Q3 2024 The Toronto-Dominion Bank Earnings Call
Aira, A-I-E-R-A.
ARA, A-R-A, A-R-A. Thank you. Merci. All participants, please continue to stand by. The conference will begin momentarily. Once again, please continue to stand by. We thank you for your patience. Nous vous remercions de bien vouloir patienter. La conférence débutera sous peu. Nous vous prions de bien vouloir attendre quelques instants et nous vous remercions de patienter. Cette conférence est enregistrée. C'est la conférence TD Bank Group Q3 2024. Je voudrais maintenant passer la parole à Mme Brooke Hales, présidente de l'Association des investisseurs. S'il vous plaît, Mme Hales. Merci, opérateur. Bonjour et bienvenue à la présentation de TD Bank Group de la troisième quarantaine de l'année 2024. Beaucoup d'entre nous rejoignent aujourd'hui des terres de l'Amérique du Nord. L'Amérique du Nord est connue comme l'île des oiseaux par beaucoup de communautés indigènes. Je suis actuellement située à Toronto. J'aimerais ainsi commencer la conférence en reconnaissant que je suis sur le territoire traditionnel de nombreuses nations, dont les Mississaugas, l'Anishinaabe, le Chippewa, les Haudenosaunee et les Wendat, et que je suis maintenant à la maison de nombreuses Premières Nations diverses, des Métis et des Inuits. Nous reconnaissons aussi que le Toronto est recouvert par le Traité 13, signé avec les Mississaugas, et le Traité Williams, signé avec plusieurs Mississaugas et Chippewa. Nous commencerons la présentation d'aujourd'hui avec des remarques de Berit Mizrani, le CFO de la Banque, après laquelle Kelvin Tran, le CFO de la Banque, va présenter nos résultats d'opération du troisième quartier. Ajay Bambwale, chef d'agence de risque, va ensuite offrir des commentaires sur la qualité du crédit, après lesquels nous inviterons des questions des analystes préqualifiés et des investisseurs sur le téléphone. Aussi présents aujourd'hui pour répondre à vos questions sont Raymond Chung, groupe d'administration de la Banque personnelle canadienne, Barbara Hooper, groupe d'administration de la Banque personnelle canadienne, Tim Wiggin, groupe d'administration de la Banque personnelle canadienne, Leo Slom, président et chef d'entreprise, TD Bank, la banque la plus convenante de l'Amérique, et Riaz Ahmed, groupe d'administration de la Banque personnelle canadienne. S'il vous plaît, retournez à la page 2. Comme noté sur la page 2, nos commentaires pendant ce témoignage pourraient contenir des commentaires avancés, qui impliquent des assumptions et possèdent des risques et des incertitudes inhérents. Les résultats actuels pourraient différer matériellement. Je souhaiterais également rappeler aux écouteurs que la Banque utilise des mesures financières non-GAAP pour arriver à des résultats ajustés. La Banque croit que les résultats ajustés donnent aux lecteurs une meilleure compréhension de la manière dont la gestion regarde la performance de la Banque. Barrett et Calvin s'adresseront à des résultats ajustés dans leurs remarques. Plus d'informations sur les mesures non-GAAP et les facteurs matériels et les assumptions sont disponibles dans notre rapport Q3-24 aux partenaires. Merci et je passe la présentation à Barrett.
Thank you.
Merci.
All participants, please continue to stand by.
Speaker Change: on participants please continue to stand by the contrference will begin momentarily once again please continue to stand by we thank you for your patients
Speaker Change: The conference will begin momentarily.
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Speaker Change: this conference is being recorded
Speaker Change: Once again, please continue to stand by.
Speaker Change: But when I look at the numbers for the U.S. segment, I see efficiency ratio effectively flat year-over-year, which I think is pretty impressive given the additional investments you've had to make in risk and control.
Speaker Change: soit's go homes at doll is play tv bank group q three two thousand and twenty four earnings conference call
miss brookkeess: i'would like to turn the meeting allover to miss brookkeess head of investor relations please go ahead in this hhousees
miss brookkeess: We thank you for your patience.
miss brookkeess: But I guess the counter argument to that would be, well, then you've had to reduce branch count, you've had to reduce headcount.
miss brookkeess: In the meantime, you know, very happy with how our businesses have performed.
Speaker Change: thank you operator good morning and welcome to tv bank group's third quarter two thousand and twenty four investor presentation
Speaker Change: many of us are joining today's meeting from lands across north america north america is known as turle island by many indigenous communities
Speaker Change: The conference will begin momentarily. We thank you for your patience. This conference is being recorded.
Speaker Change: And so the concern would be how does that impact revenue and productivity of the U.S. segment?
Speaker Change: If you look at the fundamentals in each of our segments, not only in Canada, but in the United States, wholesale, it's been terrific.
Speaker Change: i am currently situated in toronto as such i would like to begin today's meeting by acknowledging that i am on the traditional territory of many nations including the misses sawas of the credit the onishnava the chipwa the holder is showny and the wind that peoes
Speaker Change: and is now home to many diverse first nations may and inuit peoples we also acknowledgeed that toronto is covered by treatthousand and thirteen signed with the neisoga of the credit and the williams treaty signed with multiple missicessaggaas and chioab bans
Speaker Change: TD Bank Group Q3 2024 Earnings Conference Call.
Speaker Change: And, again, I think you've addressed it a little bit already, but maybe you can talk us a little bit through in terms of the strategies you're using to maintain market share and to grow productivity per branch and FTE, because that's kind of what I am seeing in the numbers.
Speaker Change: It's great to see the momentum we have in new account growth, revenue growth, loan growth.
Speaker Change: we will begin today's presentation with remarks from barrt mrnney the bank ceo after which kelvin trend the bank cfo will present our third quarter operating results
Speaker Change: j bumomwali chief risk officer will then offer a comments on credit quality after which we will invite questions from prequalified analyst and investors on the phone
Speaker Change: also present today to answer your questions our raymond chun group head adium personal banking bara hooper group had canadian business banking
Speaker Change: tim wiggan group head wealth management and insurance leosw president ceo td bank america's most convenient bank and reas onthat group had wholesale banking please turn to slide two
Speaker Change: as noted on slide two our comments during this call may contain forward-looking statements which involve assumptions and have inherent risks and uncertainties
Speaker Change: actual results could differ materially i would also remind listeners that the bank uses non-gaap financial measures to arrive at adjusted results the bank believes that adjusted results provide readers with a better understanding of how management views of bank's performance
barrer: there and kelvin will both be referring to adjust results in their remarks additional information about non-gaap measures and material factors and assumptions is available in our q three and twenty-four report to shareholders with that let me thre the presentation over to barrer
barrer: I would like to turn the meeting over to Ms. Brooke Hales, Head of Investor Relations.
barrer: So, it's good to see.
barrer: And, you know, I could not be more proud of our bankers around the world, TD bankers around the world.
barrer: Thank you, Brooke, and thank you everyone for joining us today. In Q3, TD delivered earnings of $3.6 billion in EPS of $2.05. Business fundamentals were strong across the bank. Before I get into the details, I want to spend a few minutes on the announcement we made late yesterday. We continue to actively pursue a resolution of our AML matters. Discussions have been productive, and while we are not through the tunnel yet, we can see the light at the end of this journey. In our release, we noted that it is our expectation that a global resolution can be achieved by the end of the calendar year. The provision of $2.6 billion USD that we announced, in combination with the provision of $450 million USD announced last quarter, represents the current estimate of the total fees to be paid related to these matters. I also want to spend a minute on the remediation program. It is important work, and the remediation program is well underway. In May, we informed you of our progress. We have advanced on all fronts since then. And we have implemented new cross-functional procedures to prevent, detect, and report suspicious activity. There is still much work to be done, but we are satisfied with the progress we have made. It is a priority. Our U.S. business is an important part of the bank and our future. We must focus on the necessary work to meet our obligations and responsibilities and build their future on stronger foundations. As I said before, the mistakes were serious. We own them. We know the issues and we are fixing them. I look forward to giving you more clarity as soon as possible. The sale of 40.5 million shares of Schwab, which brings our holding to approximately 10.1%, further strengthens our capital ratio, ensuring that the bank remains well above regulatory requirements after taking this provision. TD remains very well capitalized, with ample liquidity and the means to invest in our AML remediation program, in our business, and in the customer experience.
barrer: Please go ahead, Ms. Hales.
barrer: Thank you very much for the question, Paul.
barrer: And once again, I want to thank them for their dedication in delivering for all our stakeholders.
barrer: thank you broke and thank you everyone for joining us today
barrer: in q three td delivered earnings of three point six billion dollars in epss of two dollars and five cents business fundamentals was strong across the bank
barrer: Thank you, Operator.
barrer: Just to start maybe, I'd say we have been very focused on creating the space to be able to make these critical investments.
barrer: Look forward to seeing you again at the next quarter end.
barrer: So on a year-on-year basis in segment, expenses were flat.
Speaker Change: before i get into the detailsi want to spend a few minutes on the announcement we made late yesterday
Speaker Change: Good morning, and welcome to TD Bank Group's Q3 2024 Investor Presentation.
Speaker Change: And I think I communicated three quarters ago that we were prosecuting a productivity program that really had four or five major pillars. One, we were looking at organizational health post the First Horizon transaction. We were looking to right-size the organization, and overall FTEs are down about 3 percent on a year-on-year basis.
Speaker Change: Thanks very much.
Speaker Change: Many of us are joining today's meeting from lands across North America. North America is known as Turtle Island by many Indigenous communities.
Speaker Change: Second, we looked at our corporate real estate, including our store optimization program, to be able to identify areas of being able to rationalize what the current environment required, and that has been able – we have been able to generate some productivity savings there.
Speaker Change: I am currently situated in Toronto.
Speaker Change: Thank you.
Speaker Change: And then finally, we've been looking at both our technical architecture as well as our data architecture to find opportunities to be able to simplify.
Speaker Change: we continue to actively pursuea resolution of our aml maters discussions have been productive and while we are not through the tunnel yet we can see the light at the end of this journey
Speaker Change: The conference has now ended.
Speaker Change: Please disconnect your lines at this time.
Speaker Change: And we thank you for your participation.
Speaker Change: in our release we noted that it is our expectation that a global resolution can be achieved by the end of the gallendar the year
Speaker Change: 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 First Nations, Métis, and Inuit peoples.
Speaker Change: the two point six billion u s dollars provision we just announced combined with the foreer and fifty million u s dollars provision announced last quarter represents our current estimate of the total fines to be paid related to these matters
Speaker Change: We also acknowledge that Toronto is covered by Treaty 13, signed with the Mississaugas of the Credit, and the Williams Treaty, signed with multiple Mississaugas and Chippewa bands.
Speaker Change: i also want to spend a minute on the remediation program itself
Speaker Change: this is important work in the remediation program is well underway in may we updated you on our progress we've advanced on all fronts since then
Speaker Change: we ve one-boarded leadership with deep subject mat expertise supported by increased staffing resources we've hired from other banks regulators government and even law enforcement
Speaker Change: we've invested in data and technology to enable improve transaction monitoring and data analytics capabilities
Speaker Change: and we implemented new grass functional procedures were preventing detecting and reporting suspicious activity
Speaker Change: but there's still much work ahead we are pleased with the progress we've made
Speaker Change: this is a priority a u s business is an important part of the bank and of our future we must focus on the work required to meet our obligations and responsibilities and build their future on stronger foundations
Speaker Change: as i have said before the failures were serious we own it we know what the issues are and we are fixing them i look forward to providing additional clarity as soon as i can
Speaker Change: We will begin today's presentation with remarks from Barrett Mizrani, the Bank's CEO, after which Kelvin Tran, the Bank's CFO, will present our third-quarter operating results.
Speaker Change: let's now turn to a third quarter earnings
Speaker Change: revenue grew eight percent year-over-year driven by higher feeincome in our markets-driven businesses and higher volumes and deposit margins in canadian personal and commercial banking
Speaker Change: ecls were stable quarter over a quarter reflecting continued strong credit performance
Speaker Change: we completed our restructuring program announced in the fourth quarter last year delivering efficiencies across the enterprise and continue to prioritize investments in our risk and control infrastructure
Speaker Change: as of quarterend the bank c t one ratio was twelve point eight percent reflecting the impact of the l investigations provisions and shares bought back during the order partially offset by organic capital generation
Speaker Change: the sale of forty and a half million shares of chswab which brings up holding to approximately ten point one percent further strengthens our capital ratio ensuring the bank stays well above regulatory requirements after taking this provision
Speaker Change: td remains very well capitalized with ample liquidity and the means to invest in our mal remediation program in our business and in the customer experience
Speaker Change: Banks continue to shape the future of banking. This quarter, TD completed the migration of its main data platform to the cloud, eliminating related legacy systems and modernizing the bank's data infrastructure. By improving scalability, security, and speed, TD's cloud-based platform is a key foundation for our advanced data-driven organization. And we were proud that TD was recently named the best digital consumer bank in Canada for the five-year period, and the best transformation and innovation in North America for the second five-year period, both by Global Finance. Can we now return to each of our businesses and check a few points from Q3? Our Canadian personal and commercial banking segment delivered record revenues, reaching $5 billion for the first time, and a record net income of over 13% year over year. These strong results were driven by robust growth in loans and deposits and positive operating leverage. Across the segment, we are enhancing our products and offerings through personalization and executing against our 1TD strategy, including strong momentum and referrals from our branch network for sales growth. In terms of secured loans, the bank continues to deliver market-leading revenues by supporting our growing customer base. 1TD, which already has the largest credit account base in Canada, reached a new milestone with over 8 million active accounts. Additionally, according to the 2024 Bond Loyalty report, 1TD credit cards are number one among major buyers in the Loyalty program. In terms of personal loans, the bank supports the financial journey of Canada's next generation of doctors, dentists, and veterinarians by enhancing the 1TD student line of credit, offering and improving relationships as their needs evolve. 1TD has evolved in its deposit franchise, with another strong momentum for account openings, and in the Canadian market, we have expanded our packages to include offers for 1TD direct investments and the 1TD credit card, adding even more value for new Canadians. In the banking market, 1TD increased loans by 7% year over year. This week, the bank launched 1TD innovation partners, a new team that offers a comprehensive suite of services to better address the needs of technology and innovation businesses. 1TD already has over 1 million banking entrepreneurs across Canada, and now, with 1TD innovation partners, the bank is helping the next generation of tech companies at every stage of their journey. Moving to the United States, the U.S. Business Bank continues to deliver strong operating momentum, with sequential cash growth and stable deposits, excluding run-offs, and year-over-year growth in 1TD direct loans. We eliminated consumer loans by 8% year over year, with a proprietary bank balance of 16%. We have simplified our infrastructure and brought productivity expenses across our credit card business, with the migration of sales card services to our more consolidated and advanced cards.
Speaker Change: the bank continues to shape the future of banking this quarter t d completed the migration of its main data platform to the cloud eliminating related legacy systems and modernizing the bank's data infrastructure
Speaker Change: enhancing scalability security and speed td's cloud-based backatwound is a key foundation for our forward focus data-driven organization
Speaker Change: and we were proud that tedd was recently named the best consumer digital bank in canada for the fourth consecutive year and the best transformation and innovation in north america for the second consecutive year both by global finanance
Speaker Change: Ajay Bambwale, 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 Change: let me now turn to each of our businesses and review some some highlights from q three
Speaker Change: Also present today to answer your questions are Raymond Chung, Group Head, Canadian Personal Banking, Barbara Hooper, Group Head, Canadian Business Banking, Tim Wiggin, Group Head, Wealth Management and Insurance, Leo Slom, President and CEO, TD Bank, America's Most Convenient Bank, and Riaz Ahmed, Group Head, Wholesale Banking.
Speaker Change: a canadian personal and commercial banking segment delivered record revenues reaching five billion dollars for the first time and record net income up thirteen percent year-over year these strong results were driven by robust loan and deposit growth and substantial positive operating leverage
Speaker Change: Please turn to slide 2.
Speaker Change: As noted on slide 2, our comments during this call may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties.
Speaker Change: Actual results could differ materially.
Speaker Change: I would also remind listeners that the Bank uses non-GAAP financial measures to arrive at adjusted results. The Bank believes that adjusted results provide readers with a better understanding, of how management views the Bank's performance.
Speaker Change: Bharat and Kelvin will both be referring to adjusted results in their remarks. Additional information about non-GAAP measures and material factors and assumptions is available, in our Q3-24 report to shareholders.
Speaker Change: across the segment we are enhancing products and offerings through personalization and execution against our oned strategy
Speaker Change: including strong momentum and referrals from our retail branch network too well
Speaker Change: in really real estate secured lending the bank continueed to deliver market share gains while supporting our growing customer base
Speaker Change: and td which already has canad as largest credit card account ways reached a new milestone with over eight million active accounts
Speaker Change: in addition according to the two thousand and twenty four bond loyalty report td creditcards rked number one across major issuers in program loyalty
Speaker Change: in personal lending the bank is supporting the financial journey of canada' next generation of doctors dentist and veterinarians by enhancing d student line of credit offering and deepening relationships as their needs evol
Speaker Change: td grew its leading deposit franchise with another strong quarter for account opening
Speaker Change: and in the neutal canada market we extended our package packages beyond accounts to include offers for both td direct in westing and and the td cash back visa card as we add even more value when new canadians
Speaker Change: in business banking td grew loans by seven percent year-over-year this quarter the bank launched d innovation partners in new team offering broad meit of services to further address the needs of technology and innovation companies
Speaker Change: did he already has more than a million business banking customers across canada and now with tedd innovation partners the bank is helping the next generation of technology companies at every step of their journeys
Speaker Change: turning to the u s the u s retail bank continued to deliver strong operating momentum with sequential earnings growth and stable deposits excluding swees and peer leading loan growth year-over year
Speaker Change: d grepcust consumer loanss eight percent year-over-year with proprietary rebankcard balances up sixteen percent
Speaker Change: In fact, I'm very pleased that this past weekend we did consolidate our retail card services business onto our target cards operating platform, and that will represent about a $15 million reduction in operating costs.
Speaker Change: We are doing the things we need to do to be able to create operating leverage so that we can invest those proceeds, not only in the governance and control programs, but also in some of the critical areas that we've identified, like our digital and mobile environment, like investments in our next-generation store design, in cards, in wealth, areas that we think were still underpenetrated and where the franchise, our 10 million client base, would benefit from a greater and a deeper relationship over time.
Speaker Change: we simplified our infrastructure and rove productivity savings across our credit card business with the migration of retail card services into our consolidated more advanced cards platform
Speaker Change: Commercial banks have increased mid-market credit laws to 18%. These strong results were partly achieved through the continuity of our 1TD strategy. As TD Bank, America's most convenient bank, and TD Securities collaborated to bring industry expertise to mid-market clients and prospects, and to build relationships to capture financial opportunities for founders. And this quarter, we are proud that, for the fifth consecutive year, TD Auto Finance received the highest ranking in the American entrepreneur J.D. Power's financial satisfaction study. J.D. Power also awarded TD Bank, America's most convenient bank, the highest ranking in online financial satisfaction among national banks, according to its American online financial satisfaction study, reflecting our investments in digital banking and our dedication to delivering legendary customer experiences across all distribution channels. The wealth management and insurance segment demonstrated its resilience this quarter, as strong fundamentals, including record revenues, enabled the business to achieve significant demand growth. Over the past few years, we have seen an increase in the frequency of weather events, and with TD's winning direct business model and our ability to adapt to environmental changes, I am confident that the insurance business will continue to offer attractive returns on equity over time. Our advisory business saw significant growth in online assets across all our channels, coupled with market appreciation, leading to a total asset increase of 15% year over year. In the direct investment field, a leadership position is the result of consistent innovation to bring market-adaptive capabilities to our clients. You saw this last quarter with the launch of TD ActiveTrader, and we have continued to innovate. This month, TD became the first bank in Canada to launch real-time fractional shares, allowing investors to buy and sell a fraction of stocks, indices, and ETFs, making investment more accessible. This launch reflects the power of 1TD, with TD Securities providing fractional share execution to support this new feature. Our insurance business was impacted by severe weather events in the Toronto area, water leaks in Alberta in Q3, and storms and floods in Calgary and Montreal this month. At TD Insurance, we are there for our clients in their time of need. I want to thank my TD colleagues for their efforts for our clients through these events. To support communities affected by severe storms, TD has made donations in Canada and is facilitating client donations at branches across Canada. The insurance bank continues to grow with annual revenues above 14% due to broader and stronger capabilities. We continue to make good progress, integrating our teams, improving our client relationships, and enhancing momentum across our banking and market businesses. Additionally, we have improved the execution of American partners for our clients with a fully launched and automated TDSX private room. Overall, our businesses performed well in Q3, and I am confident in the strength of our franchise. We operate in a delicate environment, with significant market volatility, rapidly evolving price expectations, and high geopolitical risk.
Speaker Change: So that's really the strategy that we've been executing against.
Speaker Change: There's no doubt that as we execute on some of these programs from a governance and control standpoint, there could be some elevated expenses, and I'm comfortable with that because I want to drive to that sustainable platform in the U.S.
Speaker Change: in commercial banking middle market loan balances grew eighteen percent
Speaker Change: these strong results were driven in part by continued execution of our one d strategies as td bank america's most convenient bank and tedd securities collaborated to bring industry expertise to middle market clients and crossws and leverage relationships to capture sponsor back finance opportunities
Speaker Change: We have such a signature differentiated platform.
Speaker Change: and this quarter we are proud that for the fifth year in a row td auto finance received the highest ranking the jd power u s dealer finance satisfaction study
Speaker Change: jd power also awarded tdank america's most convenient bank the highest ranking in online banking satisfaction among national banks according to its u s online banking satisfaction study
Speaker Change: reflecting our investments in digital banking and our dedication to delivering legendary customer experiences across all our distribution channels
Speaker Change: the wealth management and insurance segment demonstrated resilience this quarter as strong fundamentals including record revenues enabled the business to earn through a significant increase in claims
Speaker Change: for the last few years we'have seen an increase in the frequency of weather events with ted's winning direct to consumer business model and our ability to adapt to changes in the environment i'm confident that the insurance business will continue to deliver in attractive return on equity over time
Speaker Change: our advice business is so significant retail net asset growth across all our channels coupled with market appreciation driving total assets up fifteen percent year-over-year
Speaker Change: direct investing a leadership position is the result of consistent innovation to bring market leading capabilities to our clients
Speaker Change: you saw that last quarter with the launch of pdactive cradater
Speaker Change: and we've continued to innovate this month td was the first main in canada to launch real time partial shares enabling investors to buyand sell of fractional stocks indices and ef making investing more accessible
Speaker Change: this launch reflects the power of one td with pdsecurities is providing the back-end execution to support this new functionality
Speaker Change: insurance business was impacted by the severe weather events in the greater to run to area and the wildfires in alberta in q three and by hastones in calgary and flood in montreal this month
Speaker Change: at ted insurance we are there for our customers in their moment of need
Speaker Change: i to thank td colleagues for the tremendous efforts for our customers through these events to support the communityities impacted by wildfires tds made donations to the canadian red cross and its facilitating customer donations that branches across canada
Speaker Change: whose banking continued its's growth with revenues up fourteen percent yearuroover year on broader stronger capabilities
Speaker Change: we continue to make good progress integrating our teams deepening our client relationships and gaining momentum across our banking and markets businesses
Speaker Change: in addition we enhanced u us share trading execution for our clients with the fully launch and automated dx private room
Speaker Change: overall our businesses performed well in q three and i'm confident in the strength of our franchise we are operating in a challenging environment with significant market volatility rapidly evolving rate expectations and heightened geopolitical risk
Speaker Change: Beyond the uncertainty regarding the future of the economy between Canada and the United States, clients and commercial clients in general are taking a cautious approach. As always, TD will be there for them as we navigate the coming months together. And those of you in Toronto have probably noticed, in addition to the city's skyline, the new TD Terrace building. Inside the building, there is a state-of-the-art TD building, constructed as a next-generation innovation center, allowing the bank to test new capabilities in a live environment. The bank's unique and inclusive culture continues to attract talent. TD received a top score of 100 in the Disability Equality Index in 2024 for the tenth consecutive year in the United States. And, with the expansion of the index to Canada for the first time this year, the bank received the same top score in Canada. Beyond our businesses, our clients are at the heart of who we are and what we do. That's why, ten years ago, we launched our first TD Thanks You campaign to show our gratitude for their unwavering support. Over the course of this milestone year, we took our appreciation to the skies with spectacular drone displays in cities across Canada. Our colleagues live our commitment to our clients every day, and I thank them for all their efforts. I am confident that, together, we will continue to deliver for all our stakeholders. With that, I will hand it over to Kelvin. Thank you, Barrett. Good evening, everyone. Please turn to page 11. The earnings announced this quarter include an investment forecast of 2.6 billion euros in the United States. On an adjusted basis, earnings were 3.6 billion euros per year, and earnings per share were 2.05 dollars, up 5% per year. Overall, we saw good fundamentals across our businesses, reflecting our strong top-line growth. This was partially offset by two elements in the wealth management and insurance sector. The impact of claims on events related to severe weather, which, as a percentage of revenue, were 40% higher than Q3 of last year, and forecasts related to ongoing investment issues. The year-over-year revenue increase was driven by higher revenue in our markets, driven businesses, higher volumes, and deposit margins in the Canadian wealth and insurance sector. We saw record revenues in two sectors this quarter, Canadian personal and commercial banking, and wealth management and insurance. Expenses increased year-over-year, reflecting investments in our risk control infrastructure and higher employee-related expenses. We continue to prioritize our investments and manage expenses smartly. By continuing to seek efficiencies in our expense base, we have now concluded our restructuring program. We have provided more details on page 2.
Speaker Change: amid uncertainty in the outlook for the economies in both canada and the u s retail customers and business clients alike are generally taking a cautious approach as always td will be there for them as we navigate the coming months together
Speaker Change: and those of thein toronto a likely notice in addition to the city skyline the new td terrorist building inside the building is a state of the r td branch built as a next generation innovation center enabling the bank to test new capabilities in a live environment
Speaker Change: the bank's unique and inclusive culture continues to attract talent
Speaker Change: he received the top score of one hundred in the two thousand and twenty four disability equality index for the tenth consecutive year in the u s and with the expansion of the index of canada for the first time this year the bank achieved the same top score in canada as well
Speaker Change: across our businesses a customers are at the heart of who we are and what we do that's why ten years ago we launch our first pd thanks you campaign to showcase our gratitude for their unwavering support
Speaker Change: in this milestone year we've taken our appreciation to the skies through spectacular drone light shows in cities of acice canada
Speaker Change: our colleagues live our commitment to our customers everyday and i want to thank them for all their efforts
Speaker Change: i'm confident that together we will continue to deliver for all our stakeholders
Speaker Change: With that, let me turn the presentation over to Bharat.
Speaker Change: Thank you, Brooke, and thank you, everyone, for joining us today.
Speaker Change: We want to make sure that we've got the license and the capability to continue to grow at scale.
Speaker Change: with that i'll turn things over to kelvin
Speaker Change: In Q3, TD delivered earnings of $3.6 billion and EPS of $2.05. Earnings fundamentals were strong across the bank.
Speaker Change: Thanks for that.
Speaker Change: Before I get into the details, I want to spend a few minutes on the announcement we made, late yesterday.
Speaker Change: And second question is a little bit of a follow-up on I think what, Meny asked to begin with and sort of the second part of his question on why the share buy back this quarter and then sell the Schwab stock.
Kelvin: thank you barret good morning everyone please turn to slide eleven
Kelvin: We continue to actively pursue a resolution of our AML matters. Discussions have been productive and while we are not through the tunnel yet, we can, see the light at the end of this journey. In our release, we noted that it is our expectation that a global resolution can be achieved by, the end of the calendar year. The $2.6 billion provision we just announced, combined with the $450 million provision announced, last quarter, represents our current estimate of the total fines to be paid related to these matters.
Kelvin: Like that's a decision you must await, I assume, sort of around the beginning of the quarter when you had a fairly good idea, of where the provisions may come in.
Kelvin: reported earnings its quarter include a two point six billion dollar u us a l investigations provision
Kelvin: I also want to spend a minute on the remediation program itself.
Kelvin: on an adjusted basis earnings were three point six billion dollars flat yearover-year and earnings per share was two dollars in five cent up five percent year-over-year
Kelvin: This is important work and the remediation program is well underway.
Kelvin: In May, we updated you on our progress. We have advanced on all fronts since then. We have onboarded leadership with deep subject matter expertise supported by increased staffing, resources. We have hired from other banks, regulators, government, and even law enforcement. We have invested in data and technology to enable improved transaction monitoring and, data analytics capabilities.
Kelvin: So obviously it's a decision you weighed.
Speaker Change: overall we saw good fundamentals across our businesses reflectinged in our strong top line growth
Speaker Change: this was partially offset by two items in the wealth management and insurance segment
Speaker Change: the impact of claims from severe rather -related events
Speaker Change: which as a percentage of earned premiums was forty percent higher than q three of last year and provisions related to ongoing litigation manners
Speaker Change: Why did you decide to go ahead and repurchase TD stock, sell Schwab?
Speaker Change: revenue increase -over-year driven by higher fee income in our markets driven businesses and higher volumes and deposit margins in a canadian personal and commercial banking
Speaker Change: Like why does that benefit shareholders?
Speaker Change: The accounting rules on this, Paul, are very straightforward.
Speaker Change: Our view is that the $2.6, billion is our current estimate.
Speaker Change: we saw record revenues in two segments this quarter canadian person and commercial banking and wealth management and insurance
Speaker Change: We have implemented new cross-functional procedures for preventing, detecting, and reporting suspicious, activity.
Speaker Change: expenses increase the-over-year reflecting investments in our risk and controll infrastructure and higher employee-related expenses
Speaker Change: And in addition to the 450 we had taken.
Speaker Change: we continue to prioritize our investments and manage expenses diligently
Speaker Change: While there is still much work ahead, we are pleased with the progress we have made.
Speaker Change: And so we made sure that we follow that standard.
Speaker Change: I think our buybacks have been continuing right through the year. And as Kelvin said, we have now completed 85% of what we had targeted. And the program now expires at the end of August.
Speaker Change: while we continue to look for efficiencies in our cost base we have now concluded our restructuring program
Speaker Change: Now we're executing well against our restructuring initiatives. We expect fiscal 2024 adjusted expense growth to be in the high single digits, reflecting higher investments in our risk and control infrastructure, strong performance in our markets-related businesses, and certain items including litigation. Provisions for credit losses (PCLs) were stable quarter-over-quarter. Please turn to slide 12. Canadian personal and commercial banking delivered a strong quarter with record net income and revenue, reflecting loan and deposit volume growth and substantial positive operating leverage. Average loan volumes rose 6% year-over-year, with 6% growth in personal volumes, driven by real estate secured lending up 6% and cards up 10%, and 7% growth in business volumes. Average deposits rose 5% year-over-year, reflecting 7% growth in personal deposits and 2% growth in business deposits. Net interest margin was 2.81%, down 3 basis points quarter-over-quarter, as expected, reflecting the migration of Bankers' Acceptances (BAs) to CORRA-based loans. As we look forward to Q4, while many factors can impact margins, we expect downward pressure due to BA-CORRA migration and the impact of Bank of Canada rate cuts partially offset by the benefit of tractor on and off rates. Expenses increased reflecting high spend supporting business growth, including employee-related expenses and technology costs. Please turn to slide 13. The U.S. Retail Bank continued to deliver strong operating momentum with sequential earnings growth and peer-leading loan growth year-over-year. Average loan volumes increased 5% year-over-year, reflecting 8% growth in personal loans and 3% growth in business loans. We continue to deliver growth in mid-market commercial lending, with volumes up 18%, a business that is also driving fee income. Average deposit volumes, excluding sweep deposits, were relatively flat year-over-year, as the U.S. Retail Bank demonstrated deposit stability in a competitive environment. Net interest margin was 3.02%, up three basis points quarter-over-quarter, driven by higher deposit margins. As we look forward to Q4, while many factors can impact margins, we expect a modest NIM expansion due to the benefit of tractor on and off rates, partially offset by any potential Fed rate cuts. Reported expenses include a $2.6 billion U.S. AML investigations provision. On an adjusted basis, expenses were relatively flat year-over-year, primarily due to higher operating expenses offset by ongoing productivity initiatives.
Speaker Change: This is a priority.
Speaker Change: So I don't think I can add any more.
Speaker Change: we have provided more details on slide twenty seven
Speaker Change: A U.S. business is an important part of the bank and of our future.
Speaker Change: We always prudently capitalized, conservatively capitalized in the bank.
Speaker Change: We must focus on the work required to meet our obligations and responsibilities and build, that future on stronger foundations.
Speaker Change: And it made sense for us to do exactly what we outlined.
Speaker Change: As I have said before, the failures were serious.
Speaker Change: And it makes sense in a sense that our capital levels will continue to be where one would expect given TD's history and the way we manage capital.
Speaker Change: We own it.
Speaker Change: now wewithre standing good execution against our restructuring initiatives we expect fiscal two thousand and twenty-four adjusted expense growth to be in the high single digits
Speaker Change: We know what the issues are and we are fixing them.
Speaker Change: So we're comfortable with how we got to where we did.
Speaker Change: I look forward to providing additional clarity as soon as I can.
Speaker Change: Let's now turn to our third quarter earnings. Revenue grew 8% year-over-year, driven by higher fee income in our markets-driven businesses, and higher volumes and deposit margins in Canadian personal and commercial banking.
Speaker Change: Okay.
Speaker Change: reflecting higher investments in our risk and controlling infrastructure
Speaker Change: strong performance in our markets-related businesses
Speaker Change: PCLs were stable quarter-over-quarter, reflecting continued strong credit performance.
Speaker Change: and certain items including the neigation
Speaker Change: I'll leave it there.
Speaker Change: cls were stable qut of a quarter
Speaker Change: please turn to slide twelve
Speaker Change: Thank you.
Speaker Change: adiianum personl and commercial banking delivered a strong quarter with record net income and revenue
Speaker Change: Thank you.
Speaker Change: reflecting loan and deposit volume growth in substantial positive operating leverage
Speaker Change: The next question is from Saurabh Movahedi from BMO Capital Markets.
Speaker Change: Please, go ahead.
Speaker Change: average loan volumes rolled six percent -over-year
Speaker Change: Okay.
Speaker Change: with six percent growth in personal volumes driven by real estate secured lending up six percent and cards upten percent
Speaker Change: and seven percent growth in business voludume
Speaker Change: Thank you.
Speaker Change: Maybe just for Riaz, if there was a desire on the part of the bank for the, wholesale bank to grow faster than maybe what had been contemplated when you executed on the Cowen acquisition, how much faster could you grow and what sort of resources would you need for each incremental 100 basis points of growth?
Speaker Change: average deposits roles five percent year-over-year reflecting seven percent growth in personal deposits and two percent growth in business deposits
Speaker Change: that interest margin was two point eighty one percent
Speaker Change: down three basis point quarter quarter as expected reflecting the migration of ba to qureour basedelloans
Speaker Change: as we look forward to q four while many factors can impact margins we expect downward pressure due to ba cora migration and the impact of bank of canada rate cuts partially offset by the benefit of tractor on in offrate
Speaker Change: expenses increaseed reflecting five spend supporting business growth
Speaker Change: including and pre-related expenses and technology costs
Speaker Change: Thanks for that, Saurabh.
Speaker Change: Look, I think if you just look at historic development or revenue, over the last five years, the wholesale bank has more than doubled.
Speaker Change: please turn to slide thirteen
Speaker Change: us retail bank continuue to deliver strong operating momentum with sequential earnings growth and cleure leading loan growth year-over-year
Speaker Change: average loan volumes increased five percent year-over-year reflecting eightpercent growth in personal loans and three percent growth in business loans
Speaker Change: we continue to deliver growth in mid-market commercial lending with volumes up eighteen percent a business that is also driving fee income
Speaker Change: average deposit volumes excluding sleep deposits were relatively flat yearover-year as the u s retail bank demonstrated deposit stability in a competitive environment
Speaker Change: that interest margin was three point ero two percent up three basis point qu to quarter driven by higher deposit margin
Speaker Change: as we look forward to q four while many factors can impact margins
Speaker Change: we expect a modest nlimim expansion due to the benefit of tractor on an off rates partially offset by any potential ft ratecuts
Speaker Change: reported expenses include a two point six billion dollar u s l investigations provision
Speaker Change: on an adjusted basis expenses were relatively flat year-over-year primarily due to higher operating expenses offset by ongoing productivity initiatives
Speaker Change: Please turn to slide 14. Wealth management and insurance delivered record revenue and strong fundamentals across its diversified businesses. Revenue grew 13% year-over-year, reflecting higher insurance premiums, fee-based revenue, deposit margins, and transaction revenue. Insurance service expenses were up 20% year-over-year, primarily reflecting increased claim severity, less favorable prior year's claims development, and larger impact of severe weather-related events. We saw claims cost of $186 million this quarter due to severe weather events in the Greater Toronto Area and wildfires in Alberta in July. In addition, there have been two significant weather events so far in August, the Calgary hailstorms and the Montreal floods. For these two events, we expect claims and related costs of more than $300 million in Q4. To help support analysts, investors' analysis of our insurance business performance, we have added disclosure of current quarter claims costs net of reinsurance to page 12 of the Supplemental Financial Information Package. Expenses were up 13% year-over-year. More than half of this increase related to provisions for ongoing litigation matters, with the remainder driven by higher variable compensation. Assets under management and assets under administration increased year-over-year, both reflecting market appreciation and net asset growth. Please turn to slide 15. Wholesale banking continued its growth, delivering revenues of $1.8 billion, reflecting higher trading-related revenue, lending revenue, advisory, and underwriting fees. This quarter, we also saw higher PCLs, reflecting a few new impairments across different sectors. Expenses increased 12% year-over-year, primarily reflecting higher variable compensation commensurate with higher revenues. The business delivered positive operating leverage and an efficiency ratio of 69% as we continue to optimize the platform. Please turn to slide 16. The corporate net loss for the quarter was $324 million. As you will recall, we guided to adjusted net losses in the $200 million to $250 million range, although we expected it to bounce around from quarter to quarter for fiscal 2024. We have increased investments in our risk and control infrastructure and expect corporate adjusted net losses to remain above that range for Q4. Net corporate expenses increased $93 million compared to the prior year, mainly reflecting investments in risk and control infrastructure, partially offset by litigation expenses in the prior year. Please turn to slide 17. The common equity tier 1 ratio ended the quarter at 12.8%, down 57 basis points.
Speaker Change: please turn to slide fourteen
Speaker Change: wealth management and insurance delivered record revenue and strong fundamentals across this diversified businesses
Speaker Change: revenue groww thirteen percent year-over-year reflecting higher insurance premiums fee-based revenue deposit margins and transaction revenue
Speaker Change: insurance service expenses were up twenty percent yearoveryear primarily reflecting increased claims severity last favorable prior year s claims development and larger impact of severe weather related events
Speaker Change: we saw claims cost of one hundred and eighty six million dollars this quarter due to severe weather events in the greater toronto area and wildfires in alberta in july
Speaker Change: in addition
Speaker Change: there have been too significant weather events so far in august
Speaker Change: the calgary heldstorms and the monary off floods
Speaker Change: with these two events we expect claan and related cost of more than three hundred million dollars in q four
Speaker Change: to help support alst investors analysis of our insurance business performance we have added disclosure of current quarter claims costs net of reinsurance to page twelve of the supplemental financial information cuty
Speaker Change: expenses were up thirteen percent year over- year
Speaker Change: more half of this increase related to provisions for ongoing litigation matters
Speaker Change: with the remainder driven by higher variable compensation
Speaker Change: assets under management and assets under administration increase yearover-year both reflecting market appreciation in net asset growth
Speaker Change: please turn to slide fifteen
Speaker Change: also banking continued its growth delivering revenues of one point eight billion dollars reflecting higher trading -related revenue landing revenue advisory and underwriting fees
Speaker Change: this quarter we also saw higher pcl reflecting a few new impairments across different sectors
Speaker Change: expenses increased troup cent year-over-year primarily reflecting higher of ourl compensation demenstrate with higher revenuees
Speaker Change: the business delivered a positive operating leverage and an efficiency ratio of sixty-nine percent as we continue to optimize the platform
Speaker Change: please turn to slide sixteen
Speaker Change: the corporate net loss for the quarter was three hundred twenty-four million dollars
Speaker Change: as you you were werecall
Speaker Change: we guided to adjusted net losses theed two hundred to two hundred and fifty million dollar range
Speaker Change: although we expected it to bounce around from the quarter to-quarter for fiscal two thousand and twenty-four
Speaker Change: We completed our restructuring program announced in the fourth quarter last year, delivering, efficiencies across the enterprise and continue to prioritize investments in our risk and control infrastructure.
Speaker Change: we have increased investments in our risk and controllinginfrastructure and expect cororate adjusted net losses to remain about that range for q four
Speaker Change: that corporate expenses increased ninety-three million dollars compared to the prior year mainly reflecting investments and risk and control frastructure partially offset by litigating expension in the prior year
Speaker Change: As of quarter end, the bank's CET1 ratio was 12.8%, reflecting the impact of the AML, investigations, provisions, and shares bought back during the quarter, partially offset by organic capital generation. The sale of 40.5 million shares of Schwab, which brings our holding to approximately, 10.1%, further strengthens our capital ratio, ensuring the bank stays well above regulatory requirements after taking this provision.
Speaker Change: TD remains very well capitalized, with ample liquidity and the means to invest in our AML, remediation program, in our business, and in the customer experience.
Speaker Change: The bank continues to shape the future of banking. This quarter, TD completed the migration of its main data platform to the cloud, eliminating, related legacy systems and modernizing the bank's data infrastructure. Using scalability, security, and speed, TD's cloud-based platform is a key foundation for, our forward-focused, data-driven organization.
Speaker Change: And we were proud that TD was recently named the best consumer digital bank in Canada for, the fourth consecutive year, and the best transformation and innovation in North America for the second consecutive year, both by Global Finance.
Speaker Change: please turn to slide seventeen
Speaker Change: a common equity one ratio ended the quarter at twelve point eight percent down fifty seven basis points seek
Speaker Change: We had strong internal cash generation this week. The impact of RWA, excluding the impact of IFX, increased slightly, mainly referring to the impact of RWA on operational risks from certain provisions taken last week. We repurchased about 13 million partnerships in Q3, and none so far in August. Our current NCIB expires on August 31, and we do not intend to repurchase any more partnerships before the expiration. Beyond the 90 million partnership buyback program, and our previous 30 million partnership buyback program, TD has repurchased more than 100 million partnerships, almost 85% of the authorized partnerships, providing income to partners by managing our capital adequately. TD sold its common partnerships to First Horizon this quarter, adding 6 basis points to CET1. We had an impact of less than 71 basis points to CET1 from the AML investment provision this quarter, referring to the impact of this quarter's income and the impact of RWA on operational risks announced last week. We expect an impact of less than 35 basis points to CET1 from the AML investment provision this quarter in Q4. As a reminder, referring to the impact of operational risks announced by AML on operational risks announced by AML in Q4, this will be partially offset by an impact of more than 54 basis points to CET1 in Q4 from the purchase of 40.5 million partnerships. With that, RJ, over to you. OK. Thank you, Kelvin, and good morning everyone. Please turn to page 18. Gross imperative housing formations were stable at 22 basis points for banks, while higher imperative housing formations in AML and U.S. commercial businesses were largely offset by lower formations in Canadian businesses. Please turn to page 19. Gross imperative housing formations increased by 3 basis points in Q4 to 44 basis points, driven by some new imperatives across a number of industries in each of AML and U.S. businesses, partially offset by lower imperatives in Canadian businesses. Please turn to page 20. Remember that our presentation reports PCL ratios, both gross and net, of the strategic PCL sharing partners of AML and U.S. We remind you that the PCLs of AML and U.S., recorded in the corporate segment, are fully absorbed by our partners and do not impact the net cash of the banks. The gross provision of banks for credit losses was stable in Q4, while an increase in the AML segment was offset by decreases in the Canadian, PNC, U.S., and corporate segments. Please turn to page 21.
Speaker Change: entually
Speaker Change: we had strong internal capital generation this quarter
Speaker Change: oura excluding the impact of fxs increased slightly primary reflecting the operational risk r imp certain provisions taken last quarter
Speaker Change: we repurchase approximately thirty million shares in q three
Speaker Change: and none in august date
Speaker Change: our current and ci expires on august thirty first and we do not intend to repurchase any additional shares prior to expirey
Speaker Change: across the ninety million share byback program and our previous thirty million share bubyback program td repurchase over one hundred million shares almost eighty- five percent of the shares authorized delivering returns for shareers while managing our capital appropriately
Speaker Change: d sold is common shares in first horrise in this quarter generating six basis points of c
Speaker Change: we had a negative seventy one basis points impact to c q one from ml investigation provision this quarter reflecting the earnings impact of this quarter's provision and the operational risk r p the provision announced last quarter
Speaker Change: we expect a negative thirty-five basis point impact from this quarter's ml investigation provision in q four
Speaker Change: as a reminder consistent with the bazzle three reforms operational rich our a impact tick effect on a one quarter lag
Speaker Change: this will be partially offside by a positive fifty four basis point impact to c one in q four from the cell of forty point five minutes
Speaker Change: Let me now turn to each of our businesses and review some highlights from Q3.
Speaker Change: And I think that this is a business that it does move quickly.
Speaker Change: swap shares
Speaker Change: Our Canadian personal and commercial banking segment delivered record revenues, reaching, $5 billion for the first time, and record net income, up 13% year-over-year. These strong results were driven by robust loan and deposit growth and substantial positive, operating leverage.
Speaker Change: And to your point, it can be grown fast or slow.
RJ: with that rj over to you
RJ: Across the segment, we are enhancing products and offerings through personalization and, execution against our OneTD strategy, including strong momentum in referrals from our retail branch network to Wealth.
RJ: But I think we have to make a balance in growing out our strategy as well as weight, our risk considerations from the perspective of making sure that we have the right talent in seats and we've been able to hire just fantastic talent over the last two years in the various seats, but also continue to build our infrastructure to make sure that we have the right visibility over the risks in the business.
RJ: In real estate-secured lending, the bank continued to deliver market share gains while supporting, our growing customer base.
RJ: But look, I think we've been, There's a lot of room for us to continue to grow, whether it be in prime businesses, transaction banking businesses, electronic trading, sponsors, leveraged finance.
RJ: And TD, which already has Canada's largest credit card account base, reached a new milestone, with over 8 million active accounts. In addition, according to the 2024 Bond Loyalty Report, TD credit cards ranked number one, across major issuers in program loyalty.
RJ: We've been able to bring up our revenue now to a consistent performance of $1.8 billion a quarter through this period of integration and build, and market conditions seem like they're only getting more supportive right now.
RJ: okay thank you kevin and good morning everyone please turn to slide eighteen
RJ: In personal lending, the bank is supporting the financial journey of Canada's next generation, of doctors, dentists, and veterinarians by enhancing TD's student line of credit, offering, and deepening relationships as their needs evolve.
RJ: So, I do feel that the growth trajectory that we're on is a good one for the bank in aggregate, and maybe we can speed it up a little bit, but I wouldn't anticipate that we're looking to double it in the next year or two.
RJ: TD grew its leading deposit franchise with another strong quarter for account openings.
RJ: Maybe you're trending at around $1.6 billion, maybe a little bit higher than that.
RJ: And, in the new-to-Canada market, we extended our packages beyond accounts to include offers, for both TD Direct Investing and the TD Cash Back Visa card as we add even more value for new Canadians.
RJ: In business banking, TD grew loans by 7% year-over-year. This quarter, the bank launched TD Innovation Partners, a new team offering a broad suite, of services to further address the needs of technology and innovation companies.
RJ: TD already has more than a million business banking customers across Canada, and now with, TD Innovation Partners, the bank is helping the next generation of technology companies at every step of their journey.
RJ: Returning to the U.S., the U.S. Retail Bank continues to deliver strong operating momentum, with sequential earnings growth and stable deposits excluding sweeps and peer-leading loan growth year-over-year. TD grew consumer loans 8% year-over-year with proprietary bank card balances up 16%.
Speaker Change: cross-impaired loan informations was stable at twenty-totwo basis points for the bank
Speaker Change: We simplified our infrastructure and drove productivity savings across our credit card business with the migration of retail card services into our consolidated, more advanced cards platform.
Speaker Change: In commercial banking, middle market loan balances grew 18%. These strong results were driven in part by continued execution of our OneTD strategies. As TD Bank, America's most convenient bank, and TD Securities collaborated to bring industry expertise to middle market clients and prospects and leverage relationships to capture sponsor-backed finance opportunities.
Speaker Change: And this quarter, we are proud that for the fifth year in a row, TD Auto Finance received the highest ranking in the J.D. Power U.S. Dealer Finance Satisfaction Study.
Speaker Change: J.D.
Speaker Change: Power also awarded TD Bank, America's most convenient bank, the highest ranking in online banking satisfaction among national banks, according to its U.S. Online Banking Satisfaction Study, reflecting our investments in digital banking and our dedication to delivering legendary customer experiences across all our distribution channels.
Speaker Change: The wealth management and insurance segment demonstrated resilience this quarter, as strong fundamentals, including record revenues, enabled the business to earn through a significant increase in claims.
Speaker Change: Over the last few years, we have seen an increase in the frequency of weather events.
Speaker Change: as higher impared loan formations in wholesale and u s commercial
Speaker Change: With TD's winning direct-to-consumer business model and our ability to adapt to changes in the environment, I am confident that the insurance business will continue to deliver an attractive return on equity over time.
Speaker Change: Our advice businesses saw significant retail net asset growth across all our channels, coupled with market appreciation driving total assets up 15% year-over-year.
Speaker Change: In direct investing, a leadership position is the result of consistent innovation to bring market-leading capabilities to our clients.
Speaker Change: You saw that last quarter with the launch of TD ActiveTrader, and we have continued to innovate.
Speaker Change: This month, TD was the first bank in Canada to launch real-time partial shares, enabling investors to buy and sell a fraction of stocks, indices, and ETFs, making investing more accessible. This launch reflects the power of OneTD, with TD Securities providing the back-end execution to support this new functionality.
Speaker Change: were largely offset by lower formations in canadian commercial
Speaker Change: Our insurance business was impacted by the severe weather events in the Greater Toronto Area and the wildfires in Alberta and Q3, and by hailstorms in Calgary and floods in Montreal this month. At TD Insurance, we are there for our customers in their moment of need. I want to thank TD colleagues for their tremendous efforts for our customers through these events.
Speaker Change: To support the communities impacted by wildfires, TD has made donations to the Canadian Red Cross and is facilitating customer donations at branches across Canada.
Speaker Change: Wholesale banking continues its growth with revenues up 14% year-over-year on broader, stronger capabilities.
Speaker Change: We are operating in a challenging environment with significant market volatility, rapidly, evolving rate expectations, and heightened geopolitical risks.
Speaker Change: We continue to make good progress integrating our teams, deepening our client relationships, and gaining momentum across our banking and markets businesses.
Speaker Change: Amidst uncertainty in the outlook for the economies in both Canada and the U.S., retail, customers and business clients alike are generally taking a cautious approach.
Speaker Change: In addition, we enhance U.S. shared trading execution for our clients with a fully launched, and automated TDSX private room.
Speaker Change: As always, TD will be there for them as we navigate the coming months together.
Speaker Change: Overall, our businesses perform well in Q3, and I am confident in the strength of our, franchise.
Speaker Change: And those of you in Toronto have likely noticed, in addition to the city skyline, the new TD, Terrace building. Inside the building is a state-of-the-art TD branch built as a next-generation innovation, center, enabling the bank to test new capabilities in a live environment.
Speaker Change: please turn to slide nineteen
Speaker Change: The bank's unique and inclusive culture continues to attract talent.
Speaker Change: TD received a top score of 100 in the 2024 Disability Equality Index for the 10th consecutive, year in the U.S., and with the expansion of the index to Canada for the first time this year, the bank achieved the same top score in Canada as well.
Speaker Change: Across our businesses, our customers are at the heart of who we are and what we do. That's why, 10 years ago, we launched our first TD Thanks You campaign to showcase our, gratitude for their unwavering support.
Speaker Change: In this milestone year, we've taken our appreciation to the skies through spectacular drone light, shows in cities across Canada.
Speaker Change: cross impai loans increased three basis points quarter-over quarter to forty-four basis points
Speaker Change: Our colleagues live our commitment to our customers every day, and I want to thank them, for all their efforts.
Speaker Change: I'm confident that together, we will continue to deliver for all our stakeholders.
Speaker Change: driven by a few new impairments across thea number of industries in each of wholesale and u s commercial
Speaker Change: partially offset by lower impairments in canadian commercial
Speaker Change: With that, I'll turn things over to Kelvin.
Speaker Change: these don to slide twenty
Speaker Change: recall that our presentation reports pal ratios both grass and net of the partner share of the u s strategic godps
Speaker Change: we remind you that u s card ps recorded in the corporate segment are fully absorbed by our partners and do not impact the bank's net income
Speaker Change: Thank you, Barrett.
Speaker Change: a bank's gross provision for credit losses were stable quarter -over quarter as an increase in the wholesale segment
Speaker Change: was offset by decreases in the canadian pnc s retail and corporate segments
Speaker Change: Good morning, everyone.
Speaker Change: Please turn to slide 11.
Speaker Change: The banks' imperative PCL was 920 million, an increase of 50 million quarter over quarter, reflecting higher provisions in the sales sector, partially offset by lower provisions in the Canadian personal and commercial sector. The PCL performance decreased by 49 million quarter over quarter to 152 million. The performance of the current higher quarter equivalent was primarily recorded in the Canadian personal and commercial sector and in the U.S. sales sectors. Please, let's return to page 22. The credit loss increased by 288 million quarter over quarter to 8.8 million due to current credit conditions, including credit migrations driven by non-commercial sales portfolios, volume increase, and a 20 million impact from foreign exchanges. The banks' alliance coverage remains high to ensure ongoing uncertainty related to the economic trajectory and credit performance. In summary, the bank has shown strong continuous credit performance this quarter, as evidenced by the growing established housing formations and the PCL. The PCL result so far is 46 basis points. My previous guidance of 40 to 50 basis points for the 2024 PCL remains appropriate, although results may vary by quarter and are linked to changes in economic conditions. With that, I return to Barrett. Thank you, Haji. Before starting the Q&A session, I want to remind you that we have included the information we can share on the AML matters from yesterday's press release and in our Q3 materials. We have no additional information to share at this time. I hope to provide more clarity as soon as possible, but for today, I suggest we focus on the banks' Q3 earnings. With that operator, we are now ready to start the Q&A session. Thank you. We will now take questions from the phone lines. If you have a question, press the 1 button on your device. You can cancel your question at any time by pressing the 2 button. Press the 1 button at this time if you have a question. There will be a brief pause while participants register for questions. Thank you for your patience. The first question comes from Manny Grauman of Scotiabank. Please go ahead. Hello. I would like to talk about cash, and specifically, it is not clear to me why you needed to sell your Schwab stocks to ensure cash, even if I take into account the guidance on operational RWA coming in Q4. So, if you could help me understand the thought process, it seems to me that there is something else going on here in terms of other considerations. Again, and particularly in the context of buying 1 billion dollars in shares in the quarter as well. So, I would like you to help me understand that.
Speaker Change: he done to slide twenty one
Speaker Change: the banks impaired p was nine hundred and twenty million
Speaker Change: an increase of fifty million quarter over quarter reflecting higher provisions in the wholesale segment partially offset by lower provisions in the canadian personal and commercial segment
Speaker Change: a forming p cl decreased forty nine million quarter over quarter to one hundred fifty two million
Speaker Change: the smaller current quarter performing build was primarily recorded in the canadian personal and commercial and u s retail segments
Speaker Change: please turn to slide twenty two
Speaker Change: the allowance for credit losses increased by two hundred and eighty-eight million quarter-over-quarter
Speaker Change: to eight point eight billion
Speaker Change: due to current credit conditions including some credit migration driven by the nonretail lending portfolios
Speaker Change: volume growth and a twenty million impact from foreign exchange
Speaker Change: a banks allowance coverage remains elevated to account for ongoing uncertainty relating to the economic trajectory and frededit performance
Speaker Change: in summary
Speaker Change: the bank exhibited continued strong credit performance this quarter as evidenced by stable cross-impaired loan formations and p
Speaker Change: a year -to date p result is forty six basis points
Speaker Change: my prior guidance of forty to fifty basis points for fiscal two thousand and twenty-four remains appropriate although
Speaker Change: Does that $1.6 billion this year, quarterly, that factors in the investments or sort of the run rate, I suppose, of the investments in risk and control?
Speaker Change: results may vary by quarter and are subject to changes in economic conditions
Speaker Change: Reported earnings this quarter include a $2.6 billion U.S. AML investigations provision.
Speaker Change: Or do you anticipate further investments that will drag that quarterly run rate of, I don't know, $1.6 billion even higher from here, aside from inflation and traditional business growth?
Speaker Change: I'd prefer not to provide specific quarter-on-quarter expense guidance now, but let me just take a step back for a moment.
barrets: with that i will turn it back over to barrets
barrets: I think you should expect from us continued focus on productivity, and it is my objective to drive positive operating leverage at the local segment level.
barrets: There's no question that some of the governance programs and the expenses thereof are being reflected in the corporate segment as the investments that we're making in the U.S. will undoubtedly ladder up to the broader global program.
barrets: thank you rj before we begin the q n a session i want to note that we have included the information that we are able to share on l matters in yesterday's press release and our q three materials
Speaker Change: we do not have additional information to share at this time
Speaker Change: On an adjusted basis, earnings were $3.6 billion flat year-over-year, and earnings, per share was $2.05, up 5% year-over-year.
Speaker Change: Overall, we saw good fundamentals across our businesses, reflecting in our strong top-line, growth.
Speaker Change: i look forward to providing additional clarity as soon as i can
Speaker Change: This was partially offset by two items in the wealth management and insurance segment.
Speaker Change: for today i suggest that we focus on the bank'sq three earnings
Speaker Change: The impact of claims from severe weather-related events, which as a percentage of earned premiums, was 40% higher than Q3 of last year, and provisions related to ongoing litigation matters.
Speaker Change: So I think that operating model will be in place.
Speaker Change: Revenue increased year-over-year, driven by higher fee income in our markets-driven businesses, and higher volumes and deposit margins in Canadian personal and commercial banking.
Speaker Change: I believe that the changes we're making are multi-year in nature, but I would expect that the bulk of the expense will be peaking in the early part of 2025 as our execution will be most concentrated in that period of time.
Speaker Change: With regards to the focus, I do want to give us the opportunity to leverage the productivity initiatives that we're running at the local level to be able to reduce our run costs, give us more capacity for change, allow us to invest in the strategic priorities, but never compromising the risk and control initiatives that we've outlined for ourselves.
Speaker Change: with that operator we are now ready to begin the q na session
Speaker Change: We saw record revenues in two segments this quarter, Canadian personal and commercial, banking and wealth management and insurance.
Speaker Change: And that is at a very high level.
Speaker Change: Expenses increased year-over-year, reflecting investments in our risk and control infrastructure, and higher employee-related expenses.
Speaker Change: thank you we will now take questions from the telephone lines if you have a question please press star one on your devices key pad you may answer your question at any time by pressing star two
Speaker Change: We continue to prioritize our investments and manage expenses diligently.
Speaker Change: While we continue to look for efficiencies in our cost base, we have now concluded our, restructuring program. We have provided more details on slide 27.
Speaker Change: Now, withstanding good execution against our restructuring initiatives, we expect fiscal, 2024 adjusted expense growth to be in the high single digits, reflecting higher investments in our risk and control infrastructure, strong performance in our markets-related businesses, and certain items including litigation.
Speaker Change: PCLs were stable quarter-over-quarter.
Speaker Change: Please turn to slide 12.
Speaker Change: please press star one at this time if you have a question there will be a brief pause while participants register for questions thank you for your patients
Speaker Change: Operating personal and commercial banking delivered a strong quarter with record net, income and revenue, reflecting loan and deposit volume growth and substantial positive operating leverage. Average loan volumes rose 6% year-over-year, with 6% growth in personal volumes, driven, by real estate secured lending up 6% and cards up 10%, and 7% growth in business volumes. Average deposits rose 5% year-over-year, reflecting 7% growth in personal deposits, and 2% growth in business deposits.
Speaker Change: Net interest margin was 2.81%, down 3 basis points quarter-over-quarter as expected, reflecting, the migration of BAs to CORA-based loans. As we look forward to Q4, while many factors can impact margins, we expect downward pressure, due to BA-CORA migration and the impact of Bank of Canada rate cuts partially offset by the benefit of tractor on and off rates.
Speaker Change: The thought process is one of creating capacity to make the investments required to continue to grow the franchise, and that we're going to stick to that operating framework, and I'll certainly provide regular updates with regards to our progress against that.
Many Groundmen: and the first question is from many groundmen from schsha bank please go ahead
Speaker Change: the morning want to talk about capital and specifically it's not clear to me while you needed to sell down your sswab stake to shre up capital especially well even if i take into account the guidance and operational r wa coming in q four
Speaker Change: so if you could help me understand sort of the thought process there seem like there's something outfour on year in terms of other considerations again and especially the context of buind back a billion dollars in in shares in the quarter as well so ho ple could help me understand that
Speaker Change: Many this is bad. You know that traditionally and historically the bank likes to be well capitalized and frankly like to carry more capital than what may generally be necessary. In line with that, we think it's prudent to have capital. There's still a lot of volatility and economic conditions are not as predictable as one would like. So this is just to be prudent and it makes sense. The framework we use and we think it made sense. We have the capital levels that we are projecting for the next quarter. So with this sort of capital stance conservative capital stance signal that AML science could end up being larger, maturely larger. We announced you know 2.6 billion yesterday additionally we'd announced 450 in the second quarter. And together this is the current estimate we have on what it will take to put this matters behind us. That's how we follow this where the accounting rules are very clear on this. So our current estimate is that this is the amount it will take you know to move forward. And just another follow up so is it fair to assume that you're not comfortable going below 12.5% CT1 is that sort of where you're thinking that in terms of your comfort level. There we're targeting 12% you know 12 between 12 12 when I have. So you know we continue to become stable with that target but obviously we review this on an ongoing basis depending on economic conditions. Thank you. The next question is from John Aiken from Jeffries. Please go ahead. Sorry can you hear me? Yeah now. Okay sorry about that my apologies. With the with the sale of the Schwab state is it safe to assume that if you have some future point we end up below 10%. You'll lose board representation and it will no longer be accounted under the equity equity method. Our current intentions is not to go below where we are. I understand that bear but is that if you do go below that is that the case? It's a strategic investment for us you know we'll be very happy as to how this investment is performed and our view is that our governance requirements and where we are. Comfortable with that would like to continue at these levels. Okay bear is it safe to assume that the sale of the state has no bearing in terms of the the agreement you have on the sweep accounts? Yes. Thank you. Are we here? Thank you. The next question is from Matthew Lee from Canacorn Genuity. Please go ahead. Hey morning guys thanks for taking my question. Maybe one on expenses. So your guidance is now high single digit growth in 24. A bit of an increase versus mid single digit mentioned prior. Maybe just breaking it down. Is the core expense growth still 2% and now the investments have pushed it to high single digits or are there other factors that may be played in terms of updated guidance?
Speaker Change: any this is where you know that traditionally any historically know the bank legkes to be well capitalized and frankly like to gry more capital
Speaker Change: then what may generally be necessary in line with that you know we think it's is prudent to have capital there's a lot of volatility and
Speaker Change: and economic conditions are not as predictable as one would like so this is just to be prudent then it makes sense that's the capital framework we use and we think it made sense to have the capital levels that we are projecting for the next quarter
Speaker Change: so with this sort of capital stands conservative capital and signal that
Speaker Change: the and mescience could end up being larger materially larger
Speaker Change: we announced in our two point six billion yesterday additionally we announced four hundredand fifty in the second quarter
Speaker Change: and together this is the current estimate we have on what it will take to put these matters behind us
Speaker Change: that's how we follow this the accounting rules are very clear on this so our current estimate is that this is the amount it will take to move forward
Speaker Change: and just another follow up is it fair toassume thatyou're not comfortablegoing below twelve and half percent ctt one is that sort of where you're thinking that was of your comfort level
Speaker Change: that we are targeting twelve percent in our tweve between twelve twelve and to havehalf so we continue to be comfortable with that target but obviously we review this on an ongoing basis depending on the economic conditions
Speaker Change: Thank you for taking my questions.
Speaker Change: thank you
john acon: thank you the next question is from john acon from jeffreys
john acon: You're welcome.
john acon: Thank you.
john acon: i
Speaker Change: he's go ahead and persu
Speaker Change: The next question is from Nigel D'Souza from Veritas Investment Research.
Speaker Change: Please go ahead.
Speaker Change: sorry hemmy
Speaker Change: and okay sorry about that myapologies with the with the sale ish swwab state is 't safe to assume that you some future point weaned up below ten percent you'll lose board representation and it will no longer be accounted under the equity enity method
Speaker Change: Thank you.
Speaker Change: our current intentions is not to go below where we are
Speaker Change: i understand that be but think is that if you do go below that is at the case
Speaker Change: it's a strategic investment for us you know we were very happy as to this investment is performed our view is that our governance requirements and where we are we are very comfortable with that would like to continue at these levels
Baron: okay baron is it safe to assume that the sale ake has no bearing in terms of the agram you have on the sweep accounts
Baron: Good morning.
Baron: yes
Speaker Change: thank you for would you
matthew leave: thank you the next question is from matthew leave from canaccorduity please go ahead
matthew leave: Expenses increased, reflecting higher spend supporting business growth, including employee-related, expenses and technology costs.
matthew leave: I wanted to turn to your disclosure on reasonably possible losses.
matthew leave: I noticed that the high end of that range is still at around $1.3 billion and is a little, change from last quarter.
Matthew Levi: morning i thanks for taking my question maybe one on expenses so your've guidance is now high single digit growth in twenty four
matthew leave: a bit of an increase versus midstingle the it mentioned prior maybe just breaking it down is the core expense growth stillill two percent and now the investments have push it to high single digits or are there other factors that may be a played in terms of upd the guidance
matthew leave: Please turn to slide 13.
matthew leave: Hello, this is Kelvin. I will answer this question. Yes, there are mainly three factors. One is that the risky control costs are higher than expected. Also, companies related to the markets are doing really, really well. And so, the tax reward is not driven by higher revenues, and we will take this reward at any time. And then, there are some discrete items, like the litigation we just talked about, in Wealth this five-year period. These are the three main factors. Okay, and then maybe a follow-up, just on the risky control costs themselves. You know, it seems that a lot of investments are being made, it's prejudiced on the employment of additional talent, going out and maintaining some sort of risky control infrastructure. Should we just assume that these FTEs stay with TD, even after this period is completed? And does that essentially mean that the OPEX association is occurring? Yes, let me take that one, Matt. This is Leo Salome. Just to give you a sense, and I think Barrett highlighted where we are making critical investments in the program. And of course, employing the right leadership has been a first priority. And I think we have been very fortunate to bring leaders on the subject from other GSIBs, the Department of Homeland Security, the Treasury Department, you know, as well as the FBI and other law enforcement organizations. So, we are really happy with the leadership team we have brought in. We have added more than 500 colleagues to support this effort. And to your point, a good part of those are program management resources that improve data, technology, and other process management changes. Which, over time, will disappear. But we are also making significant investments in investment capacity, in advanced analytics, and I thought those would remain. So, to give you a sense, there will be a part that will be repurposed to other initiatives in the future, but there will be an increase, a structural increase, to represent the model we want to lead in the future, which I think will be a very powerful AML program going forward. Thank you. The next question comes from Gabriel Duchesne, from National Bank Financial. Please go ahead. Hello. The comment on expenses. I think, Kelvin, you said that the business loss could be above the guidance of 200 to 250, again in Q4, because of risky controls, or investments in such things. If I look at your adjusted full-year expense growth, adjusted for the strategic card portfolio, you have a growth of 10%, 9% if I exclude variable accounts. At the beginning of the year, you had a guidance in the mid-single digits. Is it only because of additional investments of this nature? No. If you look at the businesses, you remember what I said earlier, there are two elements here. You are talking about business losses and expenses. The expenses, I was talking about the three drivers that caused the crisis.
matthew leave: The U.S. Retail Bank continued to deliver strong operating momentum, with sequential, earnings growth and peer-leading loan growth year-over-year. Average loan volumes increased 5% year-over-year, reflecting 8% growth in personal loans and, 3% growth in business loans.
matthew leave: We continue to deliver growth in mid-market commercial lending, with volumes up 18%, a, business that is also driving fee income.
matthew leave: Average deposit volumes, excluding sweep deposits, were relatively flat year-over-year, as the, U.S. Retail Bank demonstrated deposit stability in a competitive environment. Net interest margin was 3.02%, up 3 basis points quarter-over-quarter, driven by higher, deposit margins.
matthew leave: As we look forward to Q4, while many factors can impact margins, we expect a modest NIM, expansion due to the benefit of tractor on and off rates, partially offset by any potential, Fed rate cuts.
Kevin: i kevin of that question they're doinginglythese three factors one is risk and control costs being higher than previously thought also
Speaker Change: our markets related businesses performmed by performing readdo really well and so therefore the revebel compensation nor driven by higher revenues and we'll take that trade any day and then pllaus a few discrete items like the litigation that we just talked developed in wealth this point
Speaker Change: Reported expenses include a $2.6 billion U.S. AML investigations provision.
Speaker Change: So trying to understand why that hasn't come down given the AML provision you've taken, this quarter.
Speaker Change: On an adjusted basis, expenses were relatively flat year-over-year, primarily due to higher, operating expenses offset by ongoing productivity initiatives.
Speaker Change: so a three main factors
Speaker Change: are then then maybe a follow-up just on the am l cost themselves you know itsounds a lot of the investment' being made is predicate on a hiring additional talent kind of building out and maintaining some sort of amount infrastructure should be just just in those ft t will kind of remain with t d even after dll is complete and does that essenti need the oppex associated it's of occurring
Speaker Change: Please turn to slide 14.
Speaker Change: Are there any other legal or regulatory matters outside from AML that could lead to outsized, fines or penalties?
Speaker Change: Wealth management and insurance delivered record revenue and strong fundamentals across, its diversified businesses. Revenue grew 13% year-over-year, reflecting higher insurance premiums, fee-based revenue, deposit margins, and transaction revenue.
Speaker Change: Insurance service expenses were up 20% year-over-year, primarily reflecting increased claim severity, less favorable prior year's claims development, and larger impact of severe weather-related events. We saw claims cost of $186 million this quarter due to severe weather events in the Greater, Toronto Area and wildfires in Alberta in July.
Speaker Change: In addition, there have been two significant weather events so far in August, the Calgary, hailstorms and the Montreal floods. For these two events, we expect claims and related costs of more than $300 million in, Q4.
Speaker Change: To help support analyst investors' analysis of our insurance business performance, we, have added disclosure of current quarter claims costs net of reinsurance to page 12 of the, Supplemental Financial Information Package.
Speaker Change: Revenues were up 13% year-over-year, more than half of this increase related to provisions, for ongoing litigation matters, with the remainder driven by higher variable compensation.
Speaker Change: Assets under management and assets under administration increased year-over-year, both reflecting, market appreciation and net asset growth.
Speaker Change: let me take that one matt this leo alone
Speaker Change: Please turn to slide 15.
Speaker Change: Hi, it's Kelvin.
Speaker Change: PCL banking continued its growth, delivering revenues of $1.8 billion, reflecting higher, trading-related revenue, lending revenue, advisory and underwriting fees.
Speaker Change: We don't comment on RPOs.
Speaker Change: This quarter, we also saw higher PCLs, reflecting a few new impairments across different sectors.
Speaker Change: just to give you a sense and i think there re outled where we are making critical investments in the program and and obviously hiring the right leadership has been a first priority i think we've been veryfortunate to bring really subject matter leaders from from other jes is from the department of homeland security from the treasury department
Speaker Change: Expenses increased 12% year-over-year, primarily reflecting higher variable compensation commensurate, with higher revenues.
Speaker Change: The business delivered positive operating leverage and an efficiency ratio of 69% as, we continue to optimize the platform.
Speaker Change: Please turn to slide 16.
Speaker Change: I mean, there's a lot of puts and takes in the RPO.
Speaker Change: We continuously make an assessment.
Speaker Change: What's the appropriate amount and update it accordingly.
Speaker Change: you know as well as
Speaker Change: in the fbi under the law enforcement or organization so we're really pleased with the leadership team that we brought on board we've added over five hundred colleagues to support this effort
Speaker Change: and to your point a good portion of those are program management resources that are scaling up data technology other process management changes that will over time those will fade away but we're also making some important investments in investigative capacity
Speaker Change: in advanced analytics and i would suspect that those would stay so to give you a sense there wouldbe a portion of it that will be repurpospose to other initiatives as we move forward but there's going to be a an increase
Speaker Change: a structural increase to represent the model we want to run going forward which i think willll be a very strong l program going forward
Speaker Change: a hehelpful thanks sen
gabriel dishame: thank you the next question is some gabriel dishame from national bank financial
Speaker Change: please go ahead
gabriel dishame: good morning the expense commentary i guess kelvin you're saying that the corporate loss could be above that guidance rained the two hundred two hundred and fifty again in q four because of risk controls investments in that typof stu if i look at your full year consolidated adjusted expense growth adjusted for the strategic card portfolio your
gabriel dishame: The corporate net loss for the quarter was $324 million. As you will recall, we guided to adjusted net losses in the $200 to $250 million range, although we expected it to bounce around from quarter to quarter for fiscal 2024. We have increased investments in our risk and control infrastructure and expect corporate, adjusted net losses to remain above that range for Q4. Net corporate expenses increased $93 million compared to the prior year, mainly reflecting, investments in risk and control infrastructure, partially offset by litigation expenses in, Please turn to slide 17.
gabriel dishame: The Common Equity Tier 1 ratio ended the quarter at 12.8%, down 57 basis points sequentially. We had strong internal capital generation this quarter. RWA, excluding the impact of FX, increased slightly, primarily reflecting the operational risk RWA impacts from certain provisions taken last quarter.
gabriel dishame: We repurchased approximately 13 million shares in Q3 and none in August to date. Our current NCIB expires on August 31st and we do not intend to repurchase any additional shares prior to expiry. Across the 90 million share buyback program and our previous 30 million share buyback program, TD repurchased over 100 million shares, almost 85% of the shares authorized, delivering returns for shareholders while managing our capital appropriately.
gabriel dishame: We expect a negative 35 basis point impact from this quarter's AML investigation provision in Q4.
gabriel dishame: As a reminder, consistent with the Basel III reforms, operational risk RWA impacts take effect on a one-quarter lag. This will be partially offset by a positive 54 basis point impact to CET1 in Q4 from the sale of 40.5 million swap shares.
gabriel dishame: With that, Ajay, over to you.
gabriel dishame: Okay.
Speaker Change: you're ning a ten percent growth nine percent if i clude variable comp start of the year you'd guided to midsingle digits is that delta solely because of you know additional you know investments of this nature
Speaker Change: Okay, thank you, Kelvin, and good morning, everyone.
Speaker Change: And then on Schwab, you know, we talked about capital, but was liquidity a consideration, in the decision to sell those Schwab shares?
Speaker Change: Please turn to slide 18.
Speaker Change: Gross impaired loan formations were stable at 22 basis points for the bank, as higher impaired loan formations in wholesale and U.S. commercial were largely offset by lower formations in Canadian commercial.
Speaker Change: Please turn to slide 19. Gross impaired loans increased three basis points quarter over quarter to 44 basis points, driven by a few new impairments across a number of industries in each of wholesale and U.S. commercial, partially offset by lower impairments in Canadian commercial.
Speaker Change: Please turn to slide 20.
Speaker Change: no so if you're looking at corporate so we remember earlier when i talked about the items talk about the cororate losses and then the expenses or expenses i talked about the three drivers that cost the increase
Speaker Change: Recall that our presentation reports PCL ratios, both gross and net, of the partner's share of the U.S. strategic card PCLs. We remind you that U.S. card PCLs recorded in the corporate segment are fully absorbed by our partners and do not impact the bank's net income.
Speaker Change: The bank's gross provision for credit losses was stable quarter over quarter. As an increase in the wholesale segment, was offset by decreases in the Canadian PNC, U.S. retail and corporate segments.
Speaker Change: Please turn to slide 21.
Speaker Change: The bank's impaired PCL was 920 million, an increase, of 50 million quarter over quarter, reflecting higher provisions in the wholesale segment, partially offset by lower provisions in the Canadian personal and commercial segment.
Speaker Change: Performing PCL decreased 49 million quarter over quarter to 152 million. The smaller current quarter performing build was primarily recorded in the Canadian personal and commercial and U.S. retail segments.
Speaker Change: And remember that the increase in costs also had an impact on TD Cowen's impact because last year was partial and this year is complete. Yes. I believe it was in Q4, Carl, that you said there was an increase of half the numbers, including these AML and Cowen-type costs. The five numbers are the three factors I mentioned earlier. There is risk and control, businesses related to stronger markets, and then discrete items like delegation and so on. Okay. Keep that in mind, please. This year, I believe you quantified 500 million after the increase in risk control-type costs and then another increase of that magnitude in 2025. Is that correct? No, I believe the 500 million referred to the costs we have spent up to this point. We haven't mentioned anything for 2025. Nothing for 2025. It seems likely that these costs could persist until 2025. Is that incredible to expect? That's correct. It's a multi-year program. Okay. I understand that you don't need questions on this regulatory subject, but the press has clearly explained your estimate of total penalties and I don't dispute that number at all. It also mentioned non-monetary penalties. What do you think about that? Is there an increase in assets on the table for the American company? Non-monetary means it has nothing to do with money. It mentioned the increase of 2.6, which is monetary. So, anything that doesn't fall into that category is non-monetary. If I can't speculate, we are in the middle of our negotiations. We are making progress and it is not appropriate to speculate on the final outcome. As we announced in our press release, we hope to reach a resolution by the end of the year. I think the best thing is to remain patient and when we have more to say, we will be happy to share it. Non-monetary can imply a financial impact. We can act on that, can't we? I don't want to speculate. There may be compliance requests and other requests. It's difficult to speculate. We are in the middle of our negotiations and investments. We just want to make sure we give you satisfactory statements when it's appropriate, rather than speculating on what may or may not be. Okay. In any case, I appreciate the transparency you provided last night. Thank you. It was a pleasure talking to you. Thank you. Thank you. The next question comes from Ibrahim Poonawalla of Bank of America. Please go ahead. Hello. I would just like to follow up on Leo's response. What I want to know is...
Speaker Change: and remember that the higher expense growth rate also has partly td coen in impth as well because last year was partceial year this year's full year
Speaker Change: yeah
Speaker Change: though i mean not i think it'was on the q four call you you'd said mid-single digits including these ltype costs and count
Speaker Change: i thinksing le digits are the three factors that i've talked about earlier there's the risk control onger markets related businesses and then discrete items like ditigation and so
Speaker Change: okay now what refreshed by memory please this year i think it was a you'd quantified five hundred million after tax of the you know risk control type expenses and then another amount of that magnitude in two thousand andtwent five that correct
Speaker Change: so i think the five hundred million talked about the the cost that we've spend up into that point in time we haven't talked about anything for twenty-five
Speaker Change: nothing for two thousand twenty five is it like it seems likely that these costs could persist the into two thousand and twenty five is that reasonable to expect
Speaker Change: that'scorrect it's a multiyear program
Speaker Change: okay and then i get they don't want questions on this regulatory matter but the press release you know clearly outlined what your estimate of a you know total penalties would be and i don't dispute that number at all but there's also mentioned a non monetary pen penalties
Speaker Change: what are you thinking of there is an asset cap on the table for the u us and business
Speaker Change: nmonetary me is anything that is nothing to do with money so we
Speaker Change: he said the two point six that is monetary so anything that doesn't fit into that category is non monetary
Speaker Change: i can't specate you we're in the middle of our our negotiations you know we are making progress and it's it's not appropriate to speculate you know what the final deal would be know as we put out in our path release
Speaker Change: we expect to come to a resolution by calendar year-ends i think you know last year is to remain patient
Speaker Change: and when we have more to say we willll be happy to engage
Speaker Change: right but that you know nonmonetary can involve financial impact so you're going to readre on that corct
Speaker Change: i don't want to speculate you know there might be compliance requirements can be various other requirements hard to be don speculate
Speaker Change: we are in the middle of this
Speaker Change: in negotiations investigations and so we would just want to make sure that would give you full some disclosures when it is appropriate rather than speculating what it may or may not be
Speaker Change: allright well in any case appreciate the transparency you private provided the last night
Speaker Change: goodbye loging to you thank you thank you the next question is from abraham pawala from bank of america please go ahead
Speaker Change: Please turn to slide 22.
Speaker Change: The allowance for credit losses increased by 288 million quarter over quarter to 8.8 billion due to current credit, conditions, including some credit migration driven by the non-retail lending portfolios, volume growth and a 20 million impact from foreign exchange.
Speaker Change: Our year-to-date PCL result is 46 basis points.
Speaker Change: Could you have sourced liquidity from other avenues other than selling your equity stake, in Schwab?
Speaker Change: The bank's allowance coverage remains elevated to account for ongoing, uncertainty relating to the economic trajectory and credit performance.
Speaker Change: My prior guidance of 40 to 50 basis points for, fiscal 2024 remains appropriate, although results may vary by quarter and are subject to changes in economic conditions.
Speaker Change: In summary, the bank exhibited continued strong credit performance this quarter as evidenced by stable gross impaired loan formations and PCL.
Abraham Pawala: he good morning
Abraham Pawala: you just want to follow up leoer to your response earlier want i think if youigget out is
Abraham Pawala: With that, I will turn it back over to Bharath.
Speaker Change: How much of the remediation actions that you're taking or fixing AML sort of risk controls is still a moving target where you're still learning as you dig into in terms of what needs to be done? And from a shareholder standpoint, I think the two questions are the risk of expense creep, right? Mid single digit moved to high single digit. Could this become low double digit and then some more next year? So that's what I'm trying to handicap. And the second is, given all these experts you hired, do you forget about the regulators, but do you have a sense of the timeline of when you can at least get this at par with management's expectation in terms of where you want the AML controls to be? Thank you very much, Ebrahim. It's a very good question. Let me first just assure you that we've spent a lot of time in building a very comprehensive AML program. And it really looks at the program in its entirety, all pillars, to ensure that we've got one of the most robust AML programs in the country. That's been the objective from the very beginning. I believe we have a very robust program, and we're executing. We're well underway in terms of the actual execution program. I talked about the leadership attraction. I've talked about the increase in complement in investigators and program managers and data specialists in the technology areas. Certainly, over the course of the next year or two years, as our sophistication and advanced analytics increases, we are going to be even more effective at identifying and thwarting the risks that are present in the financial industry. But that's by design. That's exactly what we're trying to drive towards. The instructions from Barrett have been very clear from the very beginning. We want a world-class program. We're making the investments required, and it will create an infrastructure that will allow us to continue to grow sustainably and build a franchise, because we have an exceptional franchise in the U.S., and it's one that we want to continue to build. If there's an asset cap and this thing takes multi-years, as you said, as someone who runs their business day-to-day, of why that should be okay, and there's no risk of attrition?
Abraham Pawala: how much of the remediation action that you're taking or fixing
Speaker Change: emails sort of risk controls is still a moving target where you're still learning as you take into in terms of what needs to be done and
Abraham Pawala: come
Speaker Change: a shareholderof standpoint i think the two questions are the risits co expense creep right midsingledigit move to high single digits could this become low double digit and then
Speaker Change: some more next year so that's what i'm trying to handicap and the second is
Speaker Change: it given all these experts you hired do you forget about the regulators but do you have a sense of the timeline of when you can at least get this at par with management's expectation in terms of where you want' be al controls to me
Speaker Change: Thank you, Ajay.
Speaker Change: You know, you have the securities portfolio.
Speaker Change: Before we begin the Q&A session, I want to note that we have included the information that we are able to share on AML matters in yesterday's press release and our Q3 materials.
Speaker Change: Are the unrealized losses there preventing you from, I guess, selling that for liquidity, to crystallize?
Speaker Change: We do not have additional information to share at this time.
Speaker Change: I look forward to providing additional clarity as soon as I can.
Speaker Change: Just trying to understand, is liquidity at all one of the considerations here?
Speaker Change: Hi, it's Kelvin.
Speaker Change: yes thank you very much every a aim it's a very good question let me let me first just to assure you that we've spent a lot of time in building a very comprehensive a l program and
Speaker Change: The answer is no.
Speaker Change: Okay.
Speaker Change: And then just switching to credit loss provisions, could you kind of provide some color on performing, PCLs this quarter?
Speaker Change: We've seen some deterioration in unemployment rates in the labor market, but you're performing, PCLs are moving lower.
Speaker Change: So any color there on what's offsetting the unemployment trends that we're seeing that's, leading to lower provisions?
Speaker Change: You would have noticed, it's Ajay, you would have noticed that performing PCL quarter over, quarter came down $49 million.
Speaker Change: it really looks at program and it's in its entirety all pillars to to ensure that we've got one of the most robust il programs in the country
Speaker Change: Some of that was U.S. retail, so U.S. retail was down $23 million and it's really coming, from Resil and Auto with macro factors and seasonality contributing to that.
Speaker Change: Corporate segment is also down.
Speaker Change: Again, it's some seasonality and macro factors.
Speaker Change: Wholesale performing was down for two reasons. One, there were repayments, so when there were repayments, any performing we held, you, know, was released. And the second reason is because they were impaired, some of the performing PCL migrated, to impaired.
Speaker Change: So those would be the contributing factors why our performing PCL is down quarter over, quarter.
Speaker Change: that's been the objective from the very beginning i believe we have a very robust program and when we're executing we're well underway in terms of the actual execution program i talked about the leadership
Speaker Change: Got it.
Speaker Change: And on lowered impaired PCLs in Canadian banking specifically, I assume that's not driven by, rate cuts due to a lagged effect.
Speaker Change: So anything else that you could point to that's leading to provisions improving quarter over, quarter?
Speaker Change: Are you talking about Canadian PNC?
Speaker Change: attraction i've talked about the
Speaker Change: the increase in complement in investigators and program managers and in data specialist in the technology areas
Speaker Change: Correct, Canadian PNC.
Speaker Change: Really, it's mainly driven by commercial and as you know, impaireds in commercial can be, lumpy, so there were lower impaireds in commercial. That was the big driver of impaired PCLs coming down.
Speaker Change: and we are sparing we're really moving as quickly as we can to be able to make sure that we've got that mature infrastructure in place we're also making investments in data and technology so i feel quite comfortable that we have a roadmap to execute against and that we're doing we are executing against that plan
Speaker Change: certainly over over the course of the next year or two years
Speaker Change: as our sophistication advanced analytics increases we are going to be even more effective at identifying and thwarding the risk
Speaker Change: that are present the financial industry but that's by design that's exactly what we're try to drive towards i believe that the costs that we have forecasted internally are appropriate for the program that we've outlined and and i feel quite comfortable with the outcome and i just want to stress
Speaker Change: we just 're not looking to simply meet the minimum standards here
Speaker Change: Okay, that's it for me.
Speaker Change: Thank you.
Speaker Change: mean the instructions from bart has been very clear from thevery beginning we want a world-class program we re making the investments required and it will create an infrastructure that will allow us to continue to grow sustainably and build a franchise because we have an exceptional franchise in the u us and it's one that we want to continue to build
Speaker Change: Thank you.
Speaker Change: The next question is from Lemar Persaud from, Cormark.
Speaker Change: Please go ahead.
Speaker Change: Yeah, thanks.
Speaker Change: Maybe for Leo and just kind of following up on the conversation with Paul and Ebrahim, would it be fair to suggest that regardless of what comes out from these non-monetary fines, bottom line, you feel confident in the ability to grow earnings in 2025?
Speaker Change #100: and the reason longmtrying sort of drilling into this is i think you said it looklike it's going to be a multiyear program to get to the end point
Speaker Change #101: and i think i mean obvly don't want to comment on the nonme monetary penalties but in a world where thereas an asset cap the concern is if this is going to be a totalto three year deal the u franch is going to be under an asset cap
Speaker Change #102: and the risk of attrition like how howis there a way that you can make a feel better about the u s franchise if 's an asset cap and this is this thingct takes multiers as you said as someone who run that business day to day of why that should be ok and there's no risk pepattition
Speaker Change #102: Is that a fair statement?
Speaker Change: Ebrahim, I would first like to remind you that this is a priority force. The implementation of the AML program and ensuring this sustainable foundation is a top priority for me. As I have initiated, we are making the necessary investments. But I just want to pivot for a moment and point to the company's performance. If we look at the performance of the third quarter, we had sequential growth in NIAID and PTPP. This was driven by a three basis point increase in NIM and growth in direct lending and strong, stable deposit performance. We have seen that some of the areas we previously identified, such as our credit card business, have grown by 16% year over year. Our mid-market business, where, as I indicated, we have the opportunity to leverage the partnership with TD Securities and TD Cowen and enhance it, has grown by 18%. Even our small business segment, where we are the largest SBA lender, has grown by 8%. So, it has been a relatively subdued environment. I think the business continues to perform, and there is no reason for that to stop. We will continue to do what we need to do from a governance and control perspective, but we want to continue building a business that we are very proud of and that we believe can continue to consolidate in the U.S. market. Okay. Thank you. Thank you. The next question comes from Paul Holden of CIBC. Please go ahead. Thank you. Good evening. I want to follow up on the question a bit, Leo, and I think you have already answered it to some extent. But when I look at the numbers for the U.S. segment, I see that the efficiency ratio is actually flat year over year, which I think is quite impressive given the additional investments you have had to make in risk and control. But I suppose the counter-argument would be that you had to reduce the number of branches, you had to reduce the number of doors, and so, you know, the question would be how that impacts revenue and productivity in the U.S. segment. Again, I think you have already answered it a bit, but maybe you can talk to us a bit in terms of the strategies you are using to maintain market share and improve productivity per branch and FTE, because that is what I see in the numbers. Thank you very much for the question, Paul. To start, I would say that we have been very focused on creating space to be able to make these critical investments. So, in terms of years, in terms of years in the segment, expenses were flat. And I think I communicated three quarters ago that we were undertaking a productivity program that really had four or five major pillars. One, we were looking at organizational health. After the First Horizon transaction, we were evaluating the size of the organization, and FTEs in general are down by about 3% year over year. Secondly, we looked at our business reality, including our store optimization program, to be able to identify areas and streamline the current environment. And we were able to generate productive expenses. And finally, we looked at our technical architectures as well as our data architectures to find simplification opportunities. In fact, I am very pleased that this past weekend, we consolidated our merchant services business onto our TARGET card operations platform, and that would represent about a $15 million reduction in operating costs. So, we are doing the things we need to do to be able to create operational leverage, so that we can invest those savings not only in governance and control programs but also in some of the critical areas we have identified, such as our digital and digital environment, our investments in next-generation store design, in cards, in wealth, areas that we believe are still under-penetrated, and where the business, our 10 million customer base, would benefit from a higher and deeper relationship over time. So, that is really the strategy we have been executing. There is no doubt that in executing some of these programs, from a governance control perspective, there can be higher expenses, and I am comfortable with that because I want to drive this sustainable platform in the U.S. We have a significantly differentiated platform. We want to ensure that we have the license and the ability to continue growing at a level.
Speaker Change #103: i i would say first i just want emphasize this is a priority force
Speaker Change #104: you know getting the ml program complete
Speaker Change #105: and making sure that we've got that sustainable foundation is a first priority for me personally so as as as i've outlined we're making the requisite investments there but i i do want to just pivot for a moment
Speaker Change #105: For today, I suggest that we focus on the bank's Q3 earnings.
Speaker Change #105: I'm really just trying to understand, you know, just given the peak in expenses in 2025, how will the earnings power of the U.S. franchise kind of play out?
Speaker Change #105: and just point to the performance of the underly franchise if you look at the third quarter performance we did have sequential nat m p tp growth
Speaker Change #105: that was powered by three basis point increase in themim and pure-leading loan growth and and strong and stable deposit performance we saw some of the areas that we've identified previously like our bankcard business was up sixteen percent
Speaker Change #105: on a year on year basis our mid-market business where
Speaker Change #105: i've indicated we have anopportunity to be able to leverage the partnership at securities and tdcounent
Speaker Change #105: to be able to scale that business was a eighteen percent even our core small business franchise where we are
Speaker Change #105: the largest b lender in our footprint was up eight percent in what has been a relatively
Speaker Change #105: subdued the lending environment so i think the franchise continues to perform and there's no reason why that should we're going to continue to do what we need to do from a governance to control standpoint but we want to continue to build a franchise that we're veryproudof and that we think
Speaker Change #105: can continue to consolidate itself in the u s marketplace
Speaker Change #105: With that, operator, we are now ready to begin the Q&A session.
Speaker Change #106: i'll read you thank you
Speaker Change #106: Thank you.
Speaker Change #106: hibiting
Speaker Change #106: thank you then next question isternam paulholden from cibc please glad
Speaker Change #106: We will, now take questions from the telephone lines.
Speaker Change #106: I won't front run any discussions on the non-monetary penalty or any shape.
Speaker Change #106: If you have a question, please press star 1 on your device's keypad.
Speaker Change #106: I really, want to wait to see the final global resolution.
Speaker Change #106: As Bharat said, we'll certainly bring that forward as quickly as we possibly can, because I know how important certainty is as we try to, you know, project forward.
paulholden: thank you good morning i want to follow up on my question a little bit o and i think youve already answered it to some degree but when i look at the numbers for the u s segmentes see efficiency ratio
Speaker Change #108: fectively flat yearoveryear which i think is pretty impress because in the additional investments you've had tomake ris control i guess the counter the counter argument to that would be while then you've had to reduce branch count you've had to reduce headcount and so you know the concermer be how does that impact
Speaker Change #109: revenue and productivity of the u s sement i again i think you've justed a little bit already but maybe can talk usa bit in terms of you the strategies you're using
Speaker Change #110: to maintain market share and to grow productivity per branch and fe that's kind of what i am ing in the numbers
Speaker Change #110: You may cancel your question at any time by pressing star 2.
Speaker Change #110: I just come back to, I think what we're trying to do is structure ourselves so that we can essentially continue to drive the governance changes in the core business, but still grow the franchise that we have.
Speaker Change #111: no i thank you very much for the question b just to start maybe i'd say
Speaker Change #111: Please press star 1 at this time if you have a question.
Speaker Change #111: There will be a brief pause while participants register for questions.
Speaker Change #112: we have been very focused on creating to space to be able to make these critical investorments
Speaker Change #112: Thank you for your patience.
Speaker Change #113: so on a year on- your basis in segment expenses were flat
Speaker Change #113: And the first question is from Manny Grauman from Scotiabank.
Speaker Change #113: And so I think you've seen the operating momentum over the last several quarters has remained strong.
Speaker Change #113: and i think i think i communicated three quarters ago that we h we were prosecuting a productivity program that we we had four five major pillars
Speaker Change #113: Please go ahead.
Speaker Change #113: In fact, in many cases, it's been peer leading.
Speaker Change #113: And we've been very deliberate around trying to compartmentalize as best we can the various efforts so that we can continue to grow the franchise.
Speaker Change #113: So it's, I won't provide a guidance as to what 2025 looks like today, but you can, there are some areas that really point and are quite favorable for the outlook.
Speaker Change #113: Clearly, loan growth has been strong, deposit performance has been stable, and NIM performance has been peer leading in terms of, you know, relative performance.
Speaker Change #113: one we were looking at organizational health post the first horizon transaction we were looking to right size the organization and overallf s are down about three percent on a year-on-year basis
Speaker Change #113: Hi, good morning.
Speaker Change #113: I do think we have been, from an operating expense standpoint, we've tried to be disciplined, without compromising the investments that we need to make in our risk environment.
Speaker Change #113: And I do think that the macroeconomic environment in the States, to the extent that we do get the benefit of some Fed rate cuts, will take some pressure off both consumers and businesses, and potentially spark some loan demand.
Speaker Change #113: So there are reasons to be optimistic about the U.S, operation.
Speaker Change #113: But I wouldn't want to comment right now with regards to what the final global resolution would bring forward.
Speaker Change #113: Okay, maybe let me try this way.
Speaker Change #113: second we looked at our corporate real estate including our store optimization program
Speaker Change #113: to be identify areas of being able to rationalize what what the current environment required and that has been able we have been able to generate some produredictivity savings there and then finally we've been looking at both our technical architecture as wellas our data architecture to find opportunities to be able to simplify in fact
Speaker Change #113: Maybe this would be helpful.
Speaker Change #113: If we park any of the additional operating expense growth related to this AML, is there any tangible reason to suggest that TD's underlying performance would lag U.S. peers?
Speaker Change #113: Because it seems like the answer to that is no.
Speaker Change #114: i'm very pleased that this this past weekend we did consolidate our retail card services business on to our target cards operating platform and that will represent about a fifteen million dollars reduction operating costs so we are we are doing the things we need to do to be able to create
Speaker Change #114: But just curious your thoughts.
Speaker Change #114: In terms of leading indicator growth, and in terms of the sustained momentum, I think we've been able to demonstrate peer-leading performance, and that would be our objective going forward.
Speaker Change #114: operating leverage so that we can invest those proceeds not only in the governance and control programs but also in some of the critical areas that we've identified like our digital and mobile environment like
Speaker Change #114: investments in our next-generation store design in cards in wealth
Speaker Change #114: areas that we think we're still under penetrated
Speaker Change #114: and where the franchise our ten million client base would benefit
Speaker Change #114: Okay, thanks.
Speaker Change #114: from a greater in a deeper relationship over time so
Speaker Change #114: that's really the strategy that we've been executing against there's no doubt that as we as we execute on some of these programs from a government's controled standpoint there could be some elevated expenses
Speaker Change #114: and i'm comfortable with that because i want to drive i want to drive to that sustainable platform in the u s we have such as a signature differentiated platform we want to make sure that we've got the license in the capability to continue to grow at scale
Speaker Change #114: I want to talk about capital and, specifically, it's not clear to me why you needed to sell down your Schwab stakes to shore up capital, especially, well, even if I take into account the guidance on operational RWA coming in Q4.
Speaker Change #114: And then, I know you guys don't want to talk about this AML investigation, but I did notice some wording about overlapping class actions related to this AML investigation.
Speaker Change #114: Thank you for that. And second question is a little bit of follow up on I think what many asked to begin with and sort of the second part of his question on why they share by back this quarter and then sell the Schwab stock. Like that's a decision you must await. I assume sort of around the beginning of the quarter when you had a fairly good idea of where the provisions may come in. So obviously it's a decision you weighed. Why did you decide to go ahead and repurchase? You know the accounting rules on this fall are very straightforward. You know our view is that the 2.6 billion dollars is our current estimate and in addition to the 450 weight taken. And so we made sure that, you know, we follow that standard. I think our buybacks have been continuing right through the year. And as Kelvin said, you know, I think it's going to be a little bit of a change. I think it's going to be a little bit of a change. So we have now completed 85% of what we had targeted in the program now expires at the end of August . So, you know, I don't think I can add anymore. You know, we we've always put in the capitalized conservatively capitalized in the bank and it made sense for us to do, you know, exactly what we outlined. And it makes sense in a sense that, you know, our capital levels will will continue to be where one would expect given TD's history and the way we manage capital. So we're comfortable with, you know, how we got to where we did. Okay, I'll leave it there. Thank you. Thank you. The next question is from Sora Movede from BMO Capital Markets. Please go ahead. Okay, thank you. Maybe just for Rias, if there was a desire on the part of the bank for the wholesale bank to grow faster, then maybe what had been contemplated when you executed on the count acquisition. How much faster could you grow and what sort of resources would you need for each increment 100 basis points of growth? Thanks for that, Sora. But look, I think if you just look at historic development or revenue over the last five years, the wholesale bank has more than doubled. And I think that this is a business that it does move quickly and to your point, it can be grown faster slow. But I think we have to make a balance in growing out our strategy as well as weight our risk considerations from the perspective of making sure that we have the right talent in seats. And we've been able to hire just fantastic talent over the last two years in the various seats, but also continue to build our infrastructure to make sure that we have the right visibility over the risks in the business.
Speaker Change #115: kind of think for that and second question is a little bit of follow-up on i think what many us to begin with and
Speaker Change #115: So, if you could help me understand sort of the thought process there.
Speaker Change #115: Now, I'm not an expert in litigation.
Speaker Change #115: And I know you guys can't comment on these cases specifically, but more broadly, can you, comment on how successful these class actions typically are against, have been against the, Canadian banks historically?
Speaker Change #115: Like my thoughts are that the banks have these large legal budgets and a number of these, things come up, but you know, it never really amounts to much because the banks are able to successfully kind of defend themselves.
Speaker Change #115: Is that a fair statement?
Speaker Change #115: Any thoughts on that?
Speaker Change #115: Hard to comment on that, Lemar.
Speaker Change #115: It seems like there's something else going on here in terms of other considerations.
Speaker Change #115: Like, is there any thoughts you can provide on that?
Speaker Change #115: It depends on the situation, circumstance, and it's, I don't think it's appropriate to, speculate as to how a particular case might turn out.
Speaker Change #116: the sort of the second part of his question on why the sharebag buy back this quarter
Speaker Change #116: You know, best is to wait out as to, you know, what those class actions might be.
Speaker Change #116: Given the type of business we have, you know, large financial services companies serving, tens of millions of customers, they, you know, we do encounter, you know, many of these issues and it's hard to predict, you know, accurately how each one might turn out.
Speaker Change #116: Yeah, I'm just, I'm just kind of thinking about like, you know, maybe there's like a, hundred of these that come on average per year, but we hear about one.
Speaker Change #117: and then so the schw stock like that's a decision you must await i assume sort around thebegin of the quarter when you had afair good ideaof where the provisions may come in
Speaker Change #117: Again, and especially in the context of buying back a billion dollars in shares in the quarter as well.
Speaker Change #117: Because I have no, sitting on this side of the table, I have no indication of how often, these things are levied against the banks.
Speaker Change #117: So, hopefully you could help me understand that.
Speaker Change #117: Is there anything you can share on that or?
Speaker Change #117: Benny, this is Bharat.
Speaker Change #117: Fortunately, I cannot.
Speaker Change #117: I mean, these are all, there are many cases and we will see, you know, how each one turns out.
Speaker Change #117: The next question is from Jill Shea from UBS.
Speaker Change #117: Okay, thanks.
Speaker Change #117: That's it for me.
Speaker Change #117: Thank you.
Speaker Change #118: so obviously it's a decision you weighed why did you decide to go ahead and repurchase titty stock sochab like what does that benefit shareholders
Speaker Change #119: the accounting rules on this pa are very straightforward you know our view is that the two point six billion dollars is our current estimate and
Speaker Change #119: in addition to the fourhundred and fifty we had taken
Speaker Change #119: and so we make sure that you know we follow that standard
Speaker Change #119: our buybacks have been continuing right through the year and as kelvin said you know we have now
Kelvin: completed eighty five percent of what we had targeted and the program now expires at the end of august so youknow i don't think e can add anymore andyou know we always prudently capitalizede conservatively capitalize in the bank
Kelvin: You know that traditionally and historically the bank likes to be well, capitalized and frankly like to carry more capital than what might generally be necessary. In line with that, we think it's prudent to have capital. There's still a lot of volatility, and economic conditions are not as predictable as one would like. So this is just to be prudent and it makes sense. That's the capital framework we use and we think it made sense. We have the capital levels that we are projecting for the next quarter.
Kelvin: So would this sort of capital stance, conservative capital stance, signal that the AML science could end up being larger, maturely larger?
Speaker Change #120: and it made sense for us to do exactly what we outlined and it makes sense in a sense that
Speaker Change #120: We announced $2.6 billion yesterday.
Speaker Change #120: in our capital levels will continue to be where one would expect given td s history and the way we manage capital so we're comfortable with you know how we got to where we did
Speaker Change #121: okay i ave with there thank you
Speaker Change #121: Additionally, we'd announced $4.5 billion in the second quarter.
Speaker Change #121: And together this is the current estimate we have on what it will take to put these matters behind us.
sa overheady: thank you the next question is from sa overheady from bemo capital markets please goahead
sa overheady: That's how we follow this.
sa overheady: Please go ahead.
sa overheady: The accounting rules are very clear on this.
sa overheady: So our current estimate is that this is the amount it will take to move forward.
sa overheady: Thanks.
sa overheady: okay thank you maybe just for reas if if there was a desire on the part of the bank
sa overheady: And just another follow-up.
Speaker Change #123: for the wholesale bank to grow faster
Speaker Change #124: then maybe what had been contemplated when you
Speaker Change #125: executed on the coen acquisition how much faster could you grow and what sort of resources would you need for each incrementalone hundred basis points of growth
Speaker Change #125: Good morning.
Speaker Change #125: In Canadian PNC, the results were strong this quarter with revenue and volume growth.
Speaker Change #126: thanks so that sort of look i think if you just still look at
Speaker Change #127: historic development or revenue over the last five years the also bank has more than doubled
Speaker Change #128: ahand i think that this is a business that
Speaker Change #129: thatit does move quickly into your point it can be grown faster slow
Speaker Change #130: but i think we have to make a balance in growing out our strategy as well as weight our risk considerations
Speaker Change #131: from the perspective of making sure that we have the right talent seats and we've been able to hire just fantastic talent over the last two years in the various seat
Speaker Change #131: but also continue to build our infrastructure to make sure that we have the right visibility over
Speaker Change #131: the risks in the business but look i think we've been there's a lot of room for us to continue to grow whether it been prime businesses transaction banking businesses electronic trading sponsors leverage plance
Speaker Change #125: There is a lot of room for us to continue to grow, whether it is in primary businesses, transaction banking businesses, electronic sales, sponsors, supply chain financing. We have been able to bring our revenues to a consistent performance of 1.8 billion per quarter during this period of integration and building. Market conditions only seem to be becoming more supportive at the moment. So I feel that the growth trajectory we are on is a good thing for the bank as a whole. Maybe we can accelerate a bit, but I wouldn't anticipate that we would try to double it in the next year or two. Okay, thank you, I appreciate that. And then, Leo, maybe one last thing about the expenses of the American business sequence. Maybe coming back from a slightly different perspective, I think you were doing about 1.5 billion euros in non-interest expenses per quarter in 2023, excluding the 3 billion euros of legal provision. Maybe you are heading towards 1.6 billion euros, maybe a bit higher than that. Is this 1.6 billion euros in July part of the investment or the gap, I suppose, of investment in risks and controls? Or do you anticipate additional investments that will drag this gap of 1.6 billion euros in July even higher than here, apart from inflation and traditional business development? I prefer not to offer specific guidance on business sequence expenses per quarter. But let me take a step back for a moment. I think you should expect from us a continued focus on productivity, and it is my goal to drive the deployment of positive operations at the local segment level. There is no question that some of the government programs and their expenses are reflected in the corporate segment, as the investments we are making in the United States will undoubtedly tie into the global program. So, I think this operations model will be put in place. I believe the changes we are making are multi-year, but I hope that the majority of the expenses will tie into early 2025, as our execution will be most concentrated at that time. Regarding the focus, I want to give you the opportunity to manage the productivity initiatives we are driving at the local level, to reduce our driving costs, to give more capacity for change, to allow us to invest in strategic priorities, but never to compromise the risk and control initiatives we have set for ourselves. And that is at a very high level. The thought process is to create the capacity to make the necessary investments to continue to develop the franchise. And we will ensure this operations framework, and I will certainly give you regular updates regarding our progress.
Speaker Change #131: Could you just talk about the outlook there, given the macro backdrop and your expectations, for loan and deposit growth and how we should think about margins going forward?
Speaker Change #131: we've been able to bring up our revenue now to a consistent through performance of a billion eight or quarter through through this bill period of integration and build
Speaker Change #131: and market conditions that seemed like they're only getting more supportive right now so
Speaker Change #131: Thanks.
Speaker Change #132: i do feel that the growth the trajectory that we are on is is a good one for the bank inaggregate and maybe we can speed it up a little bit but i wouldn't anticipate that we're looking to double it in the next yearor two
Speaker Change #133: okay thank you appreciate that and then just oh maybe one last click at the u s retail segment expenses maybe coming out is from a slightly different perspective i think you were doing about
Speaker Change #134: u s billion and a half and non interest expenses as a quarter in two thousand and twenty three excluding the three billion u s of theillegal provision maybe you're trending out around a billion
Speaker Change #134: Thanks for the question, Jill.
Speaker Change #135: six maybe a little bit higher than that does that does that billion six this year quarterly
Speaker Change #136: that's pures in the investments or sort of you know the run rate i suppose of the investments in risk and control or do you anticipate further investments that will drag that quarterly run rate of ghteror know one point six billion even higher from here
Speaker Change #136: It's Ray.
Speaker Change #137: aside from inflation and traditional business growth
Speaker Change #137: Maybe I'll start and then Barb, I'll hand it over to you from a commercial site.
Speaker Change #138: i've been prefer not to provide specific quarter-on-quarter expense guidance now but let me let me just take a step back for a moment i think i think you should expect from a continued focus on productivity
Speaker Change #138: and it is my objective to drive positive operating leverage at at the local segment level
Speaker Change #138: I think from a PNC perspective, let me first start by saying we're just incredibly, pleased how we continue to deliver for our customers.
Speaker Change #138: And if you look across not only this quarter but previous quarters, you just see the terrific momentum, that we have across the entire Canadian franchise.
Speaker Change #138: And, you know, if I start from a revenue perspective, the Canadian PNC businesses are up 9% on a year-on-year expenses.
Speaker Change #138: We're continuing to have disciplined expense management at 4%. And so we're achieving our goal of having strong, positive operating leverage, not only this quarter, but for the second quarter in a row, we're above 500 basis points.
Speaker Change #138: And so I think that what's driving that is really both sides of the balance sheet in the Canadian Personal Bank.
Speaker Change #138: there's no question that some of the governance programs that and the expenses there of are being reflecting the corporate segment as the investments that we're making in the u s willundoubably latter up to the broader global program
Speaker Change #138: You're seeing deposit growth at 7% and we're continuing to see leadership in core deposits. And that's really being driven by our strategy around the New to Canada.
Speaker Change #138: And we're seeing another record quarter for New to Canada acquisitions in the Canadian Personal Bank.
Speaker Change #138: And you heard from Barrett the enhancements that we continue to make on our New to Canada package, from a 1TD perspective, now adding capabilities with our direct investing partners from Tim's World.
Speaker Change #138: And then from a loans perspective, you saw a good, strong loan growth of 6%. And really that's across the portfolio.
Speaker Change #138: RESO continues to be a strength for us. It's our 14th consecutive month of market share gain. We're up 6% there.
Speaker Change #138: Credit cards at 10% loan balance growth. And we're seeing very strong acquisition momentum in our credit card portfolio. And I think going forward, we'll continue to see strong acquisition momentum in our credit cards.
Speaker Change #138: We've got what we believe are market-leading partnerships that are resonating with Canadians.
Speaker Change #138: And so the other thing I'd add is from a RESO perspective, what's driving our growth, and we think will continue to drive growth as we move forward, is we launched a new channel in our RESO business called Mortgage Direct.
Speaker Change #138: And we've actually seen terrific results, and we're seeing conversion rates of our leads that are three times higher than our traditional leads in the Mortgage Direct program that we launched just about a year ago.
Speaker Change #138: And so overall, from a Canadian personal banking, I couldn't be more pleased with the momentum that we have, whether it's on the deposit side or the lending side.
Speaker Change #138: so i think that that operating model
Speaker Change #138: will be in place i believe that the changes were' making our multiyear nature but i would expect that the bulk of the expense will be peaking in the early part of two thousand and twenty five as our execution will be will be most concentrated in that period of time
Speaker Change #139: with regards to the focus i do want to give us the opportunity
Speaker Change #139: to leverage the productivity initiatives that we're running
Speaker Change #139: at the local level
Speaker Change #139: to be able to reduce our run costs
Speaker Change #139: give us more capacity for change allow us to invest in the strategic priorities but never compromising the risk and control initiatives that we've outlined for ourselves and that is at a very high level of thought process
Speaker Change #139: And I think our momentum will continue as we move forward into 2025.
Speaker Change #139: is one of creating capacity to make the investments required to continue to grow the franchise and that we're going to stick to that that operating framework and i also certainly provide regular updates with regards to our progress against that
Speaker Change #139: So is it fair to assume that you're not comfortable going below, 12.5% CT1?
Speaker Change #139: And Bharat, maybe on the commercial end.
Speaker Change #139: Thank you for taking my questions. Thank you. The next question is from Nigel D'Souza from Veritas Investment Research. Please, go ahead. Thank you. Good morning. I wanted to turn to your disclosure on reasonably possible losses. I noticed that the high end of that range is still at around $1.3 billion, and that will change from last quarter. So, trying to understand why that hasn't come down given the AML provision you've taken this quarter. Are there any other legal or regulatory matters outside from AML that could lead to outsized fines or penalties? Hi, it's Kelvin. We don't comment on RPLs. I mean, there's a lot of puts and takes in the RPL. We continuously make an assessment with the appropriate amount and update it accordingly. Okay. And then on Schwab, we talked about capital, but was liquidity a consideration in the decision to sell those Schwab shares? Could you have sourced liquidity from other avenues other than selling your equity stake in Schwab? You have the securities portfolio. Are the unrealized losses there preventing you from, I guess, selling that for liquidity to crystallize? Just trying to understand, is liquidity at all one of the considerations here? Hi, it's Kelvin. The answer is no. Okay. And then just switching to credit loss provisions, could you kind of provide some color on performing PCLs this quarter? We've seen some deterioration in unemployment rates in the labor market, but your performing PCLs are moving lower. So any color there on what's offsetting the unemployment trends that we're seeing that's leading to lower provisions? It's Ajay. You would have noticed that performing PCL quarter over quarter came down $49 million. Some of that was U.S. retail. So U.S. retail was down $23 million, and it's really coming from resale and auto with macro factors and seasonality contributing to that. Corporate segment is also down. Again, it's some seasonality and macro factors. Wholesale performing was down for two reasons. One, there were repayments. So when there were repayments, any performing we held was released. And the second reason is because they were impaired, some of the performing PCL migrated to impaired. So those would be the contributing factors why our performing PCL is down quarter over quarter. Got it. And on lowered impaired PCLs in the Canadian banking specifically, I assume that's not driven by rate cuts due to a lagged effect. So anything else that you could point to that's leading to provisions improving quarter over quarter? Are you talking about Canadian P&C? Correct, Canadian P&C. Really, it's mainly driven by commercial. And as you know, impairs in commercial can be lumpy, so there were lower impairs in commercial. That was the big driver of impaired PCLs coming down.
Speaker Change #139: Yeah, thank you, Joe, for the question.
Speaker Change #139: On commercial, you know, we feel like we have very strong momentum as well.
Speaker Change #140: thank you for taking my questions
Speaker Change #140: Is that sort of where you're thinking that in terms of your comfort level?
Speaker Change #140: though
Speaker Change #141: thank you the next question is from nigel the suser from very tal' investment research please go ahead
Speaker Change #141: We saw loans up 7% year over year. That is moderated a little bit from recent quarters, reflecting the macro environment. Deposits were strong, up 2% year over year.
Speaker Change #141: We're targeting 12%, between 12%, 12.5%.
Speaker Change #142: thank you good morning i want to turn to your disclosure on reasonably possible losses i noticice that behind end up that range is still at around one point three billion
Speaker Change #142: So we continue to be comfortable with that target, but obviously we review this on an ongoing basis depending on economic conditions.
Speaker Change #143: and as thatlittle change in last quarter so trying to understand why that has income down given the aml provision has taken this court are there any other legal or regulatory matters outside mel that could lead to outsized fins of palties
Speaker Change #143: Thank you.
Speaker Change #143: That's a bit of an inflection point for us, coming out of the SEBA loan repayments and the, you know, optimization of client balance sheets. And so we're quite encouraged by that.
Speaker Change #143: Margins have been relatively stable, absent the impacts of interest rate impacts. And so, you know, the interest rate environment will have an impact going forward.
Speaker Change #143: The market remains very competitive, but we're optimistic that we'll continue to be able to attract further growth at appropriate margins.
Speaker Change #143: Maybe one thing I would add is, you know, we are really seeing the benefit of our increased 1TD efforts.
Speaker Change #143: And so with our business clients, you know, we have been able to serve more of their financial needs, their personal financial needs.
Speaker Change #143: kevin
Speaker Change #144: we don't comment on rpl i mean there's a lot of plusit take the opa we can changeosely make a
Speaker Change #145: as an assessment was the appropriate amount an updated accordingly
Speaker Change #145: And we're seeing the relationships deepen as a result.
Speaker Change #146: okay and then on on sswab we talked about capital but was liquidity a consideration in the decision to sell those swaps shares
Speaker Change #147: could you have source of liquidity from other avenues other than selling your equity staken and swap you have the securities portfolio are the unrealized losses that repreventing you from i guess
Speaker Change #148: telling back to liquity to crystalze understand is we putting at all one of those considerations here
Speaker Change #148: Thank you.
Speaker Change #148: And customers are very happy.
Speaker Change #148: Very helpful.
Speaker Change #148: Thank you.
Speaker Change #148: And we have time for one last question.
Kelvin: ice kelvin the answer is no
Kelvin: The next question is from John Aiken from Jeffries.
Kelvin: Darko Mihalic from RBC Capital Markets.
Speaker Change #149: okay and then just switching to accredit loss provisions
Speaker Change #149: Please go ahead.
Speaker Change #149: Please go ahead.
Speaker Change #150: could you kind of provide some color on performing psals this quarter we'have seen some deterioration and unemployment rates the labor market but your're performing pceals are moving a lower any color there on what's offsetting the unemployment trends that wereseeing that that's lead to lowloer provisions
Speaker Change #150: Sorry, can you hear me?
Speaker Change #150: Hi, thank you.
Speaker Change #150: Yes, John.
Speaker Change #150: Okay.
Speaker Change #151: you would have no it's adj you would have noticed that performing pc quarter-over quarter came down
Speaker Change #152: forty nine million dollars
Speaker Change #153: some of that was u s retail so u s retail was down twenty-three million dollars
Speaker Change #154: and it's really coming from reszle and auto with macrofactors and seasonality contributing to that corporate segment is also down again its some seasonality and macrofactors
Speaker Change #154: wholesale performing was down for two reasons one
Speaker Change #154: there were repayments so when there were repayments any performing we held it always released
Speaker Change #154: and the second reason is because they were impaired some of the performing pcl migrated to impaact so those would be the contributing factors why are performing pcl is down quarter over quarter
Speaker Change #155: got it a loaded impat pce and in the caneian banking specifically i assume thats not driven by ratecuts ue to allied effect so anything else you appointed that's leading to provisions improving quarter of the quarter
Speaker Change #156: are you talking about canadian pnc crrect canadian pianc really it's mainly driven by commercial and as you know
Speaker Change #156: impeds in commercial can be lumpy so there were lower impbeds in commercial that was the big driver of p sales impai palses coming down
Speaker Change #150: Okay, that's it for me. Thank you. Thank you. The next question is from Lemar Persaud from Cormark. Please go ahead. Yeah, thanks. Maybe for Leo and just kind of following up on the conversation with Paul and Ebrahim, would it be fair to suggest that regardless of what comes out from these non-monetary fines, bottom line you feel confident in the ability to grow earnings in 2025? Is that a fair statement? I'm really just trying to understand, you know, just given the peak in expenses in 2025, how will the earnings power of the U.S. franchise kind of play out? Bharat, I won't front run any discussions on the non-monetary penalty or any shape. I really want to wait to see the final global resolution. As Bharat said, we'll certainly bring that forward as quickly as we possibly can because I know how important certainty is as we try to project forward. I just come back to I think what we're trying to do is structure ourselves so that we can essentially continue to drive the governance changes in the core business, but still grow the franchise that we have. And so I think you've seen the operating momentum over the last several quarters has remained strong. In fact, in many cases, it's been peer leading. And we've been very deliberate around trying to compartmentalize as best we can the various efforts so that we can continue to grow the franchise. So I won't provide a guidance as to what 2025 looks like today, but there are some areas that really point and are quite favorable for the outlook. Clearly, loan growth has been strong. Deposit performance has been stable. NIM performance has been peer leading in terms of relative performance. I do think we have been, from an operating expense standpoint, we've tried to be disciplined without compromising the investments that we need to make in our risk environment. And I do think that the macroeconomic environment in the States, to the extent that we do get the benefit of some Fed rate cuts, will take some pressure off both consumers and businesses and potentially spark some loan demand. So there are reasons to be optimistic about the U.S. operation, but I wouldn't want to comment right now with regards to what the final global resolution would bring forward. Okay, maybe let me try this way. Maybe this would be helpful. If we park any of the additional operating expense growth related to this AML, is there any tangible reason to suggest that TD's underlying performance would lag U.S. peers? Because it seems like the answer to that is no. But just curious your thoughts. In terms of leading indicator growth and in terms of the sustained momentum, I think we've been able to demonstrate peer leading performance, and that would be our objective going forward. Okay, thanks. And then I know you guys don't want to talk about this AML investigation, but I did notice some wording about overlapping class actions related to this AML investigation. Now, I'm not an expert in litigation.
Speaker Change #157: okay that's it for me thank you
laamar perade: thank you the next question is from laamar perade
laamar perade: from cormark please glahead
laamar perade: yes thanks maybe for leo and just kind of following up on the conversation with polyin abraham would it be fair to suggest that regardless of what comes out from these non monetary fins
laamar perade: bottom line you feel confident in the ability to grow earnings in in two thousandand twenty five that a fair statement i'm really just tryingto understand just given the peak in expenses in two thousand and twenty five how will the earnings power of the u franchise kind of play out
Speaker Change #159: or i won'ti won't front run any any discussions on the non monetary penalty or any shape really want to wait to
Buried: see the final global resolution as buried said we'll certainly bring that forward as quickly as we possibly ' cabecause i know important uncertainty is as we try to project forward i just come back to
Buried: i think what we're trying to do is is structure ourselves so that we can
Buried: essentially continue to drive the governance changes in the core business
Buried: but still grow the franchise that we have and so i think you've seen the operating momentum
Buried: over over the last several quarters has remained strong in fact in many cases it's been pure leading
Buried: and we've been very deliveberred around trying to compartmentalize as best we can
Buried: the very efforfortts so that we can continue to grow the franchise so it's i won't provide a guidance to what two thousand and twenty five looks like today but you can there are some some areas that really pointed in are quite favorable for the outlook
Speaker Change #161: clearly loan growth has been strong deposit performance has been stable a nim performance has been a pure leading in terms of relative performance
Speaker Change #161: i do think we have been
Speaker Change #161: from from an operating expense standpoint we've tried to be disciplined without compromising the investments that we need to make
Speaker Change #161: and our risk environment and i do think that the macroeconomic environment the states to the extent that we do get the benefit of some fed rate cuts will take some pressure off both consumers and businesses
Speaker Change #161: and potentially sparks some loan demand so there are reasons to be optimistic about the u s u s operation but i wouldn't want to comment right now with regards to what the final global resolution would bring forward
Speaker Change #162: okay maybe maybe if maybe let me try this this way maybe this one
Speaker Change #163: will be helpful if we park any of the additional operating expense goes related to this al is there any tangible reason to suggest that td's underlying performance would lag u s peers
Speaker Change #164: because it it seems like the answer to that is no
Speaker Change #165: but just curious tals terms of leading indicator growth and in terms of the sustained momentum i think we've been able to demonstrate pure-leading performance and that would be our objective going forward
Speaker Change #166: okay okay thank and then i know you guysdon't want to talk about this l investigation but i did notice some worry about overlapghing class actions related to the c nl investigation now i'm not a bank an expert in litigation
Speaker Change #150: And I know you can't comment on these specific cases, but more broadly, can you comment on the acceleration of these classic actions that are typically against Canadian banks historically? My thoughts are that banks have huge legal budgets, and a number of these things happen, but it doesn't really amount to much, because banks are able to defend themselves. Is that a fair statement? What are your thoughts on that? It's difficult to comment on that, Lemar, it depends on the situation, the circumstances, and I don't think it's appropriate to speculate on how a particular case might unfold. The best thing is to wait to see what these classic actions would be. From the perspective of the type of company we have, large financial institutions serving tens of millions of clients, we encounter many of these issues, and it's difficult to predict precisely how each of these issues might unfold. Yes, I wonder, maybe there are hundreds of these issues happening per year, but we hear about only one. Are there any thoughts you could share on that? Because I have no indication from this side of the table on how often these things are spent against banks. Is there something you could share on that? Unfortunately, I can't. I mean, there are many cases, and we will see how each one defends itself. Okay, thank you. That's all from me. Thank you. The next question comes from Jill Shea, from UBS. Please go ahead. Thank you. Good evening. In the Canadian PNC, the results have been strong this week with revenue and volume growth. Can you talk a bit about the aspect there, due to the macro coverage, and your expectations for revenue and deposit growth, and how should we think about margins going forward? Thank you. Thank you for the question, Jill. This is Ray. Maybe I'll start, and then Barba, I'll hand it over to you on the commercial side. I think, from a PNC perspective, I'll start by saying that we are incredibly satisfied with how we continue to deliver for our clients. And if you look, not just this quarter, but the last few, you see the tremendous momentum we have across the entire Canadian franchise. And, you know, if I start from a revenue perspective, Canadian and PNC businesses are up 9% year over year. Expenses, we continue to manage disciplined expenses at 4%. And so, we are achieving our goal of having positive operating leverage, not just this quarter, but for the second quarter overall, we are above 500 basis points. And so, I think, you know, what's driving that is really both sides of the balance sheet in Canadian PNC. You see deposit growth at 7%. And we continue to see leadership in core deposits. And it's actually driven by our strategy around New to Canada. And we are seeing another record quarter for New to Canada acquisitions in Canadian PNC. And you heard from Barrett the improvements we continue to make on our New to Canada package from a 1TD perspective, now adding capabilities with our direct investment partners from Tim's world. And then, from a loans perspective, you saw good and strong loan growth at 6%. And really, it's across the portfolio. The Network continues to be a strength for us. It's our 14th consecutive month of market revenue. We are at 6% there. Credit cards at 10%, loan balance growth. And we are seeing very strong acquisition momentum in our credit card portfolio. And I think going forward, we will continue to see strong acquisition momentum in our credit cards. We have what we believe to be our market-leading partnerships that resonate with Canadians.
Speaker Change #167: and i know you can' comment out these cases specifically but more broadly can you comment on how successfully lead class actions typically are against
Speaker Change #167: have been against the canadian banks historically like
Speaker Change #168: my thoughts so that the banks have the large legal budgets and a number of these things come up but you know never really announced amounced too much because the banks are able to success successfully kind of defends themselves is that is that a fair statement any thoughts on that
Speaker Change #169: are to comment on that laar depends on the situation circumstance and it's i don't think is appropriate to speculate is to have a particular case might turn out
Speaker Change #170: best is to wait out as do you know who what those class actions might be given the type of business we have large financial services company serving
Speaker Change #171: tens of millions of customers we do encounter you know many of these issues and it's hard to predict accurately how each one might turn out
Speaker Change #172: i'm just i'm just kind of went thinking about like you know maybe there's like aone hundred of these i come on average per year but we we hear about one like is there any thought you can provide on that because i have no sitting on this side of the table i have no indication of how often these things are leved against the banks
Speaker Change #173: sorry anything you can chere on thatmatter
Speaker Change #174: fortunately i cannot i mean these are all
Speaker Change #175: there are many cases and we'll see you know how each one turns out
Speaker Change #176: i gu thanks that's it for me
jill chey: thank you the next question is from jill chey from u b s please go ahead
jill chey: Sorry about that.
jill chey: Good morning.
jill chey: thanks good morning in canedian t n c the rezsults were strong est quarter with revenue and volume growth could you just talk about the outlook there given the macrobackdrop and your expectations for loan in deposit growth and how we should think about margins going forward thank
jill chey: My apologies.
jill chey: I will honour the no questions on AML and instead focus on Canada one more time.
jill chey: With the sale of the Schwab stake, is it safe to assume that, if at some future point we end up below 10%, you'll lose board representation and it will no longer be accounted under the equity method?
jill chey: I want to come back to what you just spoke about with respect to Canada.
jill chey: Our current intention is not to go below where we are.
jill chey: And I'll ask this in a manner that highlights my concerns with the quarter, and maybe you can beat them down.
Ray: thanks for their question jil it's ray maybe i'll start then a barble handedit over to you from on commercial site i think from a p nc perspective let me first start by saying we're just inrediblypleased how we continue to deliver for our customers
Ray: I understand that, Barrett.
Ray: and if you look across not only this quarter but previous quarters you just see the terrific momentum that we have across the entire canadian franchise
Ray: But if you do go below that, is that the case?
Ray: It's a strategic investment for us.
Speaker Change #179: and if i start from a revenue perspective the canadian pc businesses are up nine percent on a year-on-year expenses we're continuing to have disciplined expense management and four percent
Speaker Change #179: The first part is the 500 basis points of operating leverage.
Speaker Change #179: and so we're achieving our goal of having strong positive operating leverage not only this quarter but for the second quarter in oura role were above five hundred basis points
Speaker Change #179: and so i think that at the you know what's a driving that is really both sides of the balance sheet in the canadian personal bank you're seeing deposit growth at seven percent and worst continuing to see leadership in core deposits and that's really being driven
Speaker Change #179: by our strategy around the new to canada and we'receseeving another record quarter for new to canada acquisitions and a canading personal bank
Bear: and you heard from bear at the enhancements that we're continuue to make on our new to canada package from a one td perspective now adding capabilities with our direct investing partners from tim's world
Bear: and then from a loans perspective you saw a good strong loan growth of six percent
Bear: and really that's across the portfolio reslt continues to be
Bear: a strength for us it's our fourteenth consecutive month of market share gain were up six percent there
Bear: credit cards at ten percent loan balance growth
Bear: and we're seeing very strong acquisition momentum in our credit card portfolio and i think going forward wewill continue to see strong acquisition momentum in our credit cards we've got what we believe our market leading partnerships that are resonating to with canadians
Speaker Change #179: And so, the other thing I would like to add is that from a network perspective, what drives our growth, and what we think will continue to drive our growth as we move forward, is that we have launched a new channel in our network business called Mortgage Direct. And we have actually seen tremendous results. And we are seeing conversion rates from our directors that are three times higher than our traditional directors in the Mortgage Direct program that we launched about a year ago. So, in general, as a Canadian personal banker, I couldn't be more satisfied with the momentum we have, whether it's on the deposit side or the repayment side. And I think our momentum will continue as we move forward into 2025. Bharat, maybe on the commercial side? Yes, thank you Joe for the question. On the commercial side, you know, we think we have very strong momentum as well. We have seen loans up 7% year over year. This has moderated a bit over the last quarters, reflecting the macro environment. Deposits were strong, up 2% year over year. This is a bit of a turning point for us, coming from loan repayments up 7% and optimizing client balance sheets. And so we are quite encouraged by that. Margins have been relatively stable. There has been no impact on interest. The interest environment will have an impact in the future. The market remains very competitive, but we are optimistic that we can continue to attract more growth at adequate margins. Maybe one thing I would like to add is that we are really seeing the benefit of our increased 1TD efforts. With our clients, we have been able to offer more to their financial needs, their personal and financial needs, and we are seeing relationships improve. Clients are very happy. Very helpful. Thank you. Thank you. And we have time for one last question. Darko Mihalic from RBC Capital Markets. Please go ahead. Hello, thank you. Good evening. I would like to honor the questions on AML, and instead, I will focus on Canada once again. I want to go back to what you said about Canada. I will ask the question in a way that highlights my concerns regarding the quarter, and maybe you can alleviate them. The first part is the 500 basis points of operational improvement. I mean, historically, when we saw that TD, Canada, the businesses produced revenues of 9%, anything above 200 basis points of operational improvement was considered a no-go zone, because you were always investing in the business, even if you took restructured accounts. In the past, and again, I have followed TD for a very long time, it was this kind of approach, there was always reinvestment, and today, I see 500 basis points of operational improvement at an all-time low efficiency ratio, and that raises a question for me. The question is, are you really taking hard meals and expenses, because you need to get too much money here for a certain time,
Bear: and so the other thing i'd un i add is from a resl perspective what's driving our growth and we think we' continue to drive growth as we move forward as we launched a new channel in our resl business called mortgage direct
Bear: and we've actually seen terrific results and we're seeing what conversion rates of our leads that are three times higher
Bear: than our traditional leads in the mortgage direct program that we launch a just about a year ago and so overall from a canadian personal banking can be more pleased with the momentum that we have
Bear: We're very happy as to how this investment is performed.
Bear: And our view is that our governance requirements and where we are, we are very comfortable with that and would like to continue at these levels.
Bear: whether it's on the deposit side or the lending side and i think in our momentum will continue as we move forward intotwo thousand and twentyfive
Bear: Okay, Barrett.
Bear: maybe on the commercial yes i thank you joe for the question on commercial you know we feel like we have very strong momentum as well we saw loans up seven percent year -over year that is moderated a little bit from recent quarters reflecting the macro environment
Speaker Change #181: deposits were strong up two percent year over year that's a bit of an inflection point for us coming out of the se be loan repayments
Speaker Change #181: and the you know optimization of client balance sheets
Speaker Change #181: and so we're quite encouraged by that margins have been relatively stable absent the impacts of interest rate impacts and so you know the interest rate environment will have an impact going forward the market remains very competitive
Speaker Change #181: but we're optimistic that will continue to be able to attract further growth at appropriate margins
Speaker Change #182: one thing i would add is you know we are really seeing the benefit of our increased one td efforts
Speaker Change #182: and so with our business clients you know we are we have been able to serve more other financial needs their personal financial needs and we're seeing the relationships deep and as a result and customers are very happy
Speaker Change #183: helpful thank you
Speaker Change #183: And is it safe to assume that the sale of the stake has no bearing in terms of, the agreement you have on the sweep accounts?
Daryl Hill: thank you and we have time for one last question darkl i hill from r b c capital markets please go ahead
Daryl Hill: Yes.
Daryl Hill: Thank you.
Daryl Hill: I'll recue.
Daryl Hill: Thank you.
Daryl Hill: hii thank you good morning i will honor the no questions al and instead
Daryl Hill: The next question is from Matthew Lee from Canaccord Genuity.
Daryl Hill: focus on canada one more time i want to come back to what you just spoke about with respect to canada and i'll ask this cent in
Speaker Change #185: in a manner that highlights my concerns with the quarter and maybe you can beat them down
Speaker Change #185: I mean, historically, whenever we saw TDs, Canada, business, produce revenues of 9%, anything over and above 200 basis points of operating leverage was considered a no-go zone because you were always reinvesting in the business.
Speaker Change #186: the first part is the five hundred basis points of operating leverage
Speaker Change #187: i mean historically whenever we saw t's canada business produced revenues than nine percent
Speaker Change #187: anything over and above two hundred basis points of operating leverage was considered a no go zone because you are always reinvesting in the business
Speaker Change #187: Even if you were taking restructuring charges.
Speaker Change #187: In the past, and again, I've been following TD for a very long time, that was the sort of approach that there was always a reinvestment.
Speaker Change #187: even if you were taking restructuring charges in the past then again i've been following t d fora very long time that was the sort of approach that there was always a reinvestment
Speaker Change #187: And today, I see 500 basis points of operating leverage of all-time low on efficiency ratio.
Speaker Change #188: and today i'd see four hundred or five hundred basis points of operating leverage of all time low on efficiency ratio and it begs the question for me the question is are you hitting the braks really hardened expenses because you need to overearn here for a for a period of time only to later half to spend again
Speaker Change #188: And it begs the question for me.
Speaker Change #188: The question is, are you hitting the brakes really hard on expenses because you need to over-earn here for a period of time, only to later have to spend again?
Speaker Change #188: So, maybe you can beat down that thesis for me and explain why this is maybe transitory.
Speaker Change #188: So, maybe you can shed some light on this thesis and explain why this might be transitory. Do you actually think of returning to a type of historical operator that has never really exceeded 200 basis points? Or is this a new paradigm we are looking at for TD? Thank you. Thank you, Darko. Maybe I'll start. This is Ray. And thank you for the question. The way I've thought about our business over the last few quarters and going forward, first and foremost, we are looking to deliver positive operator consistently. So, I think your statement about positive operator and the history we have with it is accurate. From an expense point of view, there are a few different levers we are looking at and managing going forward. And certainly, one of them involves finding the right mix between complements. And when you look at the traffic in our branches, transaction traffic in our branches is actually down by 50% since the pandemic. So, we have looked at how to find the right balance. And what we are doing in our branch network is actually moving from a service colleague to a business colleague, to two business colleagues or two advisors to one service colleague. This leads to significant productivity, while we can actually reduce costs in our Canadian branch network on this side. And so, I see this happening from a productivity point of view. The other thing we are looking at, like Leo, we are looking across the expense management spectrum in Canadian Personal Banking, whether it's procurement, whether it's office administration complements and others. And so, we will continue to look at this in aligning our strategies going forward. But make no mistake, Darko, we continue to make investments to accelerate our growth in digital, mobile, and Omni, to ensure we meet our clients' needs. And so, we are able to balance, on a forward plan, high revenues on both sides of the balance sheet, managing our expenses and making the necessary investments in digital mobile, and also improving our risk and control environment here in Canada. So, what would be your long-term goal for operational support for this business? The goal continues to always be to improve operational support going forward. And that has always been the goal for TD Bank and will continue to be the goal for Canadian Personal Banking. Is that the case for the 500 basis points? It's difficult to give direction at that level. I think the point to take here is that we have very strong revenue momentum, driven by account acquisition, particularly in the Canadian sector. In addition to that, we are finding ways for the business to be more productive. Thanks to technology, Ray talked about what is happening with traffic and how we can improve our models. As long as these factors remain, where account acquisition continues to be strong and revenue improves, based on the strength of Ray and Barb's business, we should have good means of positive operations.
Speaker Change #189: so maybe you can beat down that thesis for me and and explained why this is maybe transitory
Speaker Change #189: Will you, in fact, try to revert back to a historical kind of operating leverage that, never really exceeds 200 basis points, or is this a new paradigm that we're looking at for TD?
Speaker Change #190: will you in fact try to revert back to a historical kind of operating levers that does never really exceeds two hundred basis points or is this a new paradigm that we're looking at for td thank you
Speaker Change #190: Thank you.
Speaker Change #190: Thank you, Darko.
Speaker Change #190: Maybe I'll start.
Speaker Change #190: Please go ahead.
Speaker Change #190: It's Ray, and thanks for the question.
Speaker Change #191: i think you ddark libe 'll started it's r and thanks for the question
Speaker Change #191: Hey, morning, guys.
Speaker Change #191: The way I sort of think about our business as we're, over the last few quarters and, moving forward, first and foremost, we are looking to consistently deliver positive operating leverage. So, I think your statement around positive operating leverage and the history that we, have with that is accurate.
Speaker Change #192: the way to lear to think about our business as over the last few quarters and moving forward
Speaker Change #192: Thanks for taking my question.
Speaker Change #193: first and foremost we are looking to consistently deliver positive operating leversage i think your statement around positive operating leverage in the history that we have with that is accurate
Speaker Change #193: Maybe one on expenses.
Speaker Change #193: So your, guidance is now high single-digit growth in 24, a bit of an increase versus mid-single-digit mentioned prior.
Speaker Change #193: Maybe just breaking it down, is the core expense growth still 2% and now the investments have pushed it to high single digits?
Speaker Change #193: From an expense perspective, a few different levers that we're looking at managing as, we move forward, and certainly one of them is around finding the right mix within the complements.
Speaker Change #193: from an expense perspective a few different levers that we're looking at managing as we move forward
Speaker Change #193: Or are there other factors that may be at play in terms of that updated guidance?
Speaker Change #193: and certainly one of them is around finding the right mix within the compcomplements and when you actually look at
Speaker Change #193: And when you actually look at the traffic within our branches, transaction traffic within, branches are actually down 50% over the past, since the pandemic.
Speaker Change #194: the traffic within our branches transaction traffic within branches are actually down fifty percent
Speaker Change #194: And so, we've looked at how do we actually find the right balance, and what we're doing, within our branch network is actually moving from a one-service colleague to one-sales colleague to two-sales colleagues or two-advisor colleagues to one-service colleague.
Speaker Change #194: over the past since the pandemic and so we've looked at at how do we actually find the right balance and what we're doing within our branch network is actually moving from a one service colleague to one sales colleague
Speaker Change #194: to two sales colleagues or two advisor colleagues to one service called that's a driving significant productivity while we're able to actually take down costs in our committee branch network on that side and so i see that plane through from a productivity perspective
Speaker Change #194: That's driving significant productivity while we're able to actually take down costs in, our Canadian branch network on that side.
Speaker Change #194: And so, I see that playing through from a productivity perspective.
Speaker Change #194: The other thing that we're looking at is likely we are looking across the entire spectrum, on expense management in the Canadian Personal Bank, whether it's real estate, whether it's from the actual head office complements and what have you.
Speaker Change #194: the other thing that we're looking at is likely we are looking across the entire spectrum on expense management in the canadian personal bank whether it's real estate
Speaker Change #194: whether it's fund the actual the head office complements and what have you
Speaker Change #194: And so, we'll continue to be looking at that as we line up our strategies as we move forward.
Speaker Change #194: and so ' continue to be
Speaker Change #194: But make no mistake, Darko, we are continuing to make investments to accelerate our growth, in digital, mobile, and omni to make sure that we're meeting the needs of our customers.
Speaker Change #194: looking at that as we line up our strategies as we move for
Dark: but makeking no mistake dark we are continuing to make investments to accelerate our growth in digital mobile and omni to make surethatwe're meeting the needs of our customers and sowe're able to balance on a go-forward basis growing revenue on both sides of the balance sheet
Dark: And so, we're able to balance on a go-forward basis growing revenue on both sides of the, balance sheet while managing our expenses and making the necessary investments from a digital, mobile, and also improving our risk and control environment here in Canada.
Dark: while managing our expenses and making the necessary investments from a digital mobile and also improving our risk and control environment here in canada
Dark: So, what would be your long-term target for operating leverage for this business?
Speaker Change #196: so what would be your long-term target for operating leverage for this business
Speaker Change #196: The goal continues to always be just to deliver on a positive operating leverage as we move forward.
Speaker Change #197: the goal continues to always be just to deliver on a positive operating leverage as we moveforward and that'salways been thegoal for t bank and wewill continue to be the go for the canian personalbank
Speaker Change #197: And that's always been the goal for TD Bank and it will continue to be the goal for the, Canadian Personal Bank.
Speaker Change #197: But would it be fair to say 500 basis points?
Speaker Change #198: so what wouldit these would be fair to sit up five hundred basis points
Speaker Change #198: It's hard to provide guidance at that level.
Speaker Change #198: I think the point to make here is we've got very strong revenue momentum driven by account, acquisition, particularly in the new to Canada segment.
Speaker Change #199: it's hard to we provide guidance at that level like i think the point to make here is we've got very strong revenue momentum driven by account acquisition and particularly in the new to canada segment
Speaker Change #199: In addition to that, we are finding ways to have the business be more productive through, technology.
Speaker Change #199: in addition to that you know we are finding ways to have the business be more productive through technology rate talked about and what's happening to traffic and how can we know tweak our models as long as those factors remain where the account acquisition continues with strong driving revenue growth
Speaker Change #199: Ray talked about what's happening to traffic and how can we tweak our models.
Speaker Change #199: As long as those factors remain, where the account acquisition continues to be strong, driving revenue growth, given the strength of Ray's business and Barb's business, we should see good positive operating leverage.
Speaker Change #199: you know given the strength of of raise business and barb's business you know we should see good positive operating leverage
Speaker Change #199: Rizh. Okay, thank you for taking my questions. Thank you. The decent gentleman, this will conclude today's question and answer session. I'll now turn the call over to Mr. Masrani. Thanks very much, operator. And thank you all for joining this morning, really appreciate it. I know, you know, you have lots of questions on the AML matters, but as you can probably understand, you know, we cannot tell you more than we already have. I understand that you want to know more and then I'm looking forward to the day that we can provide you all the details that you need. In the meantime, you know, very happy with how our business is performed. If you look at the fundamentals in each of our segments, not only in Canada, but in the United States, wholesale. It's been terrific. It's great to see the momentum we have in new account growth, revenue growth, loan growth. So it's good to see. And you know, I could not be more proud of our bankers around the world. And once again, want to thank them for their dedication and delivering for all our stakeholders. Look forward to seeing you again at the next quarter end. Thanks very much. Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.
Speaker Change #200: okay thank you for taking my questions
mr mrannie: thank you ladies and gentlemen this will conclude today's question and answer session i'll now turn the call over to mr mrannie
mr mrannie: Hi, it's Kelvin.
mr mrannie: Okay.
mr mrannie: thanks very much jooperator
mr mrannie: I'll take that question.
mr mrannie: Thank you for taking my questions.
mr mrannie: and thank you all for for joining this morning really appreciate it i know you know you have lots of questions on the l matters but is you can probably understand you know we cannot tell you more than then we already have i understand that you want to know more and i'm looking forward to the day that we cantprovide you all the details that you need
mr mrannie: Yeah, there are mainly three factors. You know, one is risk and control costs being higher than previously thought.
mr mrannie: Thank you.
mr mrannie: Ladies and gentlemen, this will, conclude today's question and answer session.
mr mrannie: I will now turn the call over to Mr. Masrani.
mr mrannie: Thanks very much, operator.
mr mrannie: Also, our markets-related businesses are performing really, really well.
mr mrannie: And so, therefore, the reimbursable compensation are driven by higher revenues, and we'll take that trade any day.
mr mrannie: And then, plus, there are a few discrete items, like the litigation that we just talked about in wealth this quarter.
mr mrannie: Those are the three main factors.
mr mrannie: inthe meantime you know very happy with our business is are performed if look at the fundamentals in each of our segments not only in canada and the united states wholesale
mr mrannie: All right, then, and maybe a follow-up just on the AML, costs themselves.
mr mrannie: You know, it sounds like a lot of the investment that's being made is predicated on hiring additional talent, kind of building out and maintaining some sort of AML infrastructure.
mr mrannie: Should we just assume those FTEs will kind of remain with TD even after that build-out is complete?
mr mrannie: And does that essentially mean that off-tax associated is kind of occurring?
mr mrannie: Yeah, let me take that one, Matt.
mr mrannie: This is Leo Salom.
mr mrannie: The next question is from Gabriel Deschain from National Bank Financial.
mr mrannie: Just to give you a sense, and I think Barrett outlined where we're making critical investments in the program.
mr mrannie: And obviously, hiring the right leadership has been a first priority, and I think we've been very fortunate to bring really subject matter leaders from other GSIBs, from the Department of Homeland Security, from the Treasury Department, you know, as well as, you know, the FBI and other law enforcement organizations.
mr mrannie: So we're really pleased with the leadership team that we brought on board.
mr mrannie: it's been terrific is great to see the momentum we have in new account growth revenue growth loan growth so it it's good to see and you know i could not be more proud of our bankers around the world d mainagers around the world and once again want to thank them
mr mrannie: We've added over 500 colleagues to support this effort.
mr mrannie: And to your point, a good portion of, those are program management resources that are scaling up data, technology, other process management changes that will, over time, those will fade away.
mr mrannie: Please, go ahead.
mr mrannie: But we're also making some important investments in investigative capacity, in advanced analytics, and I would suspect that those would stay.
mr mrannie: Good morning.
mr mrannie: So to give you a sense, there would be a portion of it that will be repurposed to other initiatives as we move forward, but there's going to be an increase, a structural increase to represent the model we want to run going forward, which I think will be a very strong AML program going forward.
mr mrannie: The expense commentary, I guess, Kelvin, you were saying that the, you know, corporate loss could be above that guidance point, the 200 to 250, again, in Q4, because of risk controls or investments in that type of stuff.
mr mrannie: All right, that's helpful.
mr mrannie: If I look at your full year consolidated adjusted expense growth, adjusted for the strategic card, portfolio, you're running at 10% growth, 9% if I exclude variable comp.
mr mrannie: Thanks, guys.
mr mrannie: At the start of the year, you'd got it to mid-single digits.
mr mrannie: Thank you.
mr mrannie: Is that delta solely because of, you know, additional, you know, investments of this nature?
mr mrannie: That's correct.
mr mrannie: No.
mr mrannie: It's a multi-year program.
mr mrannie: So, if you're looking at corporate, so remember earlier when I talked about the two items here, you talked about the corporate losses and then the expenses.
mr mrannie: Okay.
mr mrannie: So expenses, I talked about the three drivers that caused the... And remember that the higher expense growth rate also had partly TD Cowen impact as well, because last year was partial year, this year is full year.
mr mrannie: And then, look, I get you don't want questions on this regulatory matter, but the press release, you know, clearly outlined what your estimate of total penalties would be, and I don't dispute that number at all. But there's also mentioned a non-monetary penalties.
mr mrannie: Yeah.
mr mrannie: What are you thinking of there?
mr mrannie: Well, no, I mean, I think it was on the QFAR call, you said mid-single digits including, these AML type costs and Cowen.
mr mrannie: Is an asset cap on the table for the U.S. business?
mr mrannie: And the five single digits are the three factors that I talked about earlier, there's the risk, and control, stronger markets related businesses, and then discrete items like litigation and so forth.
mr mrannie: Non-monetary means anything that is nothing to do with money.
mr mrannie: Okay.
mr mrannie: So we said 2.6, that is monetary, so anything that doesn't fit into that category is non-monetary.
mr mrannie: Now, refresh my memory, please, this year, I think it was, you'd quantified 500 million, after tax of the risk control type expenses and then another amount of that magnitude in 2025.
mr mrannie: If I can't speculate, you know, we're in the middle of our negotiations, you know, we're, making progress and it's not appropriate to speculate, you know, what the final deal would be.
mr mrannie: for their dedication and delivering for all our stakeholders look forward to seeing you again as the next quarter end thanks very very much
mr mrannie: Is that correct?
mr mrannie: And, you know, as we put out in our press release, you know, we expect to come to a, resolution by calendar year-end, so I think, you know, best year is to remain patient, and when we have more to say, we'll be happy to engage.
mr mrannie: No, I think the 500 million talked about the cost that we've spent up until that point, in time.
mr mrannie: Right.
mr mrannie: We haven't talked about anything for 2025.
mr mrannie: But, you know, non-monetary can involve financial impact, so we can agree on that, correct?
mr mrannie: Nothing for 2025.
mr mrannie: I don't want to speculate, you know, there might be compliance requirements, there can, be various other requirements, it's hard to, you know, speculate, you know, we are in the middle of this negotiations, investigations, and so we just want to make sure that we give you fulsome disclosures when it is appropriate, rather than speculating what it may or may not be.
mr mrannie: Is it like, it seems likely that these costs could persist though into 2025, is that unreasonable, to expect?
mr mrannie: All right.
mr mrannie: Well, in any case, I appreciate the transparency you provided last night.
mr mrannie: Thank you.
mr mrannie: It was nice talking to you, Gabe.
mr mrannie: The next question is from Paul Holden from CIBC.
mr mrannie: Thank you.
mr mrannie: Please go ahead.
mr mrannie: The next question is from Ibrahim Poonawalla from Bank of America.
Speaker Change #202: thank you the conference has now ended please disconnect your lines at this time and we thank you for your participation
Speaker Change #202: Please go ahead.
Speaker Change #202: Thank you.
Speaker Change #202: And thank you all for joining this morning.
Speaker Change #202: Okay.
Speaker Change #202: Really appreciate it.
Speaker Change #202: Good morning.
Speaker Change #202: I know you have lots of questions on the AML matters, but as you can probably understand, we cannot tell you more than we already have.
Speaker Change #202: I just wanted to follow up, Leo, to your response earlier, what I'm trying to figure out is, So, how much of the remediation actions that you're taking or fixing AML sort of risk controls is still a moving target where you're still learning as you dig into in terms of what needs to be done?
Speaker Change #202: And from a shareholder standpoint, I think the two questions are the risk of expense, creep, right?
Speaker Change #202: Mid-single-digit move to high-single-digit.
Speaker Change #202: Could this become low-double-digit and then some more next year?
Speaker Change #202: So, that's what I'm trying to handicap.
Speaker Change #202: And the second is, given all these experts you hired, do you – forget about the regulators, – but do you have a sense of the timeline of when you can at least get this at par with management's expectation in terms of where you want the AML controls to be?
Speaker Change #202: Yeah, thank you very much, Ebrahim.
Speaker Change #202: It's a very good question.
Speaker Change #202: Let me first just assure you that we've spent a lot of time in building a very comprehensive, AML program.
Speaker Change #202: And it really looks at the program in its entirety, all pillars, to ensure that we've, got one of the most robust AML programs in the country.
Speaker Change #202: That's been the objective from the very beginning.
Speaker Change #202: I believe we have a very robust program, and we're executing – we're well underway, in terms of the actual execution program.
Speaker Change #202: I talked about the leadership attraction.
Speaker Change #202: I've talked about the increase in complement in investigators and program managers and, data specialists in the technology areas, and we are sparing – we're really moving as quickly as we can to be able to make sure that we've got that mature infrastructure in place.
Speaker Change #202: We're also making investments in data and technology, so I feel quite comfortable that, we have a roadmap to execute against and that we're doing – we are executing against that plan.
Speaker Change #202: Certainly over the course of the next year or two years, as our sophistication and advanced, analytics increases, we are going to be even more effective at identifying and thwarting the risks that are present in the financial industry.
Speaker Change #202: But that's by design.
Speaker Change #202: That's exactly what we're trying to drive towards.
Speaker Change #202: I believe that the costs that we have forecasted internally are appropriate for the program, that we've outlined, and I feel quite comfortable with the outcome.
Speaker Change #202: And I just want to stress, we just – we're not looking to simply meet the minimum standard, here.
Speaker Change #202: I mean, the instructions from Barrett have been very clear from the very beginning.
Speaker Change #202: We want a world-class program. We're making the investments required, and it will create an infrastructure that will, allow us to continue to grow sustainably and build a franchise, because we have an exceptional franchise in the U.S., and it's one that we want to continue to build.
Speaker Change #202: Right.
Speaker Change #202: And Leo, the reason I'm trying to sort of drill into this is, I think you said it looks, like it's going to be a multi-year program to get to the end point.
Speaker Change #202: And I think – I mean, obviously, you don't want to comment on the non-monetary penalties, but in a world where there's an asset cap, the concern is, if this is going to be a two- to three-year deal, the U.S. franchise is going to be under an asset cap, and the risk of attrition – like, how – is there a way that you can make us feel better about the U.S. franchise if there's an asset cap, and this thing takes multi-years, as you said, as someone who runs that business day-to-day, of why that should be okay, and there's no risk of attrition?
Speaker Change #202: Ebrahim, I would say, first of all, I just want to emphasize, this is a priority for us.
Speaker Change #202: Getting this AML program complete and making sure that we've got that sustainable foundation is a first priority for me, personally.
Speaker Change #202: So as I've outlined, we're making the requisite investments there.
Speaker Change #202: But I do want to just pivot for a moment and just point to the performance of the underlying franchise.
Speaker Change #202: If you look at the third quarter performance, we did have sequential NIAID and PTPP growth.
Speaker Change #202: That was powered by a three-basis point increase in NIM and peer-leading loan growth and strong and stable deposit performance.
Speaker Change #202: We saw some of the areas that we've identified previously, like our bank card business was up 16% on a year-on-year basis.
Speaker Change #202: Our mid-market business, where I've indicated we have an opportunity to be able to leverage the partnership with TD Securities and TD Cowen to be able to scale that business, was up 18%.
Speaker Change #202: Even our core small business franchise, where we are the largest SBA lender in our footprint, was up 8% in what has been a relatively subdued lending environment.
Speaker Change #202: So I think the franchise continues to perform, and there's no reason why that should end. We're going to continue to do what we need to do from a governance and control standpoint, but we want to continue to build a franchise that we're very proud of and that we think can continue to consolidate itself in the U.S. marketplace.