nothing has changed through this to suggest that we will change our framework in any way.

Thanks for that.

Thank you. The next question is from Paul Holden from CIBC. Please go ahead. Your line is now open.

Thanks. Good afternoon. So first of all I wanted to ask the point of clarification on the additional interest rate sensitivity you provided the 275 in Canada plus 225 in the U S. So 500 total is that sort of.

Is that something you'd expect to accrue in a very short order or is that something that would accrue.

Over multiple quarters of multiple years of that 25 basis points works its way into margins.

Thanks, Paul for and that those particular numbers are on the basis of an immediate 25 basis points rise in the central bank rate and therefore would accrue.

Almost immediately.

And then the NII sensitivity table that is in the MD&A that talks to a 100 basis points that would take into account the paid of considerations as well as the.

Tractor and constrains over time, but debt amount 540 or on the Canadian dollar million would need immediate.

Got it. Thank you thanks for that.

And then the 1 additional question I had is with respect to U S auto loan growth and I guess particular to this quarter I was expecting a little bit more.

Given the volume of car sales as well as <unk>.

Some of the auto loan growth, we saw from the U S comps. So wondering why it wasn't better in the quarter and sort of maybe also an update.

An update of that work tied to that the bone segment as well.

Paul It's Greg and thanks for the question.

I would just say that.

This is a business that you know, we're we're pretty mature in and.

We've been managing this for a number of years and we've said that.

It's not just about the growth of the business for US. It's also about the margin of the business and it's about the quality of the growth.

As you can imagine over the last year, we wanted to be obviously, particularly careful.

During the pandemic about how we were going to grow it and we were going to grow it smartly and obviously, we will also not just with an eye on margins, but with an eye on credit quality.

As things are forming up firming up including the used car prices.

The ability in the in the consumer market from a credit in the liquidity standpoint, obviously.

This is a space and a lot of consumer asset classes that are quite favorable.

But we've also seen that margins have been holding up quite strong as well and.

If this level of.

The new car, but also used card sales continue.

We could see a little bit more moderation of the increased growth, but the other thing.

Juxtapose that against is we're also seeing record pay downs across all consumer categories. So.

Even though these are term loans facilities over anywhere from 48.

The 272 months, we're seeing some of these schedules paid down quicker than normal given the excess cash that's in the market. So I think there is a number of factors going on.

Clothing excess consumer of liquidity, they're applying to debt.

And certainly our mix of the business between the <unk>.

Prime Super Prime and from near Prime that we do.

And quite frankly, we like the margin for the volume that we're taking on right now.

Okay got it I'll leave it there thank you.

Thank you. The next question is from Scott Chan from Canaccord Genuity. Please go ahead. Your line is now open.

Good afternoon, maybe just sticking on the us side.

With housing and I noticed the residential mortgages in the HELOC were down quarter over quarter and we all we all know the story in Canada, where it was up sequentially for TD as well.

We give an update on maybe the housing market in the U S. If it's slowing a little bit more in Canada.

All of that is affecting kind of those 2 day to TD buckets sure Scott.

Scott, It's Greg and thanks for the question the first I'd start with home equity that you've seen this trend going back over the last really year and a half of 2 years about pressure on home equity balances given the ultra low rates that we've been in for a while now.

And quite frankly, even though we're down which we don't like to see on a quarter over quarter of year over year basis.

We're actually down a lot less than a lot of our U S. Peers. If you look at their home equity numbers.

We continue to originate home equity and.

This is of space, depending on where interest rates and market demand lies.

We will be interesting and continuing to first stabilize and then grow it but.

I would just say that the across the entire industry people have been retiring of home equity in favor of <unk>.

Refinanced out the fixed mortgages and fixed term for extended period of time, given where rates are on the mortgage front.

What I would say is yes.

Yes over the last couple of quarters. There has been very very strong growth, although had led up a bit as you got into the second half of Q2.

Because it was just running so hot from a refinance standpoint.

Since 2020.

And and rates going so low.

So we are seeing.

A lot of the volume now on the purchase side and we're still seeing refinances getting done, but it's really move to more of a purchase market.

And that's split between conforming and jumbo mortgages, so a little bit of of cooling on the refinance side. As this has gone on for quite a while since last year.

But again.

Over the year up 4%. This also I should note includes of increasingly engaging in the conforming and for sale business.

And youre seeing that in our fee income lines as well as we're originating.

More than we have historically in the conforming for.

Sale business so.

Little bit of of shifts in our mix as well as not just the jumbo for our own balance sheet, but also conforming business that we would sell off the Fannie and Freddie.

Okay. Thanks for thanks very much.

Okay.

Thank you. The next question is from Sohrab <unk> of the <unk>. Please go ahead. Your line is now open.

Yes. Thank you.

Just wanted to go to Terry very quickly.

Within the Canadian personal and commercial banking segment, Terry I think you provided disclosure of that.

While earnings were about $419 million. This quarter can you tell me how much of that was discount brokerage piece.

So I don't think we provide that level of detail.

As you noted we do disclose.

All of the GI results in the wealth of results.

What I would point to.

Given the platform as it was.

A very strong quarter.

Well overall with record volume record of account opening from market levels from net off the growth.

And the also the work class of business for 1 for me.

Despite locked down for seeing the activity.

In terms of referrals across our business.

With this pandemic.

And on the global.

The strong momentum to build upon that the go forward.

But no disclosure on the dollar value associated with discount brokerage non.

Is that part of the losses.

Thank you.

Thank you. The next question is from Nigel D'souza from Barrett. This investment research. Please go ahead. Your line is now open.

Thank you good afternoon, I wanted to touch on deposits from my understanding carrying excess deposits on your balance sheet weighs on your margin.

When I look at on a quarter reported basis at the bank level looks like deposits actually.

I was wondering if you could provide an update on your outlook for the deposits run off do you expect to retain a lot of of the excess deposits you currently carrying or have you seen.

The 1 off of a draws of those deposits to pick up as the economy reopens.

Maybe if you go U S and Canada separately rate that would make sense, because we come back with the consolidated so maybe Terry do you want to start first and talk about Canada for sure.

Sure Thanks, Derek and thanks for the question Rachel.

In terms of the overall deposit growth growth in Canada, obviously, both sequentially and year over year.

The need to grow our lead in.

Deposits in Canada.

Thank you also to lead in money movement.

Both interact.

For end flashes debt mentioned in his remarks.

Moving in global of transfer.

Hey, Timna.

Capability.

We're also seeing debit.

Debit volume growth typically through the pandemic for we're feeling very comfortable on.

Across our business day in Canadian retail the core deposit growth.

And customer acquisition continues to be an important factor for us moving forward on your question around retention of balances.

I think.

Knowing what we know today, we would see.

Runoff in 2021, as we project forward.

We're having great Boston pudding.

For those deposits at work for our customers.

Our mutual fund net sales results in the quarter.

For the strongest we've seen since 2.

<unk> 2017, as an example.

So having really good success in terms of helping our customers too.

May be a segment of the stay at home favorites, who hadn't anticipated having the liquidity that they have today.

Is now getting the advice they need from us for help make that.

The investments or ethical planning for themselves for the longer term.

So that's how we think credit in Canada, maybe I'll turn it over to Greg.

Yes.

Yes, Nigel Thanks for the question, maybe I would just first clarify that if you look at <unk>.

Back out sweeps deposits for a minute and just look at the core business of consumer and business deposits.

If you look at the year over year basis.

The consumer deposits are up 23% of very large base year over year quite strong business deposits are up 33% year over year quite strong if you look at our quarter over quarter sequentially.

Personal deposits of spill up from Q1 to Q2 up over 6% another $7 billion came in.

From Q1 for Q2 and business deposits up nearly 3% at.

At around $2.8 billion Q over Q1 or Q1 over Q2, so still quite strong growth in my comment would be on this is that yes, we would have expected some smoothing out given the strong pace of growth over this past year, but between the government stimulus on PPP or the paycheck protection program on the.

The business side continue to fund more accounts customers were still raising cash and you saw quite robust balance sheets on the business side on the consumer side. Obviously, you had the $1.9 trillion stimulus on top of the $900 million stimulus at the end of 'twenty. So our accounts continue to be flush on the consumer side.

We would expect some normalization at some point, depending on the shape of any additional government or support programs out there.

But what I would say is that as the economy begins to open up and some of this gets to be spent.

As we are seeing of real time, we're also seeing.

A record or near record volumes in terms of debit and credit card and interchange and things like that beginning to ramp up over the last couple of months.

Eventually this will turn into additional fees for the bank and lending opportunities as cash balances get spent down but for.

For right now we're actually quite happy.

Because we continue to open accounts.

Attract new households, and certainly if the quality of the deposits that matter to it's not like we're paying up or these are coming into.

Hi rate accounts I mean, these are coming into very low rate or no rate of channels and their core checking accounts for new households, or added balances to existing checking households, So just to give you a little color on that.

Alright.

Nigel it's better just to add.

The Didi has traditionally been strong in the deposit business, particularly checking you should expect us to continue having debt strength through any cycle and we consider that business to be core to our model in the sense that it provides us with the key relationship from which we can deepen that relationship so the number.

It is going to go up and down as you heard from Darien, Greg debt.

The do go up and down in the puts and takes it off the income goes up in deposits go down a bit.

Given our diversified model you should see that strength ongoing but just wanted to leave you a message that this is a core strength of the bank, we like our strength in this area.

Should the <unk>.

Spect us to continue having the strength going forward.

Because that's the very detailed and helpful. The sponsor and if I could just quickly touch on the expense side.

It looks like your expenses are running a bit elevated and I was wondering if there's any factors you would.

2 for that.

You mentioned real estate optimization in the past.

And it looks like your other expenses are running a little bit.

The elevated but is there anything specific that.

Most of your expenses to run a little higher than you anticipated and do you see expenses.

Trending lower of what's your outlook on the expense side.

Nigel the main thing on expenses I called out in my remarks were that.

Have to do around the share of the.

Retailers.

Share of their net profit and the strategic card portfolio, which makes that look particularly elevated.

And then other than that at the top of the house expenses would have grown.

1%, then I would say to you that there are.

Not any particular trends to call out day, rather than to just say that.

We continue to see higher employee related expenses.

And of course, the foreign currency translation.

An impact as well, but if.

If you look at the noninterest expense line that I've set out in the sub pack, you'll see that there are some fluctuations from quarter to quarter, but overall trends.

Seem to be fairly stable and we're making the investments that we need to make to.

To continue to grow the business.

Okay I appreciate the color. Thanks.

Thank you. The next question is from Gabriel the Shane from National Bank Financial. Please go ahead. Your line is now open hey, good afternoon.

Wanted to ask about the <unk>.

Canadian banking segment I look at it on the.

PMT basis or from your appendix in the.

Is there the compare.

Kind of a string here of the.

Pretax pre provision profit growth.

That's been down on the year over year basis. However, it looks like we're entering.

Of the backup.

For the comps are.

Yes.

I'm just wondering what your view is on the whether we can resume.

Positive growth from that segment of the deeper into Q4 on the <unk> basis.

Terry I think Tim I'll take the question. Thank you.

So as you've mentioned.

We would've had actually positive.

If you take out the install.

Sorry.

Customer remediation of the Canadian rate level.

The quarter year over year.

And then at the P&C segment level.

For the conversation we've been having.

Certainly the.

Notwithstanding the strong volume growth and increases that we had seen in anticipating customer activity.

We do think there will be margin pressure for the balance of 'twenty 1 as the answer.

The fleet kind of the conversations <unk> had earlier of having.

Having said that if I look out for there.

Thanks for both.

Economies reopening of how we're positioned for.

Some of the factors we've been talking about.

There is the potential for the interest rate.

Yes.

But isn't that sensitivity of that Hudson mentioned earlier.

Well over time.

Please see the online.

All right.

Dr Repricing.

<unk>.

From more favorable.

We're well positioned we've seen the credit card spend.

In Canada.

The 2 actually above retail sales were above Q2 of 2019.

In an environment, where probably trended down 80% from the industry and recreation and Entertainment zone.

So with our breath of credit card offerings, I feel very comfortable that we're well positioned the productivity.

Forward.

The continued strength in real estate secured lending at 3 <unk> origination quarters back to back Adler and the 1.

On the CD strength, we've talked about and the mutual fund.

Sales that I mentioned earlier, where we're seeing the cash.

Being opposite David total Copenhagen, and that's for the.

The long term.

Put all of that together.

Like we're very well positioned.

For our customers to meet their needs going forward.

And over the time.

Yeah.

Sure.

Timing wise I mean.

There's a lot of moving pieces in there.

It sounded like the.

And although the margin pressures are still going to be.

Weighing down on the degree of Q4 and the sufficiently enough of it.

We're going to have negative growth.

The.

Thank you for a while there moving parts of them. So it's very hard to call. What the why I tried to give you color I do think that we will improve the margin compression for the balance of 'twenty, 1 as assets reprice.

First of all of the things being equal okay.

Okay and then.

Just the capital question for for Barrett.

I mean I'm not the M&A question, you know or whatever of the answers there.

The.

For the consistent 1 so I don't want to go down that path again, but I do want to ask about the <unk>.

The options that are of your disposal if and when.

Of the removes the distribution restrictions.

There is an acquisition mutually exclusive from.

So for like a non.

The accelerated buyback program or.

A big dividend increase.

But the kind of the expectations of some other banks are setting the once those restrictions are removed.

Maybe more so on the dividend front, we could see the biggest figure of the norm.

The bigger than normal larger than normal increases because of the flow through.

Of the CAD payout ratio of just wondering how your force do things are shaping up.

And Gabe it's hard to give you precise answers on.

That may or may not happen from the near term or whatever.

But the way you had laid out the framework that we've used and that has been there for many many years does not change.

If we don't have use for the capital as I laid out earlier than we are not shy and returning capital to our shareholders.

And we've done it previously and we will do it again if circumstances warrant there are yes, the the levels and as you said you know pretty pretty lofty.

All of those.

Vehicles.

Available to US and then we will look at what makes sense.

From an ongoing basis expectations ways, where the world of what our since my view of the earnings potential in the future et cetera. So all of those inputs would be considered.

But like I said the framework.

It has not changed and I don't see changing again Rob.

Yeah.

The kind of touched upon that for most of the numbers are so large that you could do a bit of everything.

The acquisitions buybacks dividend interest and of course, the organic growth.

Yeah.

It's hard to pin down the specific formula here for you because there isn't 1.

And.

All of those the options that are available to us as they are to others.

You would expect us to be prudent and use those options that make sense for the bank over the long term.

Alright.

We look forward for that thanks.

Thank you.

Thank you. The next question is from Darko <unk>. Please go ahead from RBC capital markets. Please go ahead. Your line is now open.

Great. Thank you the question centers around Canada, the P&C as well.

I just wanted to drill into the premium rebates.

Despite the premium rebates insurance put up very good earnings.

So maybe you can talk a little bit about how you're measuring I mean are you are you excluding the claims from the expense part when Youre doing.

Pre tax pre provision and operating leverage.

And as the premium rebate.

Is that like the 1 off just this quarter or do you anticipate the does more of that to bleed into Q3.

Alright, Thanks for the question, Doug Teri, So maybe on the premium rebates. So it was the 165 million per quarter.

And we have said.

And earlier.

The rebates.

<unk> had been the non adult in the prior period.

Yes.

The basis for Darrin listen of activity.

The being lower.

During the pandemic and so given the uncertainty around helping from the forward, it's hard to say, whether there will be another period, where.

More slowly than the aviation might make sense, but we'll obviously.

Pay close attention to the housing situation is evolving the NIM.

When I talked about the Canadian retail piece. The GP. If you excluded that remediation you would get to a part of it.

The year.

The results for Q2 for Canadian repo.

And then in terms of the performance of the business.

Are you feeling.

Really good about.

How that business is performing.

No.

The gross written premium would have been up double digits agenda.

The remediation.

Sales were strong with from Chinas strong.

The digital capability.

We have in that business really of our distinctive in terms of the general insurance business our auto claims.

The collision centers across the country for.

The much better experience for TD customers if they become.

In need of repairs for the vehicle depot an accident.

And just overall good growth in the.

The life and health business.

In particular, the dark place business.

So I would say.

Hard to say, whether we'll have more with maybe a follow a very strong quarter.

The core business and we've been investing in that business over time, but really the a premier of direct insurance business in Canada.

And thank you for that and just to be clear on the expense side because of no.

I appreciate you guys answer to the previous question on.

At the top of the house expenses are well controlled but in Europe and your division for your segment sorry.

Terry.

Do see pretty good expense growth.

And even though I appreciate that excluding the premium rebate.

You would have positive operating leverage it still does seem outsized in terms of expense growth relative to what other banks are putting up so is there 1 or 2 specific initiatives that youre spending on that might ease off.

As we get into the back half of the year or into next year.

So maybe just to be clear the pizza. He was positive for Canadian retail, excluding the customer remediation I didn't comment from operating leverage just the decor.

The expenses, sorry, overall I think we are.

As had mentioned.

You know for the approval.

Management over the full year for the top of the house the I would say that would be the same.

And then Gary from my perspective on the Canadian retail business. When you look at Q2 year over year.

We have mentioned this as well.

Employee related expense growth.

If you look back to Q.

Q2 sort of La Quinta.

In particular in plains of the pump and then Q2 this year. The those 2 would be going into for 2 actions. So that would be 1 items for year over year.

And then volume driven expenses with the strong.

With the activity.

And if I look quarter over quarter, it was a pretty modest sequential.

The increase of for Canadian retail.

I think you know.

And we have said debt when you look at.

Of the business. The overall, we're making the investments we need to to grow the business.

To create efficiencies Tien.

To generate cost savings.

Over time, as well as customer efficiencies and capabilities from the colleague efficiencies and I think we're doing that in the way that also allows us over a full year for you to manage expenses prudently.

Okay, great. Thanks for the color.

Thank you. The next question is from Mike Chris Van of Itch from Credit Suisse. Please go ahead. Your line is now open.

Hey, good afternoon, a couple of quick ones for Greg 1.

If you can comment on the Ida agreement the impact of of the balance of starting to come off in the back half of this year.

Can you can you quantify that for us at least ballpark.

Greg would you like net take that.

You can rate.

<unk> as you know under the.

The.

Agreement that we have.

With Schwab debt.

And they are able to reduce the balances that they have on.

Deposits with us by $10 billion of year, starting on July 1.

And then any excess debt went from the date, we closed up until.

Until.

On June 30, it so yes.

Yes to give you a hypothetical example, if sweep balances at the closing were $145 million.

They can take them down to $135 million of July 1 starting from whatever the current position is and then $10 million a year after.

Okay. So just just to get a sense of the magnitude.

The I know you haven't disclosed the spread the Tds earn previously on those balances, but can I look at something like the U S call reports just to get some color on what type of security you might be holding.

From those deposits.

Yes, I think you're generally as you know we.

The absence of sweep deposits are bound loans and deposits temporarily balance so I take care of our approach we will give you.

A decent.

Viewing to the.

The liquidity premiums that are available for the kinds of securities and equity purchase.

Okay. Thanks for that and then just quickly on the PPP loans I'm wondering if you can give us an update on maybe what's been of crude and what's left to be of crude.

Magnitude wise, just just it would be helpful to sort of look at it from the perspective of your NII in the U S going forward.

Okay.

Mike Happy to answer it in.

PPP has been a very successful program in the first round, we put on the over $8 billion worth of PPP loans for 85000 small business customers and in the second round.

We've put on approximately 4 billion net roughly 3.6 to $3.7 billion extra outstandings for another 46.47000 customers. So you can get the average size of round 2 of each 1 of those loans is something just shy of $80000, obviously very very small business for the majority.

Alrighty.

So if you put those together.

Obviously over $12 billion between round, 1 which was really second into third quarter of last year, and then round, 2 which just completed or in the process of being completed right now.

Little over $12 billion and the way we would think about it is through the end of the second quarter, we probably have for given something in the order of.

The 20%.

Of that exposure and.

Half of that would have been.

Those fees would have been in the crude into NII during.

Prior quarters and the other half of that 20% would of been in the in the second quarter. Just completed so the way I think about it is we still about 80% more to go to accrue of those fees over obviously the next year of 2.

And is that is that relatively straight line over the next 6 to 8 quarters.

It depends on the forgiveness program because the way they've done this is.

Firstly.

Loans arent forgiven for customer doesn't seek they have to actually apply for forgiveness. It would just accrual for the remaining for 5 years of Whatever's left on the term of the loan we would take it into the income, but I would suspect the vast majority would seek some sort of forgiveness and apply through it in and then once those loans are forgiven.

They would immediately accrue in and we would think over the next several quarters. The majority of that would come into income.

Okay. That's very helpful. Thank you for that.

Thank you the <unk>.

Next question is from Doug Young from day, Jordan Capital markets. Please go ahead. Your line is now open.

Good afternoon, I'll try to keep this quick just on the expense side and wholesale just trying to get an understanding mix was up 14% year over year revenue is down 8%. So I mean, what drove that discrepancy is there something unusual in there additional staffing cost and is this a new run.

Rate to think about.

I think June.

Bob.

The majority.

The majority of the increase year over year was in the variable comp line as you would recall less to the second quarter of.

2020 was a very challenging quarter.

When we talk to the.

The vast majority of the PCL accrual that impacted the comp accrual.

And.

So year over year.

It looks high but ex that.

Expenses are well controlled.

So I wouldn't say this is the new run rate now.

Okay.

And then just lastly, I think we've heard this from other banks too and I think from yourselves is while there's and then there's a view of that with credit card balances, obviously being down maybe they stabilize and maybe the come back and that would be positive for many reasons, including net yeah, what's the risk that credit card balances don't come back.

There has been the new adoption of the things like buy now pay later, which is starting to ramp up quite quickly.

Curious your thoughts on that thank you.

Gary.

Good day.

Thank you for in Canada.

Hum.

My sense is that's not.

What we would anticipate happening.

And.

Actually in the lab.

Period, we saw sort of a flattening of.

Loan balances for the month over month through the quarter, which we haven't actually seen we have been seeing a decline of previous to that.

So I <unk>.

Mike.

We've got pent up demand for home travel Recreation and entertainment as Ed mentioned earlier.

I think our ex.

Those are high the ticket items, our expectation is that we would start to see it.

More of timing of ship from our perspective, we'll know whether or not at the port.

Right.

Yeah I'll leave it there thank you.

Okay.

Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead. Your line is now open.

Yes. This is Mike most of the card for you in the past the bank has pointed to.

The 5 year bank of Cat bond yield is a reasonable benchmark pieces when gauging what could happen is the banks margin in the domestic retail.

But the I guess the first of all of my partners is that still a reasonable.

Would you still recommend that is something we could track to give us some indication of where the margin might add over time.

Yes, I think Mario in Canada, we use 5 year swap rate and at the bank of Canada, but the swap rate.

And then in the U S ex the 7 year swap rate so both of those still remain with.

Within the framework of how we manage our overall tractors.

Okay. So let me let me deal with that let me just trying to win by so hypothetically if we were to see.

The 5 year swap rate loans materially higher but again.

This is very much type of.

But essentially back where it was before this all happened.

By the notion that inflation could put some upward pressure on rate.

Is there any sort of structural reason why tds.

Margins in the domestic retail in the U S. Retail segment I think the structural reasons why they wouldnt get back to the levels, we saw pre crisis and by that I mean, the materially higher than.

The domestic retail margin.

Pre pandemic like showed in the 84 basis points and in the U S.

As of year, well aware was a lot higher than where it is today. The are there structural reasons like changes in business mix or maybe extending ladder. The duration of the lives of some reason of why we won't get back there.

No Mario there are no structural reasons, which would which would cause that to not materialize.

As you know.

Net interest sensitivity measures, we do give you additional sensitivity that set of issue.

100 basis points widening of margin the impact on NII would be plus $2.1 billion.

Yes, there are actually kind of from.

Okay, just on trends about business mix changes or you might see.

Certain liquidity requirement and certain.

In times of our or you may see that we've gathered from any.

More deposits over the course of for the last for 5 quarters that may make that jump around a little bit, but the fundamentals of the sensitivity of the bank to interest rate upside remains very sound and we.

We remain very optimistic that those margins are coming back as rates rise.

Alright, thank you.

Thank you and the last question is from Sohrab <unk> from BMO capital markets. Please go ahead. Your line is now open.

Hey, Thank you very much for taking my question I, just wanted to come back to Teri.

Ask a little bit about the competitive dynamics that you may be seeing from non traditional sources spin.

Specifically well for simple the work that we do shows that you may be losing custom.

Customer interest to them.

Maybe 3 times more than in.

And the next biggest Canadian and competitor or are you in a position to comment on how.

How much of the how much transfers you are seeing in various parts.

The positive fewer bank 12 for simple.

Hi.

I wouldn't be end of the position to comment comment on that specific day.

I think I'd come back to the fact that we are.

Well, it's account openings asset levels.

And trade volumes at record levels this quarter.

I think the comprehensive approach that we take to well.

Uh huh.

The direct capabilities that allow customers to.

Built portfolios or make decisions on the self service basis, but also the <unk>.

Taylor ability of advisors, even in our direct investing business and the comprehensive education and training that we make available for customers really stands out.

Okay.

Relative to the competition in the space and I think we still fully adjusted to compete against all competitors, both traditional and non traditional.

So youre not seeing any need to spend any more money to retain your discount brokerage customers.

We would over time continue to look at any competitive threats and what would be the appropriate way to respond.

I think what we believe is that.

Well from the simple.

Comprehensive sort of need and customers actually have been prohibited list in our direct investing business pre <unk>.

<unk>, we might have seen more of the account opening activity actually be.

This is true for all from our branch.

Personal banking.

Colleague.

And through the pandemic, obviously digital account openings has risen.

Also have seen is that the digital account actually have more activity and higher balances when we subsequently reach out.

Specifically to customers with an advisor and so with multichannel opportunities for our customers the training and education.

It is second to none of the video library that is available to our customers.

Bank position growth.

To compete incredibly effectively.

Chris This is bill on the answer here.

Okay. Thank you very much.

Thank you.

There are no more questions in the queue at this time I would now like to turn the call to Mr. Mas for any for closing remarks.

Thank you operator, and thank you everyone for joining us while it is premature to declare victory against the pandemic given what we're seeing around the world.

We are encouraged with the progress we've seen in North America.

In various parts of our footprint and as the economy recovers and we get to the other side of this.

We feel very good with our diversified business model of the value proposition, we provide and of course the famous legendary experiences of the bank is well known for.

So we feel that as the economy normalizes.

The strength will come to for and looking forward to.

Good growth levels, as we see that happening.

I also want to take the opportunity to once again, thank my 90000 colleagues around the world.

They've been the pillar of the anchor for the bank to manage through a very difficult period here.

They continue to deliver for our shareholders for our customers.

For the communities as well as for each other so thank you for that and the folks look forward to meeting some of you in person hopefully sooner.

And then later, but at the minimum we'd be talking 90 days from now thank you very much.

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