The Toronto-Dominion Bank Q2 2023 Earnings Call
Speaker 1: I.
Speaker 1: I.
Speaker 2: This conference is being recorded. This conference is being recorded.
Speaker 3: All participants, please stand by. Your conference is now ready to begin.
Speaker 3: Good afternoon everyone and welcome to the TD Bank Group Q2 2023 Earnings Conference Call. I would now like to turn the meeting over to Ms. Brooke Hales. Please go ahead Ms. Hales. That's me.
Speaker 4: Thank you, operator. Good afternoon and welcome to TD Bank Group's second quarter 2023 investor presentation. Many of us are joining today's meeting from lands across North America. North America is known as Turtle Island by many Indigenous communities. I am currently situated in Toronto.
Speaker 4: As such, I would like to begin today's meeting by acknowledging that I am on the traditional territory of many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa, the Haudenosaunee, and the Wendat peoples, and is now home to many diverse nations, Métis, the Haudenosaunee, and Inuit peoples.
Speaker 4: We also acknowledge that Toronto is covered by Treaty 13, signed with the Mississaugas of the Credit, and the Williams Treaties, signed with multiple Mississaugas and Chippewa Bands.
Speaker 4: We will begin today's presentation with remarks from Barrett Mizrani, the bank's CEO , after which Calvin Tran, the bank's CFO , will present our second quarter operating results. Ajay Bambawale, Chief Risk Officer, will then offer comments on credit quality, after which we will invite questions from pre-qualified analysts and investors on the phone.
Speaker 4: Also present today to answer your questions are Michael Rhodes, Group Head, Canadian Personal Banking. Barbara Hooper, Group Head, Canadian Business Banking. Raymond Chun, Group Head, Wealth Management and Insurance. Leo Salong, President and CEO , TD Bank, America's Most Convenient Bank. Henrias Ahmed, Group Head, Wholesale Banking.
Speaker 4: Please turn to slide two.
Speaker 4: 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 were applied in making these forward-looking statements.
Speaker 4: 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.
Speaker 4: I would also like to remind listeners that the bank uses non-GAAP financial measures, such as 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 referencing referring to adjusted results in his remarks.
Speaker 4: Additional information on items of note, the bank's use of non-GAAP and other financial measures, the bank's reported results, and factors and assumptions related to forward-looking information are all available in our Q2 2023 report to shareholders. With that, let me turn the presentation over to Barrett.
Speaker 5: Thank you, Brooke, and thank you everyone for joining us today.
Speaker 5: To start, I want to express that our thoughts are with Albertans in light of the devastating fires.
Speaker 5: TD has mobilized to provide assistance to impacted customers and colleagues.
Speaker 5: The bank has also contributed directly to relief efforts and enabled customers to do so as well through branches, phone and online.
Speaker 5: In addition, before I review our second quarter, I'd like to provide a few comments on our joint announcement with First Horizon earlier this month.
Speaker 5: While we are not at liberty to address confidential discussions with our regulators, we are confident the mutual termination was the right decision given the uncertainty in timing of regulatory approvals.
Speaker 5: This decision provides clarity to our colleagues, our customers, and to you, our shareholders.
Speaker 5: I want to thank Brian Jordan, First Horizon's President and CEO and his team for their partnership and wish them great future success.
Speaker 5: Now let me turn to the future of our US business.
Speaker 5: TD Bank, America's most convenient bank, is well capitalized with a stable deposit base and deep customer relationships.
Speaker 5: We built a brand that is second to none and the best team in banking.
Speaker 5: A business model and footprint provide a robust foundation for continued growth.
Speaker 5: and we are already executing on significant opportunities.
Speaker 5: TD is strong, resilient and well positioned to build on our momentum in the months and years ahead.
Speaker 5: Let me now turn to our results.
Speaker 5: Q2 was a good quarter for TD. Earnings were $3.8 billion and EPS was $1.94. There were many moving parts this quarter, which strengthened our retail businesses while wholesale banking was impacted by challenging market conditions.
Speaker 5: Revenue grew 14% year over year driven by margin expansion.
Speaker 5: This was offset by higher provision for credit losses and increased expenses, reflecting the inclusion of common investments in colleagues and business growth and the impact of foreign exchange.
Speaker 5: PTPP was over 6% year over year, as Citi's business fundamentals remain strong. Our long-standing strategic focus on gathering core deposits across our North American franchise continues to be a significant competitive advantage, particularly in the U.S.
Speaker 5: in the current operating environment amid increased competition for deposits.
Speaker 5: And as expected, we saw some credit normalization this quarter, but credit performance remains robust.
Speaker 5: The bank's CET1 ratio was 15.3%, reflecting organic capital generation offset by the impact of the carbon acquisition.
Speaker 5: Beginning with the dividend declared today, we have decided to remove the discount to the shares issued under our dividend reinvestment plan.
Speaker 5: And to offset the discounted shares issued under the drip, today we announce our intention to repurchase up to 30 million common shares for cancellation subject to regulatory approval.
Speaker 5: Depending on market conditions, we expect to complete this share buyback by the end of the summer, at which point we will assess the opportunity for further buybacks.
Speaker 5: We have a strong capital position which provides flexibility in an uncertain operating environment.
Speaker 5: We are pleased to be able to return capital to shareholders while simultaneously accelerating investments to drive profitable growth across attractive opportunities.
Speaker 5: For example, in the US, we're increasing new store openings by 50% and doubling wealth advisor hiring. In Canada, we are expanding hiring of frontline and specialist advisors and accelerating investment to upgrade platforms and enhance digital and mobile capabilities across our businesses. You will hear more about these strategic growth initiatives in the weeks and months to come.
Speaker 5: banking with sales up 28% year over year. And to help build confidence for newcomers to Canada, we enhance our online appointment booking capabilities to enable customers to book appointments in their preferred language.
Speaker 5: The bank delivered industry leading market share gains in core deposits, putting TD's market share at almost 26%.
Speaker 5: In credit cards, we saw a record organic Q2 loan growth of 14% year over year, in the highest quarter ever for active accounts and digital acquisition.
Speaker 5: TD recently launched an exclusive Canadian bank offer with Uber, adding to the list of leading global consumer brands that partner with TD, including Air Canada, Amazon, Expedia, and Starbucks.
Speaker 5: In real estate secure lending, we saw strong sequential volume growth. Our teams also delivered the highest quarterly retention rates since 2008.
The business may achieve double-digit loan growth for the seventh consecutive quarter.
In the first phase of a multi-year initiative to modernize our customer and credit platforms, almost 3,000 business bankers across our footprint began using a new relationship management tool that will lead to improved customer experience and increased efficiency.
TD Auto Finance was ranked the highest in dealer satisfaction among non-captive, non-prime lenders with retail credit for the sixth year in a row in the J.D. Power 2023 Canada Dealer Financing Satisfaction Study.
Turning to the US, a US retail bank delivered another strong quarter with earnings of $944 million US dollars, up 23% year-over-year, reflecting revenue growth of 24% and record positive operating leverage.
With the contribution from our investment in schwa of $185 million, segment earnings were US$1.1 billion.
We saw robust loan growth again this quarter, with personal loans and business loans up 12% and 9% respectively year over year.
TD also has strong momentum in customer acquisition, with new business checking accounts up 29% year over year.
We continue to invest in our U.S. credit card business, where we have significant opportunity to expand our lending footprint and deepen relationships with existing deposit customers.
Earlier this month, we launched TD Clear and TD FlexPay, innovative new cards that offer compelling value propositions to accelerate TD's growth in the market.
The bank also enhanced benefits to the popular TD cash and double up credit cards and made significant advancements in our card servicing and digital capabilities. These investments are supported by TD's recent renewal of its agreements with Visa in Canada and the United States.
Further driving organic growth, TD Bank, America's most convenient bank, has an ambitious plan to open 150 new stores by 2027. We are on track to open a total of 18 stores in 2023, with 5 already up and running.
Earlier this month, we were excited to open our first store in Charlotte, North Carolina.
When TD entered each of New York City, Philadelphia, Boston, and Miami, we meaningfully outgrew peers and I'm confident that we will have the same success in Charlotte.
Today, nearly 80% of TD's deposits are in the MSA's where we have a top three position as customers respond to our model by entrusting us with more of their business.
And the bank continues to receive recognition for its unique and inclusive culture. In April , TD was once again named one of America's best employers for diversity by Forbes, moving up to No. 2 spot out of 500 companies ranked.
In wealth management and insurance, we earned $563 million this quarter. Revenue was up 2% year over year, reflecting the strength of our diversified business model as higher insurance volumes and the benefits of higher interest rates helped offset the impacts of trading normalization and market volatility.
TD Direct Invest continue to widen.
The gap to peers with gross new accounts and trading market share increasing year over year.
And we rolled out a series of enhancements to TD EZ Trade, adding streamlined access to ready-made TD one-click ETF portfolios and more self-service capabilities.
TD Asset Management widened its lead versus competitors as the No. 1 Canadian Institutional Asset Manager and No. 1 Money Manager for Canadian Pension Assets. TD Asset Management also led the banking industry in long-term mutual fund sales in the quarter and leverage is broad.
product shelf to grow ETF market share. In advice, we continue to invest for future growth, adding over 500 advice professionals in the past year.
And on the insurance side, we launched small business insurance this quarter. A direct-to-consumer offering is resonating with customers.
and PD is uniquely positioned to satisfy this unmet
need in the marketplace. We are Canada's number one direct insurer and building on our digital leadership with almost one in four new sales across our insurance business completed online from end to end this quarter.
In wholesale banking, we delivered a net income of $213 million.
Despite weaker market conditions, revenues were up 13% year over year driven by the carbon acquisition and growth in transaction banking and lending.
This was more than offset by an increase in expenses reflecting the common acquisition and the impact of investments in colleagues made throughout the year.
The dealer has added almost 100 new corporate lending relationships over the past year, extending approximately $34 billion in additional loan commitments across a diversified range of industries. The dealer has added almost 100 new corporate lending relationships over the past year,
BD Securities was proud to be one of three banks shortlisted by Global Trade Review for the top North American leaders in trade award for its trade finance offering.
And our integration with Kavan is well under way. In fact,
Only one day after closing, TD Cowan acted as book runner on its first equity offering.
Since then, TD Cowen has book run 13 equity offerings totaling US$3.5 billion. This is just the beginning as we leverage our new capabilities in U.S. equities and extend our competitive advantage.
I'm excited to welcome our common colleagues once again and for all that we will accomplish together.
Halfway through the year, much has shifted. With the mutual termination of the first horizon agreement and deterioration in the macroeconomic environment, we do not expect the Bank to deliver adjusted EPS growth in the 7-10% medium-term target range in 2023.
Despite the difficult operating environment, TD continues to deliver for all of its stakeholders and reimagine financial services to shape the future of banking.
I hope you will join us for TD's investor day on June 8th where we will provide more details on the bank's strategy and growth plans with a focus on our Canadian retail businesses.
We will hold a subsequent investor day to highlight our U.S. and wholesale businesses.
DD is forward focused and purpose driven.
And our TD Bankers around the globe bring that vision to life every day. I will close by thanking them for all they do to make TD the better bank.
With that, I'll turn things over to Kelvin.
Thank you, Barrett. Good afternoon, everyone. Please turn to slide 9.
for Q2. The bank reported earnings of $3.4 billion and earnings per share of $1.72.
down 12% and 17% respectively. Adjusted earnings were $3.8 billion up 1% and adjusted earnings per share was $1.94 down 4%.
Reported revenue increased 10% and includes a net loss from mitigation of impact from interest rate volatility to closing capital on the first rise in acquisition.
Adjusted revenue increased 14% reflecting margin growth in the personal and commercial banking businesses, the impact of FX translation and higher advisory fees, equity commissions, and global transaction banking and lending revenue in TD Securities.
Provision for credit losses was $599 million compared with $27 million in the second quarter last year. Credit expenses increased 16% and include acquisition and integration related charges.
Adjusted expenses increased 12% reflecting the inclusion of TD Cowen, higher employee-related expenses, the impact of FX translation, and higher spend supporting business growth.
After the retailer partners net share of the profits of the US strategic card portfolio, adjusted expenses increased 12.3% XFX.
Reported total bank PTPP was up 3% year over year.
Consistent with prior quarters, Slide 24 shows how we calculated adjusted total bank PPPP and operating leverage, removing the impact of the U.S. strategic car portfolio, along with the impact of foreign currency translation and the insurance fair value charge.
Adjusted total bank PPPP was up 6% after these modifications. Please turn to slide 10. Canadian personal and commercial banking net income for the quarter was $1.6 billion up 4% year over year.
Revenue increased 11% reflecting higher margins involving growth.
Average loan volumes are 6%, reflecting 5% growth in personal volumes and 11% growth in business volumes.
Average deposits rose 2%, reflecting 8% growth in personal deposits, partially offset by 7% decrease in business deposits.
In the current rate environment, we continue to see migration of balances into term deposits and other high yielding investments.
Net interest margin was 2.74% down 6 basis points compared to the prior quarter, primarily due to lower deposit margin.
Many factors can impact margins, including the path of short-term rates.
tractor on and off rate, customer activity, and competitive market dynamics. While margins may bounce around quarter to quarter, we are pleased with the year-to-date margin expansion and expect the return of moderate expansion by the end of the year.
Total PCL of $247 million decreased $80 million sequentially.
Total PCL as an annualized percentage of credit volume was 0.19%.
Down 6 basis points sequentially.
Non-interest expenses increased 8% year over year, reflecting higher spend, supporting business growth including technology and higher employee related expenses.
expenses increased 8% year over year, reflecting higher spend, supporting business growth, including technology and higher employee related expenses. Please turn to slide 11.
US retail segment reported net income for the quarter was $1 billion US, down 3% year over year.
Adjusted net income was US$1.1 billion.
Up 19% year over year.
US retail bank reported net income was $859 million US, down 5%, primarily reflecting higher non-interest expenses including acquisition and integration related charges for the first Horizon acquisition in RPCL.
partially offset by higher revenue. US retail bank adjusted net income was 944 million dollar US up 23%.
Reported revenue increased 14% year over year. Prior reported revenue includes an insurance recovery related to litigation.
Adjust the revenue increase 24% year over year, reflecting higher deposit margins and loan volumes partially offset by lower deposit volumes and loan margins.
Adjusted revenue increased 24% year-over-year, reflecting higher deposit margins and loan volumes, partially offset by lower deposit volumes and loan margins, and lower overdraft fees.
Average loan volumes increase 10% year over year.
Personal loans increased 12%, reflecting good originations and slower payment rates across portfolios.
Business loans increased 9%, reflecting strong originations from new customer growth.
higher commercial line utilization and slower payment rates, partially offset by PPP loan forgiveness.
Average deposit volumes excluding super deposits were down 5% year over year.
Personal deposits were down 3% and business deposits declined 6%. Balances were impacted by the economic environment inflationary pressures.
We also saw some migration to higher yielding products, including CDs and non-depository investment opportunities.
Sweep deposits decreased 23%. Earlier this month TD and Schwab amended the insured deposit account agreement.
to reflect the current market and interest rate environment. The revised agreement extends the term by three years and provides for lower deposit balances in the first six years and higher balances in the latter years.
In addition, the agreement increases certainty for TD around future deposit balances and strengthens our partnership with Zwha.
Net interest margin was 3.25%, down 4 paces for inconsequentially.
due to lower deposit margins reflecting higher funding costs. Many factors can impact margins.
including the path of short-term interest rate.
tractor on and off rate, customer activity
and competitive market dynamics. While we are pleased with the substantial year-to-date margin expansion.
We expect downward pressure again on margins in Q3, reflecting intensifying pricing competition in the US market.
However, we do expect margins to resume growth, albeit moderately starting in Q4 with new tractor on rates. Total PCL was $140 million U.S., a decrease of $9 million sequentially. That is for the fruting
net PCL ratio including only the bank's share of PCL for the U.S. Strategic Cards portfolio as an annualized percentage of credit volume was 0.33 percent lower by one basis point sequentially.
Reported expenses increase 17% and include acquisition and integration related charges for the first-rise item acquisition.
Adjusted expenses were up 9% reflecting higher employee related expenses and higher business investments.
The contribution from TD's investment in Schwab was $185 million US, up 5% from a year ago, reflecting higher net interest income partially offset by higher expenses, lower asset management fees and lower trading revenues.
The contribution from TD's investment in Schwab was $185 million US, up 5% from a year ago, reflecting higher net interest income partially offset by higher expenses, lower asset management fees, and lower trading revenues. Please turn to slide 12.
Wealth Management and Insurance and Income for the quarter was $563 million, down 16% every year.
Revenue increased 2%, reflecting high investment income in the insurance business, an increase in the fair value of investments supporting claims liabilities and higher insurance volumes, partially offset by lower transaction and fee-based revenue in wealth.
ECL for the quarter was $1 million, an increase of $1 million from the prior quarter. Insurance claims increased 36% year over year, reflecting the impact of changes in the discount rate which resulted in a similar increase in the fair value of investments supporting claims liabilities reported in non-interest income.
more severe weather related events, and increased driving activity in inflationary costs. Non-intra expenses decreased 1% year over year, reflecting lower variable compensation, partially offset by higher spans supporting business growth, including employee-related expenses in technology.
Asset under management increased 3% year over year and asset under administration increased 2% year over year, both reflecting net asset growth.
Please turn to slide 13.
Folsom banking reported net income for the quarter was $150 million.
A decrease of 58% year over year.
This reflects higher non-interest expenses, which include acquisition and integration-related charges for TD Cowen, partially offset by higher revenues.
Adjusted income was $213 million dollars, down 41% year over year.
Revenue, including TD Cowen, was 1.4 billion dollars, up 13% year over year.
Higher revenue reflects higher advisory fees, equity commissions, global transaction banking revenue, and lending revenue partially offset by lower trading-related revenue. BC out for the quarter was $12 million, a decrease of $20 million from the prior quarter.
Reported expenses increase 53% and include acquisition and integration related charges for TD Cowen.
Adjusted expenses increased 44% reflecting the inclusion of TD Cowen, continued investments in wholesale banking's U.S. dollar strategy, including the hiring of banking, sales and trading and technology professionals, and the impact of foreign exchange translation. Please turn to slide 14.
The corporate assignment reported a net loss of $399 million in the quarter compared with the reported net loss of $151 million in the second quarter last year. The year-over-year increase primarily reflects lower revenue from Treasury and balance sheet management activities. For more information, visit www.fema.gov
A net loss from mitigation of impact from interest rate volatility to closing capital on first horizon acquisition and higher net corporate expenses. Adjusted net loss for the quarter was $177 million compared with an adjusted net loss of $79 million in the second quarter last year.
Please turn to slide 15. The common equity tier 1 ratio ended the quarter at 15.3% down 14 basis points sequentially.
We had strong internal capital generation this quarter, which added 28 basis points to CET1. This was partially offset by an increase in RWA net of FX, which decreased CET1 by 2 basis points.
We saw a 14 basis point increase in CET1 related to the issuance of common shares under our dividend reinvestment plan.
As Barrett mentioned, beginning with the dividend declared today and until further announcement, there will be no discount to the shares issued under our dividend reinvestment.
As a reminder, in Q1, we implemented credit risk methodology changes in preparation for Basel III reforms. From? parental shootout in the world.
The implementation of the Basel III reforms had a small positive impact this quarter.
The current acquisition decreased CT1 by 55 basis point inclusive of the increase in RWA and increase in goodwill and intangible deductions.
Relating to the first horizon acquisition, a net loss from the mitigation of the impact from interest rate volatility to closing capital decreased CET1 by two basis points.
and an FX hedge increased CT1 by 4 basis points. All hedges related to the first horizon acquisition are now closed. RWA including FX increased 3.3% quarter over quarter reflecting higher market risk and operational risk RWA, partially offset by a decrease in credit risk RWA.
Credit risk RWA decreased $3.4 billion, or 1%, mainly reflecting the impact from Basel III reforms largely offset by TD current acquisition and volume increases.
Market risk RWA increased $2.2 billion or 11%, reflecting the impact of the current acquisition.
Operational risk RWA increased 19 billion or 29 percent, reflecting the impact of Basel III reforms, inclusive of the impact of the Stanford settlement and the TD Cowen acquisition.
The leverage ratio was 4.6% this quarter and the LCR ratio was 144%, both well above published regulatory minimum. There is a lot of innovation going on as they go through western government, places like
Finally, before I turn the call over to Ajay, I wanted to note that we appreciate that analysts and investors may have questions on the financial impact from the mutual termination of the first rise in agreement.
We have added slide 26 in this presentation to assist in that regard.
With that, RJ, over to you.
Thank you, Kelvin, and good afternoon, everyone. Please turn to slide 16.
Gross impaired loan formations decreased by 2 basis points to 14 basis points quarter over quarter.
reflected in the commercial lending portfolios.
partially offset by further normalization of credit performance in the consumer lending portfolios.
Please turn to slide 17. Gross impaired loans were stable quarter over quarter and remained at low levels.
Please turn to Slide 18. recall that our presentation reports PCL ratios both cross and net of the partner share of the U's strategic card PCLs.
We remind you that US-COD PCLs recorded in the corporate segment are fully absorbed by our partners.
and do not impact the bank's net income. The bank's provision for credit losses decreased four basis points quarter over quarter to 28 basis points. The decrees
reflects a smaller performing allowance build this quarter. Please turn to slide 19. The bank's impaired PCL was $551 million.
a decrease of 2 million quarter over quarter.
The Bank's current quarter impaired PCL rate remained well below 2019 levels.
Performing PCL decreased by 89 million QoQ to 48 million.
The smaller current quarter provision was recorded across segments. Please turn to slide 20.
The allowance for credit losses increased by 168 million quarter over quarter.
reflecting an 83 million impact of foreign exchange, current credit conditions
including some credit migration and
some credit migration. And volume growth.
The bank's allowance coverage remains elevated to account for ongoing uncertainty relating to the economic trajectory and...
credit performance. In summary, while we've seen ongoing normalization of key credit metrics in the consumer lending portfolios.
The bank's credit performance remained strong this quarter.
evidence by gross impaired loan formations, gross impaired loans, and impaired PCLs remaining at low levels. Looking forward, after two quarters of continued strong credit performance, I would like to thank you for your time.
I now expect total PCLs in 2023 to come in near the lower end of my prior guidance of 35 to 45 basis points.
However, results may vary by quarter.
However, results may vary by quarter.
Despite recent challenges for the broader financial sector, TD remains well positioned. Given, we are adequately provisioned.
We have a strong capital and liquidity position and we have a business that is broadly diversified across products and geographies.
With that 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 are using a speakerphone, please lift your hands before making your selection if you have a question.
please press star 1 on the device's keypad. You may cancel your question at any time by pressing star 2. So please press star 1. At this time, if you have a question, there will be a brief pause while the participants register. We thank you for your patience.
The first question is from Ibrahim Pudawala from Bank of America. Please go ahead. Your line is open. Thank you. First question Bharat may be on Capital CET 115.3.
It sounds like you have no restriction in terms of what you can do in the US. I appreciate you can't talk about whatever the regulatory issue is, but the growth plans that you laid out sounds like…
TD can go about business as usual or sounds like you're accelerating your growth. Give us a sense of the 15.3 C T1.
What is the right capital level that you're managing to and how do you get there in a world where USMNA probably is out of the question for the foreseeable future? I think we could start there.
Yeah, Abraham, great question and nice to talk to you.
So firstly we are going through an uncertain period here from an economic perspective, markets perspective, volatility. We are going through an uncertain period from an economic perspective, markets perspective, volatility.
the level of capital we have, that is a good thing. It's always good when you have such an uncertainty in the marketplace. Secondly,
As you said, we continue to invest in our franchises and over the next little while you'll hear more about it. We will provide more detail as to how we're thinking about growth and that should be a good discussion and hopefully.
you'll be able to make it to the Canadian side of that discussion on June the 8th when we have our investor day. And as I said in my remarks, we will have a follow on investor day regarding our US business as well as our wholesale business.
Targeting capital, I mean I know last quarter there was lots of discussion by many of you that you know what's your path to 12% and I've laid out a clear path as to how we get to 12%. I guess around 12% would be a good target based on conditions as we know today.
But we continue to see a good growth in our businesses. I'm sure Michael, Leo, Riaz and Ray will talk about, there's terrific momentum in our businesses and we're looking forward. To deliver the volumes and taking share, which has been the historic advantage TD has had.
it makes sense to buy back those shares. And we expect to finish that buyback by the end of the summer or so. And then of course we will look at what makes sense and we will be assessing the way forward from that with respect to capital deployment. And then of course we will look at what makes sense and what makes sense. And then of course we will look at what makes sense and what makes sense.
But my message on capital deployment has not changed. It has been there for a few years. You know, we look at what level of capital we're going to require to support our strategies, our W.A. growth, market share growth. We have not been shy in deploying our capital where we think we need a capability build. Either we buy or build it ourselves.
We look at other opportunistic situations that might present themselves. And we also consider buybacks when appropriate. So thinking of that framework remains unchanged. And I would say that over the next few months, we'll be able to provide more clarity as to how we will deploy our capital going forward.
But Bharat are you saying that you are able to do M&A because it sounded like
you may build or buy does that mean you can still do M&A if you wanted to because the expectation externally is given this issue that whatever happened to let to the first horizon termination.
You're out of M&A for the foreseeable future. Is that a wrong assumption? I think you know to speculate on M&A is always a you know
It's always a dangerous game because nobody can say it perfectly. But you know, we've done deals previously on capability bills. I think in Ray's business we acquired Greystone a few years ago. And in Riaz's business we just acquired Cowan.
You know, we in Riaz's business acquired headlands as well not too long ago. And so that goal, it's an ongoing exercise for us, you know, either it's capability bills or where there's an extension to our businesses. And we will continue to look at those as they present themselves.
I'll take you. Thank you. Thank you. The next question is from Mani Grom and from Scotiabank. Scotiabank, please go ahead. Your line is open.
Hi, good afternoon. Just to follow up on Ibrahim, Barrett just wanted to better understand why not be more aggressively buying back shares here given the excess capital position? What's the counterpoint to doing a bigger buyback? I said it would take us a bit of time to get the 30 million shares but...
and then we can discuss further as to what would be an appropriate level of buybacks.
Got it. And then just focusing in on the US, you terminated the transaction with FHM, but you still have a very sizable US business. I'm just wondering how you view the US regional banking crisis, how that has impacted that existing business, both in terms of
good and bad from your perspective? I'll pass it on to Leo to provide the perspective on that. But you know, we've been in the U.S. for many years. As you said, we have a sizable, you know, great scale business from Maine to Florida that has been a terrific and continues to be a terrific growth engine for the bank. And in this current crisis, you know, in my remarks, I said, we know that this thing is new and biastic YouTube got to beef up that for the surprises. See, this guy is really high on bets and piano.
how many new accounts we are opening, the type of business we're attracting. But Leo can perhaps provide more perspective because we are viewed as a, we have a brand that is second to none in the US. This particular turmoil, we've seen our deposits actually, deposit flow to be attractive. The number of accounts opened at TD.
in terms of the activity. The market has continued to see deposit contraction at the industry level. I think overall deposit's down about a trillion dollars year on year. That coupled with obviously the liquidity scares that took place. No doubt the regional banks and some of the small banks.
quite positive about our franchise. We've got a very strong deposit base. I think what probably characterizes our footprint in the US is that we've got probably one of the leading retail deposit franchises and it's held up quite well. In fact, on a quarter on quarter basis, retail deposits were essentially flat and we saw a very good account opening volume.
even on the commercial side of the house, our commercial checking accounts opened in the quarter. We're up 29% on a year-on-year basis. So the franchise continues to perform well. We were resilient from a deposit standpoint. I do think that the market will be tighter as we move forward. You're already seeing wide- Cloaking kind of weather on the look back.
tighter credit conditions. And I think given the fact that we've got a strong capital base liquidity to be able to provide our clients with the support that they need through the cycle, I think we find ourselves in a very good position to be able to consolidate relationships with some of our key clients and be able to take share.
Is growth in the US Southeast still a priority, geographically speaking? I'm sorry, can you say that again, Manny? You know, the big rush, part of the rationale for FHN was growing in the US Southeast fast growing region. How important is growth in that region and can you do it organically?
Yeah, very much so. As Barrett indicated in his opening remarks, we've outlined a plan to open up 150 stores. A very large portion of that is in the Southeast. So think consolidating our footprint in Florida, specifically South and Central Florida, continuing expansion into Carolinas.
We already have a very strong footprint in South Carolina. Barrett alluded to the fact that we opened up our first store in North Carolina. I was down in Charlotte, met with the mayor, had a great grand opening. We're gonna continue to lean into that market as well. Atlanta's the market, it's the one major metro market where we do not have a significant retail presence and we're gonna lean into that market. We've already got an interesting commercial footprint.
round out our existing footprint. But the southeast is going to be a very important part of the overall equation.
is going to be a very important part of the overall equation. Thank you.
Thank you. The next question is from Scott Chan from Canaccord Nuity. Please go ahead. Your line is open. Thank you. Good afternoon. Maybe I'll stick with you Leo on the US side. Notice that your loan growth was pretty strong quarter for quarter, retail, commercial and mortgages.
And it seems like your peers have kind of stepped back or called it the market conditions. And just wondering if TD is just a bit more aggressive or how are you kind of gaining that incremental market share that we've seen over the past few quarters? Sure. Sure, Scott. Let me just provide a little bit of color on the numbers.
because I think it'll help. We were pretty balanced in terms of loan growth in the quarter. Both our personal and our commercial banking businesses ex-PVP were up double digits. If you look at the consumer side of the house for just a moment, Resil was quite strong. It was up 17% in terms of overall balance growth on a year-on-year basis. I'd like to say that it was powered by.
significant origination growth. It wasn't. We had solid performance in terms of origination. I think the real story was pay downs. Pay downs are at historical levels. So obviously what we did originate resulted in good loan growth, and we tend to be slightly undersized in terms of our overall mortgage books. So it provided us a good headline print. Cards,
We were really pleased with the cards performance. We saw a 9% growth in cards. And the lion's share of that was actually in our proprietary line. So think bank card and our retail card services business were up 15% and 13% respectively.
And then the auto business, which obviously has been quite challenged with supply chain issues, saw some very good performance. We were up 6%. And more importantly, we are seeing good risk adjusted yield expansion in that market. So we're hopeful that will translate into greater profitability.
On the commercial side, we continue to do well from a commercial standpoint. I think a combination of factored plays played into it. We saw a little bit more growth than we did in previous quarters in the small business and the community regional segments. Commercial real estate is still somewhat...
sluggish as you would expect. We've been cautious in that area. We've been quite deliberate over the past three, four years and we've reduced our overall exposure to commercial real estate. But we saw good solid growth in the mid-market and the C&I community and the pipeline.
remain strong. I'll just caution a little bit that I think the outlook, the debt ceiling discussions, I could see a little bit of moderation in that commercial, I'm sorry, in the commercial banking space, at least in the near term, but I'm still quite confident that, once again, given our capital, our liquidity position, we'll be able to support clients through the cycle.
Thanks Leland. Maybe just for Riaz on capital markets, I was suspected that two months of cow and would have held up profitability in the segment. It seems like Canada's run rate of profit is about $15 million a quarter in the normal market. So can you help us maybe unpack?
where the shortfall came? Was it your core business, Cowen, or just market factors?
Scott, thanks for that. Look, I think overall the quarter continues to, we continue to kind of navigate a difficult operating environment with kind of mixed results by business. So overall trading results, equity underwriting and USM.
was spectacular for us this quarter, given we were able to close three or four transactions that had already been in the pipeline.
So, all in all, kind of a mixed result on revenue with a 14% growth. I think U.S. equity and M&A would have been lighter by U.S. $50 to $75 million, let's say, on what our overall expectation would have been.
But as you say, thrilled to close the acquisition of Cowen. We had a nice pickup in equity commissions and a little bit of contribution on the advisory side and expect a strong pickup in revenue and markets turn more favorable.
And then on the expensive side, you know, we've been talking about the significant investments we've made in growing our US platform and now including the acquisition of Cowen. So all in all, I think the, you know, I'm really quite excited and optimistic to
prepare TD Securities and Wholesale Bank for its next phase of growth. But I do expect the revenue and expense numbers over the next couple of quarters to remain a bit bumpy as we adjust and optimize business mix and deepen the integration.
I think it'll be, we'll hit our more of a run rate stride by fiscal 24. Okay, thank you very much.
I think it will hit more of a run rate stride by fiscal 24. Okay, thank you very much. Thank you.
The next question is from Doug Young from Desjardins Capital Markets. Please go ahead, your line is open. Good afternoon. I guess the question is for Kelvin. In your prepared remarks, you talked about them saying Canada and the US and it sounds and correct me if I'm wrong, but it sounds like you expect some moderation.
in Q3 and then a return to modest expansion in Q4 and then it sounds like maybe going into fiscal 24, but I don't want to put words in your mouth and correct me if I'm wrong, but what I'm trying to figure out is what's driving that? Is it just the pickup and tractors in Q4? Like what gives you the confidence that it will start to moderately expand to Q4 and going forward?
But when you're looking at rates, what we benefited from over the last year are a rise in short-term rates, which have a more immediate impact. And then now we're looking at tractors coming on, with tractors on rates being higher.
than the off rates. And so that's going to be supportive of margin expansion, but more gradually than what normally you see in short term rates increases. Is there a reason why it's Q4? And is there a structural reason why there's a delay and you don't see that unfolding in Q3?
Well, it really depends on what the rates were five or seven years ago. And these tractors price in every month is like a lather bond portfolio that gets repriced. And so bit by bit, it actually helps with the margin, which is very different than if you have a short term rate on
on float rate investment because when there's a change in central bank rate, then that entire deposit investment from those deposits get repriced.
whereas tractors is one of a fraction of that every month and then over time it builds.
You haven't disclosed the size of the tractor portfolio or would you be willing to?
No, we haven't disclosed that detail. Okay. All right. And my second question is, I guess in the U.S., you had a decline in sweep deposits from Schwab 11%, quarter over quarter. I think I kind of get what drove it, but can you talk a bit about what drove it?
Can you talk a bit about the new sweep deposit agreement and how that impacts the economics for TD going forward versus the old agreement and what are the puts and takes that we should think about? What are the puts and takes that we should think about?
Yeah, this is Leo. I can take that. Maybe just to start with the quarter itself. So Sweets closed the quarter at about $110 billion and was down 23%. And essentially, as would have been reported by SWOB, a lot of that is simply client's cash sorting or cash sorting.
looking for brokerage fixed income yield pickup vis-a-vis deposit sweeps. So a very expected sort of behavior amongst clients that are investing with Schwab for investment returns. We do expect that trend to continue, albeit maybe moderate a bit as we think about the subsequent quarter.
I think we're quite pleased with the new agreement. Kelvin outlined the basic terms of the agreement. It essentially extends the agreement with Schwab for another three years. And it increases our long-term floor in that agreement up to $60 billion, which is certainly important to us.
in terms of preserving that strategic relationship. We do provide greater flexibility for them to accommodate some of that cash sorting behavior that's taking place. We would expect more down draft into 2024. We think that the actual impact on that is going to be manageable and something that we can do.
is the way it was structured before. Is that, am I right to think of it? No.
No, no the actual economics on the actual sweep structures themselves, that hasn't changed. The only fundamental change is providing a lower floor that gives them greater flexibility in terms of liquidity management in the short term.
Okay, appreciate it. Thank you. Thank you. The next question is from Paul Holden from CIDC. Please go ahead. Your line is open. Thank you. Good afternoon. A couple questions related to the US retail business. I guess first off just looking at the increase in average FTE across the different...
segments, I noticed US retail's up 12% year over year, pretty significant. So maybe you can talk about some of those investments you've made in the FT. Like, what specifically are those for? Are those related to the new upcoming store openings or is it a separate investment?
Paul, thank you for the question. Actually three sources just to maybe oversimplify a bit. One portion of that is just returning staffing levels to pre-pandemic levels in all of our front facing areas. I think the stores, the call centers.
We had experienced attrition through the pandemic and now we're returning that and fortunately that increase is translating into better customer satisfaction scores. So we're quite pleased with that investment. The second grouping is a very deliberate investment in our digital technology and data initiatives. It's a major thrust and not only are we trying to...
grow the store network, which has historically been a real asset for TD in the States. But we're also complementing with a big push on digital and mobile and those investments and that staff complement is supporting the delivery of some critical initiatives there. And the third was actually resources for the First Horizon integration program.
And so what you would expect us to do is unwind those resources. We're going to do that gradually obviously where we have an opportunity to be able to backfill into our core franchise. We'll certainly do that, but we'll see a reduction there with regards to the overall integration resource that we had put in place.
Okay, that's great color on that. And then I want to ask a question on the planned store opening. So I think we'll all agree it's the right long term strategy, but we also know the market can get a little bit fussed around the growth and expenses ahead of the planned revenue benefit.
So just wondering how you plan on sort of legging in these store openings if there's any planned expense efficiencies against it or maybe just give us a general sense of how you visualize the expense growth in the US business as a result of this planned strategy. Sure. Paul and Barrett talked about trying to do an investor day and I...
I look forward to being able to share maybe the more fulsome strategy with you. We're essentially looking to invest in four critical areas. Our consumer distribution expansion, the store expansion we talked about, leaning into digital and mobile capabilities and making sure that we're delivering a commensurate, legendary experience through those. Japping California State University
digital assets, growing our cards franchise, and then finally building out our national commercial banking footprint. Underpinning all of that is a very deliberate productivity program focused on identifying structural opportunities to not only fund these programs, but hopefully give us some sort of capacity for what might be declining rate cuts in the future.
and critical growth initiatives. So that'll certainly be part of the strategy.
Got it. Okay. Thank you. I'll leave it there. Just maybe, Paul, I'll add one thing, Leo, is we're making early days, but certainly strong progress on growing our U.S. wealth business in partnership with Leo's retail and commercial business. And so some of the FTE that you'd see that we're making investments in the U.S. is actually to accelerate the growth of our business.
our advisors in the US footprints in sort of our four major markets. And we've taken our playbook here, our very successful playbook, on how to build out a financial planning business for the mass affluent, affluent clients from Canada. And we're exporting that into the United States and already seeing very early promising signs.
Thank you. The next question is from Gabriel Deschaine from National Bank Financial. Please go ahead. Good afternoon. I'm Gabriel Deschaine from National Bank Financial.
Yeah, good afternoon. I'll rapid-fire these. The U.S. business, I saw that you used a few more federal home loan bank deposits. Just wondering why you tapped that funding source, higher cost given that your balance sheet in the U.S. is so liquid to begin with. Then the wealth business in Canada primarily, I saw transaction revenues down 35% year over year.
I'm wondering how much of that is caused by, you know, fee impact or changes to your fee structure versus you know, just market behavior subdued and then on the wholesale business I get markets weren't favorable this quarter but you know operating leverage was quite negative this quarter and I'm wondering how
You're thinking about the combined Cowen and your legacy business and the cost base there basically. Gabe, why don't I take the first one with regards to FHLB borrowings. Borrowings in the quarter went up to 19.5 billion up from 10 at the end of last quarter. We typically use it as a temporary bridge source of liquidity. But sometimes it is more economic to do that than...
and breaking into an investment position that hasn't yet matured. To give you a sense, we've already on a spot basis today, those borrowings are back down to $11.5 billion. It's simply a transitional force, a funding force.
It's Raymond. If I think about Canadian wealth, the question you had on fee income, I would say, you know, similar to the rest of the industry, there's probably three headwinds that are impacting fee income. One is equities and with the S&P on average down about 8%. That will have...
headwinds on our fee income side of the business. The other piece is trades per day. Trades per day continue to normalize in our direct investing business, still down about 29% on a year-on-year basis. It's still up from pre-pandemic levels, but we're still seeing a normalization on trades per day. And then like the rest of the industry, a deposit mix with the higher interest rate environment that we're in, we're certainly seeing some of our deposits staying within the TD family.
but moving to more interest-bearing products like GICs in the short term. What I would say though is the fundamentals of the business I'm very pleased with. I'm continuing to see very strong net asset growth, which is leading to market share gains across all of our wealth management businesses. So whether that's in our...
institutional asset management business. We're widening our market share lead there. We're picking up more from a market share on trades in general in the direct investing business. We picked up market share in new accounts in direct investing and continue to be the fastest growing private wealth management business in Canada. So the fundamentals of the businesses are strong and I think the impact that you're seeing on fee income are more industry related at this moment. Yeah, no, I was asking specifically about the trade, that's a volume client behavior thing, not, there's not.
was not about cost synergy.
And I think as we move things around and optimize things, we'll find some efficiencies, but clearly with the weaker markets, we're going to go through a little bit of an S curve to build up the revenue with the elevated cost base. But look, I think I have...
as to what we can do together and as the teams have started to work together, we're already involved in so much dialogue as a combined form with our clients that we could have not done individually on our own. So I feel incredibly positive about the acquisition and the transaction and I think it would be a mistake to start.
All right, thanks for all that. Have a good day.
Thank you. The next question is from Lamar Persaud from CommerX Securities. Please go ahead. Your line is open. Thank you.
Thanks. I appreciate the commentary on the segmented margins, but I'm wondering, does that translate through to the all-bank level? So we should expect a pause on expansion of the all-bank level for Q3 and then expansion again in Q4. Is that fair?
Generally speaking, there is a correlation, but at the total bank level, assuming you mean X trading, the core NIM, you also have impact on some of our hedging activities like in corporate and also the sweep deposit that is not included in
the US P&C business. And then generally we don't talk about the trading, the non-trading name of TD Securities, but they do have that impact as well as as is Wealth and Insurance. So those are some of the components that could be refined in terms of estimate versus the two big, bigger US P&C businesses.
Thank you.
Go.
So it depends on the movement of those other factors. You're not offering any guidance at the all bank level. Yeah, because those are like, if you look at the hedging stuff that could bounce around in corporate. But I think the important thing is that for the fundamentals of our retail businesses, that is what we expect for those segments.
Okay, okay, that's fair. And then maybe, Freddie J., but can you talk a little bit about the office portfolio? How much of that is Canada versus U.S.? And should we expect some rising losses on this portfolio moving forward? Thanks. I'm happy to respond. So –
Office, I'd say, overall is about 11% of total CRI, and as a percent of total bank loans and BAs, it's 1%, so it's quite small. $3 billion of that, which is approximately 30% of our loan exposure of $10.3 billion in office is Canada, and that's largely in the GTA and the GBA.
and it's spread across A, B, and C properties. The one distinguishing factor in Canada is that you have meaningful recourse to guarantors, and the portfolio is performing at present quite well. In the U.S., our exposure is $7.3 billion. Seventy percent of that is in major metros.
and a significant portion of our exposure is actually Class A properties. If I look at both Canada and the U.S.
Across OfficeCree, I would describe the classified exposure, or what we would call watch exposure, and impairment levels to currently be low. However, there is migration occurring on the portfolio. And what we've done as a bank is we've stress tested our office portfolio.
most of our CRIE reserves. And our CRIE reserves overall are approximately two and a half times pre-COVID level. So we feel well-reserved from what data we know today. And overall, I'd say we draw comfort from the fact that, you know, we do have a lot of depth.
of experience in this space. And as I said, the reserve levels give me comfort as well. So hopefully that's enough color for you. Yeah, that's really helpful. Thanks, that's it for me. Thank you. The next question is from Joo-Ho Kim from CrediSwiss. Please go ahead, your line is open.
I just had a quick question and I wanted to ask on the on capital deployment and I appreciate that you provide that you will provide more clarity as as we look ahead but I wanted to see if you can discuss sort of beyond the US retail banking space.
where you're seeing some interesting opportunities. Could we maybe see the bank do something in the wealth space in Canada, or would the bank even consider sort of an out-of-footprint acquisition opportunities as we look ahead? I'm just trying to get a general sense of any color commentary would be helpful. Thank you.
It's hard to speculate on M&A. It's difficult to say where because these opportunities present themselves when market conditions allow them.
But as you've seen, in Canada, whenever there is an opportunity, the RTD looks at it very seriously, given our size, scale, and the number of customers we have.
I pointed out an example of TD Greystone was a terrific acquisition that was about three years ago, four years ago. And we continue to monitor the market for what is possible and what would make sense for us. The important thing to note is that.
TD, we are disciplined on this. Just because we have the capital, we don't want to chase everything that's out there. It has to make strategic sense, it has to make financial sense, it has to be within our risk appetite, it has to be culturally aligned. We have a very disciplined approach on this.
The next question is from Suram Mulvihady from BMO Capital Market. Please go ahead. The line is open.
Thank you, I realize we've gone fairly long here, but thank you for taking my questions. Going into the details of the regulatory constraints, you will in the US.
Thank you, I realize we've gone fairly long here, but thank you for taking my questions. Without going into the details of the regulatory constraints, you will in the US, can you comment if …
resolving those issues will mean elevated spending in the foreseeable future? You know, the bank spends, how much do we spend in a year, Calvin? I think it's $20-odd billion. The scale of TD is quite large. And in theory that zero to a hundred dollars is Atlantic only, Wildwood Park had an obviously relatively small investment in cares.
whether we have to spend on this or that, I mean of course there's a prioritization required as you would expect in any business. It's normal course stuff to continue to look at opportunities to invest in our platforms. And you heard some of the things that Leo was talking about and that's an investment.
And I would add, and I think the question was, because the expenses are up front and the returns are later on, but at TD we've had a tradition of doing what is right over the long term. I mean, we don't see, we don't look at what's our quota to quota. Of course, you look at it and we take it seriously, but the whole plan here is that are we creating long-term sustainable shareholder value or not? And that's the way you should think about it. They turn their head vent 13-14 driver gas reduction into hydro imprisonment vat 12 weeks ago, something like that. So there's that, that's a really important part of the carried. And I think it's very significant we can get a resume program all right Finally. There's some other pieces of what we're doing for HAA inspector Stephen that I cannot go up to. simulator
I'm surprised, you know, my friend Michael Rhodes is sitting here and he's got such a great story, so I'm going to pass it on to him to talk about what are you doing in the biggest business we have within the TD family. Barat, thank you for the question. But just kind of, sorry, sorry, Mike, I would like to hear from you. But my question is resolving the regulatory issues in the US.
So I would love to hear from Canada for sure, but the issues in the US, will it require elevated spend? Do you have to spend money to issue them to resolve the issues in the US with the regulator? You know, when the time is right, we will talk more about it. We got an investor day coming for the US. You know, what our spend levels will be.
at quite a pace in the US and I don't see that changing.
So Barrett, do you still want me to answer your question? Yes. Okay. Thank you for the question Barrett, but you think about obviously a lot of great things going across the enterprise and throughout the conversation Leo, Ray and others have used the word fundamentals quite a lot and I'm going to use the word fundamentals also. And I think about the fundamental of the Canadian personal bank.
are really quite strong and particularly strong this quarter. You know, Barrett, you mentioned your introductory comments, 20% growth in everyday bank accounts on a year-to-year basis. It's checking accounts, savings accounts, credit card accounts, and relative to pre-pandemic, it's more than 20% growth, so we're doing very well there. Our core checking accounts in the second quarter are the best ever. The core checking account is a franchise account from which...
like all other sorts of goodness happens in terms of deepening relationships. Our net customer growth is the best we've seen in years. Our deposit growth is $20 billion on a year-over-year basis, 8%. CARDS growth was 14% and we continue to expect strong growth on an ongoing basis.
Our new account acquisition has been strong and we haven't quite returned pre-pandemic. In fact, we have a ways to go to return to pre-pandemic levels on revolve rate. Our rezzle growth was the best sequentially in the marketplace, if you actually look on a spot basis. And recognize the market has been slow for real estate in general, but we're certainly...
basis and it's really across the franchise and now between you know Leo, Barb, Ray and myself and and Riaz.
feel good about how we're positioned. Thank you, Michael. Michael, thank you very much. I hope you didn't front run your June 8th event. Can I ask a second question since you answered Barrett's question?
I guess my second question again for the team is obviously nice to have the elevated capital levels. How much does the ROE drag from that elevated capital level factor into the urgency to deploy? We generate good returns, Orav. You know, if you look at our ROE...
in our pockets that is burning a hole there, you know, and then we need to be, you know, impatient as to, you know, how we manage that. It is important that, you know, we look at the environment, look at, you know, what our own growth plans are, and those things are important factors for us. So, you know, the ROE drag is something that I'm sure Calvin will keep on.
calculating, but we feel pretty comfortable as to where we are. Thank you. Thank you. Okay, the next question is from Nigel Sousa from Veritas Investment Research. Please go ahead, your line is open.
Good afternoon, thanks for taking the question. Just a couple of quick thoughts. First on deposits, I'm wondering if you could expand on the trends you're seeing for migration to term deposits. What's the rate of that migration this quarter versus last quarter where you've seen so far in the CQ3? And on the US retail side, how do you see that going?
Any color on trends you're seeing specifically for non-interest bearing and uninsured deposits? First with Gannett. First with Gannett, okay. Sure, you know, great question. And well, first of all, may I just start with sort of stating the obvious that our strategy is to grow our core deposit franchise and we pick our spots to compete and we've been obviously very pleased with the results we've seen so far this year. And you know, one thing I should probably underscore, which I didn't mention earlier, is that you're new to Canada.
lines of the marketplace. Everyone's seen some degree of migration, but we're seeing less migration than others in the marketplace. And so I actually feel very good about where we are in terms of our overall mix and our deposit behaviors. And it certainly brought to the marketplace both an absolute level and trend line. We look quite good.
I'll just add it's Raymond that and I said it a bit a little bit earlier from a wealth perspective we are definitely seeing some of our deposits from our cash and mutual funds moving to more interest rate sensitive products like GICs high interest savings accounts and so what you'll see is the deposits are moving from the wealth business but they're actually staying inside the TD
franchise and moving into Michael's personal deposits. And so net net, you're seeing still us retaining our deposits. What I would say is that migration has definitely slowed significantly. And so we do think hopefully that we've reached the bottom of that piece of it. And those deposits that are sitting in GICs are sitting in short term. And so we do see as the markets do turn, the opportunity for those funds to come back into the equities.
Before Leo takes it, Barb, you want to comment on business deposits as well? Yeah, the story is similar. We are also focused on core deposits and our core deposit business remains very strong and stable. We have seen core deposits move into term deposits. We're very price disciplined on term deposits.
and they really, for the majority of our clients, aren't franchise-type deposits. They're very transactional, and so we don't write business to any great extent that is not economically attractive for us, and so that's what we've seen. Is it slowing? I'd say we saw some slowdown in April , one month.
what I would call the mass retail and small business client bases. We didn't see that this quarter. In fact, retail deposits under $100,000 actually increased overall despite the uncertainty in the marketplace. We felt really good about that sort of core retail and small business client franchise.
Where we're seeing more migration is obviously clients, mass Apple and high net worth clients on the retail side and your institutional larger corporate mid-market players which are actively yield seeking. So to give you a sense in our commercial banking business.
We had just three very large clients move significant amount of deposits into TD Wealth.
and secure brokerage returns that are better than what they were securing previously with Sweep. So we're still seeing that at the margin. Now medium term rates have come off a little bit and so some of that may not be quite as attractive as it might have been, but I still think there's going to be some yield seek that's likely to take place in the market.
We have looked at our pricing. I think our pricing is solid, but given the strength of our deposit We certainly aren't pricing at the margin I think we've got a strong core, and I think we can you know we can defend our current pricing in place Got it, and could you also comment on the level of excess deposits and maybe tied down into Arising that service costs or potential behavior changes by the clients in Canada. I guess
Maybe in a variable mortgage, are you seeing higher paydowns to kind of manage the renewal payment shock or what are you seeing on the excess deposit side? So if I look at our deposit book in situations where we both obviously the mortgage and the deposits, it's actually interesting on average we're actually seeing.
more discretionary reduction in spend in customers who don't have a mortgage than who do have a mortgage. And so mortgage customers in general are handling things very well. And then when you look at customers who have renewals coming up, again we're seeing that customers are making very modest shifts in the discretionary behavior. When you get to trigger rate customers there's a bit more of a shift, but overall across the board our customers are handling the increased payments on their mortgages.
overall quality we're seeing on Rezzle, but even on the variable interest rate mortgage book is good and it's really no difference. So customers are, at least so far, adapting quite well. And Nigel, I would just add from a pay down perspective in the US.
we're still at historical lows. Obviously we don't have the same variable pricing challenges that the Canadian market has. So we're not, we're seeing record low pay down activities in terms of the reso book. Likewise on the commercial side pay downs.
were down significantly in the quarter. So that is contributing to some of the actual loan growth that we're seeing over the past couple of quarters.
were down significantly in the quarter. So that is contributing to some of the actual loan growth that we're seeing over the past couple of quarters.
Thank you. The last question will be from Mike Risvenovich from KBW Research. Please go ahead, your line is open. Hi, for Michael, I think part of your great Canadian story is your residential mortgage book. So just looking at your market share gains, it looks like it was pretty much across the board. Every region you picked up share among the big five this quarter.
And my question is, how highly correlated is that to your margin compression in Canadian P&C Bank? I'm not sure how spreads acted in the quarter in the mortgage lending business, but was that a meaningful impact to the margin downside that we saw? I can make this answer very short. No, that was not a meaningful impact. The mortgage performance that we had was just from a combination of very strong retention of our existing block.
this is in any way impactful on your ability to deploy capital in non deposit taking institutions. I think it's a fair assumption that we're all making that you can't buy another bank, hence FHN got canceled. But what about if you were to look at like a wealth or capital markets acquisition is it any different or does the same
whatever issue is going on in the background impact, put the whole thing on hold in terms of capital deployment. Is there a difference between the two? Well, it depends what it is. And approvals take time. And so we'll have to assess, depending on what kind of opportunity there is in the market. And Mike, as you know, I can't comment any further.
whatever issue is going on in the background impact, you know, put the whole thing on, I guess, on hold in terms of capital deployment. Is there a difference between the two? Well, it depends, you know, what it is. And, you know, I mean, approvals take time. And so we'll have to assess, depending on, you know, what kind of opportunity there is in the market. And Mike, you know, as you know, I can't comment any further, but, you know, we look at
all kinds of transactions and many of them don't make sense. It's hard to speculate on what we would do or what we would not do. Okay, so you are open to other types of M&A, not just necessarily deposit-taking institutions. Is that a fair assessment? Rhea just signed a big check and bought Cowen. So, all right. Thank you. Are there questions registered at this time? I will talk.
of transactions and many of them don't make sense. It's hard to speculate on what we would do or what we would not do. Okay, so you are open to other types of M&A, not just necessarily deposit-taking institutions. Is that a fair assessment? Rhea has just signed a big check and bought, you know, Cowen, so. Okay. All right. Thank you. There are no further questions registered at this time. I will talk, sorry, turn the call.
Back over to Mr. Ms. Rheining. Thank you, operator, and thank you everyone for joining. I know we went long, but it was such a great discussion. Brooke thought we should keep on extending since we have so much interest. But thank you. It was a great, great call and terrific questions as well. Hopefully we'll see all of you on June 8th here in Toronto.
and we thank you for your participation.