Q3 2024 The Toronto-Dominion Bank Earnings Call
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
This conference will begin momentarily.
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Speaker Change: We thank you for your patience.
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miss brookcaless: please stand by your meeting is about to begin good morning at everyone welcome to the tv bank group q three two thousand and twenty four earnings conference calli would like to turn the meeting over to miss brookcaless head of inves relations please go ahead miss hales
miss brookcaless: Please stand by.
miss brookcaless: Your meeting is about to begin.
Miss Hales: thank you operator good morning and welcome to tv bank group's third quarter two thousand and twentyfour investor presentation
Speaker Change: many of us are joining today's meeting from lands across north america north america is known as turtle islands by many indigenous communities
Speaker Change: Good morning, everyone.
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 mes sawas of the credit the onishnava the chipwa the holder is showny and the wind-up peoples
Speaker Change: and is now home to many diverse first nations mayte and inuit peoples we also acknowledgeed that toronto is covered by treatthousand and thirteen signed with in neisauas of the credits and the williams treaty signed with multiple missicsaaggaas and chioab andanss
Speaker Change: Welcome to the TD Bank Group Q3 2024 Earnings Conference Call.
Speaker Change: I would like to turn the meeting over to Ms. Brooke Hales, Head of Investor Relations.
Speaker Change: it will begin today's presentation with remarks from barrtment ronney the bank ceo after which kelvin trren the bank cfo will present our third quarter operating results oji bumwi 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: Please go ahead, Ms. Hales.
Speaker Change: Thank you, Operator.
Speaker Change: also present today to answer your questions our raymondchun ruhead naadium personal banking barahooperg group had canadian business banking
Speaker Change: Good morning and welcome to TD Bank Group's, Q3 2024 Investor Presentation.
Speaker Change: in wiggan group head wealth management and insurance leoam president ceo td bank america's most convenient bank and reas onthat group had wholesale banking please turn to slide two
Speaker Change: Many of us are joining today's meeting, from lands across North America.
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 believe that adjusted results provide readers with a better understanding of how management views the bank's performance
Speaker Change: be 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
Speaker Change: North America is known as Turtle Island, by many Indigenous communities.
Speaker Change: I am currently situated in Toronto.
barrer: thank you brookke 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: 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 Anishnabeg, the Chippewa, the Haudenosaunee, and the Wendat peoples, and is now home to many diverse First Nations, Métis, and Inuit peoples.
barrer: 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: before i get into the tails i want to spend a few minutes on the anncement we made late yesterday
Speaker Change: we continue to actively pursue a resolution of our al 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
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 year
Speaker Change: the two point six billion u s dollars provision we just announced combined with the four 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: 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 matter 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 cross functional procedures were preventing detecting and reporting suspicious activity
Speaker Change: while there is 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 end 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've 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: let's now turn to a third quarter earnings
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: revenue grew eight percent 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: ecls were stable quarterovera 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 quarter end the bank ct one ratio was twelve point eight percent reflecting the impact of the al investigations provisions and shares bought back during the borarder 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: 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 in modernizing the bank's data infrastructure
Speaker Change: enhancing scalability security and speed d's cloud-based platform 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 finance
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 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 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: across the segment we are enhancing products and offerings through a personalization and execution against our onetd strategy
Speaker Change: including strong momentum and referrce from our retail branch network too well
Speaker Change: in really real estate secured lending the bank continued 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 bonded loyalty report td credit cards ring 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 s student line of credit offering and deepening relationships as their needs evol
Speaker Change: did he 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 offwers were both td direct inwesting and and the td cash back visaak card as we add even more value for 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 meet of services to further address the needs of technology and innovation companies
Speaker Change: vhe already has more than a million business making customers across canada and now with teddinnovation partners the bank is helping the next generation of technology companies at every step of their journeys
Speaker Change: Actual results could differ materially.
Speaker Change: turning to the u s the u s retail bank continuue to deliver strong operating momentum with sequential earnings growth and stable deposits excluding swes and peer-leading loan growth year-over-year
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. Barrett and Kelvin will both be referring, to adjusted results in their remarks.
Speaker Change: Additional information about non-GAAP measures, and material factors and assumptions is available in our Q3-24 report to shareholders.
Speaker Change: td grewcst consumer loans eight percent year-over-year with proprietary bankcard balances up sixteen percent
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 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 cliines and cprows and leverage relationships to capture sponsor back finance opportunities
Speaker Change: and this quarter we are proud that for the fifth year in a row tdotto 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 and 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 wealths 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
Speaker Change: 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 an 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-roover-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 pdactive crater
Speaker Change: and we've continued to innovate this month td was the first maingin canada to launch real time partial shares enabling investors to buy and sell of fractionalof stocks indices and etf making investing more accessible
Speaker Change: this launch reflects the power of one td with td securityities providing the back-end execution to support this new functionality
Speaker Change: our insurance business was impacted by the severe weather events in the greater torrunto area and the wildfires in alberta in q three and by haillstones in calgary and loods in montreal this month
Speaker Change: at id insurance we are there for our customers in their moment of need
Speaker Change: i to thank td colleaguesfor the tremendous efforts for our customers through these events to support the communityities impacted by wildfires pds made donations to the canadian red cross and its facilitating customer donations that branches across canada
Speaker Change: wholesale banking continued its' growth with revenues up fourteen percent year-over-year on broader stronger capabilities 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 s share trading execution for our clients with the fully launch in automated dsex 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: 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 you in toronto a likely notice in addition to the city skyline the new td terraceist building inside the building is a state of the rtd branch built as the 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: it 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 us 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 our 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 across canada
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: With that, let me turn the presentation over to Barrett.
Speaker Change: with that i'll turn things over to kelvin
Speaker Change: Thank you, Brooke, and thank you, everyone, for joining us today.
Speaker Change: In Q3, TD delivered earnings, of $3.6 billion in EPS of $2.05.
Kelvin: thank you barret good morning everyone please turn to slide eleven
Kelvin: reported earnings this quarter include a two point six billion dollar u s al investigations provision
Kelvin: on an adjusted basis earnings were three point six billion dollar flat yearover-year and earnings per share was two dollars in five cents up five percent year-over-year
Kelvin: Business fundamentals were strong across the Bank.
Kelvin: overall we saw good fundamentals across our businesses reflecting in our strong top line growth
Kelvin: Before I get into the details, I want to spend a few minutes on the announcement we made late yesterday.
Kelvin: this was partially offset by two items in the wealth management and insurance segment
Kelvin: the impact of claims on severe rather -related events
Kelvin: which as a percentage of earned premiums was forty percent higher than q three of last year and provisions related to ongoing litigation manners
Kelvin: 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
Kelvin: we saw record revenues in two segments this quarter canadian personal and commercial banking and wealth management and insurance
Kelvin: expenses increase the-over-year reflecting investments in our risk and control infrastructure and higher employee-related expenses
Kelvin: We continue to actively pursue a resolution of our AML matters.
Kelvin: we continue to prioritize our investments and manage expenses diligently
Kelvin: Discussions have been productive, and while we are not through the tunnel yet, we can see the light at the end of this journey.
Kelvin: 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 US$2.6 billion provision we just announced, combined with the US$450 million provision announced last quarter, represents our current estimate of the total fines to be paid related to these matters.
Kelvin: while we continue to look for efficiencies in our cost base we have now concluded our restructuring program
Kelvin: I also want to spend a minute on the remediation program itself.
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. And we have implemented new cross-functional procedures for preventing, detecting, and reporting suspicious activity.
Kelvin: While there is still much work ahead, we are pleased with the progress we have made.
Kelvin: we have provided more details on slide twenty seven
Kelvin: This is a priority.
Kelvin: now wewith 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
Kelvin: reflecting higher investments in our risk and controlling infrastructure
Kelvin: The entrance will begin momentarily.
Unknown Executive: The entrance will begin momentarily. Once again, please continue to stand by. We thank you for your patience. The entrance is being recorded. This conference is being recorded. Please stand by. Your meeting is about to begin. Good morning, everyone. Welcome to the TD Bank Group, Q3, 2024 Earnings Conference call. I would like to turn the meeting over to Ms. Brook Hales, Head of Invest Relations. Please go ahead, Ms. Hales. Thank you, operator.
Kelvin: strong performance in our markets-related businesses
Kelvin: Once again, please continue to stand by.
Kelvin: We thank you for your patience.
Kelvin: and certain items including the itigation
Kelvin: ecls were stable quar of our quarter
Kelvin: please turn to slide twelve
Kelvin: in adium personnel and commercial banking delivered a strong quarter with record net income and revenue
Kelvin: reflecting loan and deposit volume growth in substantial positive operating leverage
Kelvin: The entrance is being recorded.
Kelvin: average loan volumes rolled six percent yearover-year
Kelvin: This conference is being recorded.
Kelvin: with six percent growth in personal volumes driven by real estate securured lending up six percent and cards up ten percent
Kelvin: Please stand by.
Kelvin: Your meeting is about to begin.
Kelvin: Good morning, everyone.
Kelvin: Welcome to the TD Bank Group, Q3, 2024 Earnings Conference call.
Kelvin: and seven percent growth in business volume
Kelvin: I would like to turn the meeting over to Ms. Brook Hales, Head of Invest Relations.
Kelvin: average deposits roles five percent year-over-year reflecting seven percent growth in personal deposits and two percent growth in business deposits
Kelvin: Please go ahead, Ms. Hales.
Kelvin: Thank you, operator.
Unknown Executive: Good morning and welcome to TD Bank Group's third quarter, 2024 Investor presentation. Many of us are joining today's meeting from lands across North America. North America is known as Turtle Island by many Indigenous communities. I am currently situated in Toronto.
Kelvin: that interest margin was two point eighty one percent
Kelvin: down three basis point quarter or quarter as expected reflecting the migration of vas to core our basaseelloan
Kelvin: as we look forward to q four while many factors can impact margins we expect downward pressure due to bacor migration and the impact of bank of canada rate cuts partially offset by the benefit of tractor on and offrate
Brooke Hales: 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, Nati, and Inuit peoples. 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.
Kelvin: expenses increased reflecting five spend supporting business growth including em peryear-related expenses and technology costs
Kelvin: A US business is an important part of the bank and of our future.
Kelvin: please turn to slide thirteen
Kelvin: We must focus on the work required to meet our obligations and responsibilities and build that future on stronger foundations.
Kelvin: the u s retail bank continueed to deliver strong operating momentum with sequential earnings growth and pure leading loan growth year-over-year
Kelvin: Good morning and welcome to TD Bank Group's third quarter, 2024 Investor presentation.
Brooke Hales: We will begin today's presentation with remarks from Barat Masrani, the Bank CEO, after which Kelvin Tran, the Bank CFO, will present our third quarter operating results. 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. Also present today to answer your questions are Raymond Chung, Group Head, Canadian Personal Banking, Barbara Hooper, Group Head, Canadian Business Banking, Kim Wigan, Group Head, Wealth Management, and Insurance, Leo Swam, President and CEO, TD Bank, America's Most Convenient Bank, and Rias Ahmed, Group Head, wholesale banking.
Kelvin: average loaner volumes increased five percent year-over-year reflecting eightpercent growth in personal loans
Kelvin: and three percent growth in business loans
Kelvin: we continue to deliver growth in mid-market commercial lending with volumes up eighteen percent a business that is also driving fee income
Kelvin: average deposit volumes excluding sleep deposits were relatively flat year-over-year as the u s retail bank demonstrated deposit stability in the competitive environment
Brooke Hales: Please turn to Slide 2. As noted on Slide 2, our comments during this call may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially. I would also remind listeners that the bank uses non-gap 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. Barrett and Kelvin will both be referring to adjusted results in their remarks. Additional information about non-gap measures and material factors and assumptions is available in our Q324 report to shareholders.
Kelvin: that interest margin was three z ero two percent up three basis point borto ber quarter driven by higher deposit margin
Kelvin: As I have said before, the failures were serious.
Kelvin: We own it.
Kelvin: We know what the issues are, and we are fixing them.
Kelvin: as we look forward to q four while many factors can impact margins
Kelvin: I look forward to providing additional clarity as soon as I can.
Kelvin: we expect a modest nim expansion due to the benefit of tractor on an offrates partially offset by any potential f ratecut
Kelvin: reported expenses include a two point six billion dollar u s ml investigations provision
Kelvin: 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.
Kelvin: on an adjusted basis expenses were relatively flat over-year primarily due to higher operating expenses off set by ongoing productivity initiatives
Bharat Masrani: With that, let me turn the presentation over to Barrett. Thank you, Broke, and thank you everyone for joining us today. In Q3, TD delivered earnings of $3.6 billion in EPS of $2.05.
Kelvin: Many of us are joining today's meeting from lands across North America. North America is known as Turtle Island by many Indigenous communities.
Kelvin: please turn to slide fourteen
Kelvin: wealth management and insurance delivered record revenue and strong fundamentals across this diversified businesses
Bharat Masrani: 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. We've hired from other banks, regulators, government and even law enforcement. We've invested in data and technology to enable improved transaction monitoring and data analytics capabilities. And we've implemented new cross-functional procedures for preventing detecting and reporting suspicious activity. While there is still much work ahead, we are pleased with the progress we've made.
Kelvin: revenue groww thirteen percent year-over-year reflecting higher insurance premiums fee-based revenue deposit margins and transaction revenue
Kelvin: I am currently situated in Toronto.
Kelvin: 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, Nati, and Inuit peoples.
Kelvin: insurance service expenses were up twenty percent year-over-year primarily reflecting increased claim severity last favorable prior yearyears claims development and larger impact of severe weather related events
Kelvin: 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.
Kelvin: we saw claims cost of one hundred eighty-six million dollars this quarter due to severe weather events in the greater torontal area and wildfires in alberta in july
Kelvin: in addition
Kelvin: there have been too significant weather events so far in august
Kelvin: the calgary held storms and the monary off floods
Kelvin: with these two events we expect canim and related a cost of more than three hundred million dollars in q four
Kelvin: to help support alice 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 co
Kelvin: expenses were up thirteen percent year-over-year
Kelvin: more and half of this increase related to provisions for ongoing litation matters
Kelvin: with the remainder driven by higher variable compensation
Kelvin: assetts under management and assets under administration increaseed year-over-year both reflecting market appreciation in their asset growth
Bharat Masrani: This is the priority. A US 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 that future on stronger foundations. As I've said before, the failures were serious. We own it. We know what the issues are and we are fixing them.
Kelvin: please turn to slide fifteen
Kelvin: also banking continued its growth delivering revenues of one point eight billion dollars reflecting higher trading-related revenue landing revenue advisory and underwriting fees
Kelvin: this quarter we also saw higher pcl reflecting a few new impairments across different sectors
Bharat Masrani: I look forward to providing additional clarity as soon as I can.
Kelvin: We will begin today's presentation with remarks from Barat Masrani, the Bank CEO, after which Kelvin Tran, the Bank CFO, will present our third quarter operating results.
Bharat Masrani: 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. ECLs were stable quarter-over-quarter, reflecting continued strong credit performance. We completed our restructuring program announced in the fourth quarter last year delivering efficiencies across the enterprise and continued to prioritize investments in our risk and control infrastructure. 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 upset by organic capital generation.
Kelvin: expenses increased triou per cent year-over-year primarily reflecting higher ril compensation menstrate with higher revenues
Kelvin: 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.
Kelvin: the business delivered a positive operating leverage and an efficiency ratio of sixty-nine percent as we continue to optimize the platform
Kelvin: please turn to slide sixteen
Kelvin: the corporate met loss for the quarter was three hundred twenty-four million dollars
Kelvin: as you will recall
Kelvin: we guided to adjusted net losses indetheed two hundred to two hundred fifty million dollar range
Kelvin: although we expected it to bounce around from the quarter -to-quarter for fiscal two thousand and twenty-four
Kelvin: we have increased investments in our risk and controllinginfrastructure and expect corporate adjusted net losses to remain about that range for q four
Bharat Masrani: 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. 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.
Kelvin: net corporate expenses increased ninety-three million dollars compared to the prior year mainly reflecting investments and risk and controlled infrastructure partially offset by litigahat vage in the prior year
Kelvin: please turn to slide seventeen
Kelvin: the common equityto one ratio ended the quarter at twelve point eight percent down fifty -seven basis points sequentially
Bharat Masrani: 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. Announcing scalability, security and speed, TD's cloud-based platform is a key foundation for our forward focus, data-driven organization.
Kelvin: we had strong internal capital generation this quarter
Kelvin: oura excluding the impact of fx increased slightly primary reflecting the operational risk r impfrom certain provisions taken last quarter
Kelvin: we repurchase approximately thirteen million shares in q three
Kelvin: and none in august todayate
Kelvin: our current n ciid expires on august thirty first and we do not intend to repurchase any additional shares prior to expiry
Bharat Masrani: 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.
Kelvin: across the ninety million share byback program and our previous thirty million sharebuyback program pd repurchase over one hundred million shares almost eighty-five percent of the shares' authorized delivering returns for shareholders while managing our capital appropriately
Kelvin: Also present today to answer your questions are Raymond Chung, Group Head, Canadian Personal Banking, Barbara Hooper, Group Head, Canadian Business Banking, Kim Wigan, Group Head, Wealth Management, and Insurance, Leo Swam, President and CEO, TD Bank, America's Most Convenient Bank, and Rias Ahmed, Group Head, wholesale banking.
Bharat Masrani: Let me now turn to each of our businesses and review some highlights from Q3. Our Canadian personal and commercial banking segment delivered record revenues reaching $5 billion for the first time in record net income, up 13% year-over-year. These strong results were driven by robust loan and deposit growth and substantial positive operating leverage. Across the segment, we are enhancing products and offerings through personalization and execution against our one TD strategy, including strong momentum and referrals from our retail branch network to wealth.
Kelvin: Please turn to Slide 2.
Speaker Change: edd sold is common shares in first horizise on this quarter generating six basis points of cq one
Kelvin: 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: 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 a and the provision announced last quarter
Kelvin: Actual results could differ materially.
Speaker Change: we expect a negative thirty-five basis point impact from this quarter's l investigation provision in q four
Kelvin: I would also remind listeners that the bank uses non-gap 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. Barrett and Kelvin will both be referring to adjusted results in their remarks.
Bharat Masrani: It really states secured lending, the bank continued to deliver market share gains while supporting our growing customer base. 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. 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.
Speaker Change: as a reminder inssistent with the ble three reforms operational rich ard a in impastic effect on a one quarter lag
Kelvin: Additional information about non-gap measures and material factors and assumptions is available in our Q324 report to shareholders.
Speaker Change: this will be partially offset by a positive fifty-four basis point impact to c one in q four from the celle of forty point five minutes
Kelvin: With that, let me turn the presentation over to Barrett.
Speaker Change: blop shares
AJ: with that aj overto you
AJ: okay thank you kelvin and good morning everyone please turn to slide eighteen
Speaker Change: cross-impaired loan informations were stable at twenty-two basis points for the bank
Speaker Change: as higher impaired loan formations in wholesale and u s commercial
Bharat Masrani: TD grew its leading deposit franchise with another strong quarter for account openings. And in the new to Canada market, we extended our package, 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. In business banking, TD grew loans by 7% year-over-year. This quarter, the bank launched TD innovation partners, a new team offering broad suite of services to further address the needs of technology and innovation companies. 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 journeys.
Speaker Change: were largely offset by lower formations in canadian commercial
Speaker Change: please turn to slide nineteen
Speaker Change: gross impaired loans increased three basis points quarter-over quarter to forty-four basis points
Speaker Change: driven by a few new impairments across a number of industries in each of wholesale and u s commercial
Speaker Change: partially offset by low impairments in canadian commercial
Speaker Change: thesease don' to slide twenty
Speaker Change: recall that our presentation reports pcal ratios both gross and net of the partner share of the u s strategic cops
Speaker Change: we remind you that u s card ps recorded in the corporate segment of fully absorbed by our partners and do not impact the bank's net income
Bharat Masrani: Turning to the US, the US retail bank continue 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%. 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. In commercial banking, middle market loan balances grew 18%.
Speaker Change: the 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: please turn to slide twenty one
Speaker Change: the banks impaired pc was nine hundred and twenty million
Speaker Change: an increase of fifty million quarter overquarter reflecting higher provisions in the wholesale segment partially offset by lower provisions in the canadian personal and commercial segment
Bharat Masrani: These strong results were driven in part by continued execution of our one TD 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: performing p decreased forty-nine million quarter over quarter to one hundred and fifty two million
Bharat Masrani: 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. JD Power also awarded TD Bank America's most convenient bank the highest ranking in online banking satisfaction among national banks, according to his 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 smaller current quarter performing build was primarily recorded in
Speaker Change: 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 due to current credit conditions including some credit migration driven by the non retail lending portfolios
Bharat Masrani: 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. For the last few years, we have seen an increase in the frequency of weather events. 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 in attractive return on equity over time.
Speaker Change: volume growth and a twenty million impact from foreign exchange
Speaker Change: the banks allowance coverage remains elevated to account for ongoing uncertainty relating to the economic trajectory and credit performance
Speaker Change: PCLs were stable quarter-over-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: in summary
Speaker Change: the bank exhibited continued strong credit performance this quarter as evidenced by stable cross-impaired loan formations and p
Bharat Masrani: Our advice business is so significant retail net asset growth across all our channels coupled with market appreciation, driving total assets up 15 percent year over year. Direct investing a leadership position is the result of consistent innovation to bring market leading capabilities to our clients. You saw that last quarter with the launch of TD Active Creator and we have continued to innovate. This month, TD was the first making Canada to launch real-time partial shares, enabling investors to buy and sell a fraction of stocks, indices and ETFs, making investing more accessible.
Speaker Change: a year to date pcl 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: results may vary by quarter and are subject to changes in economic conditions
Barrts: with that i will turn it back over to barrts
Barrts: 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.
Barrts: 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.
Barrts: thank you j before we begin the q n s 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
Barrts: 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.
Bharat Masrani: This launch reflects the power of one TD with TD securities providing the backend execution to support this new functionality. Our insurance business was impacted by the severe weather events in the greater Toronto area and the wildfires in Alberta and Q3 and by health storms and calorie and floods in Montreal this month. A 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: 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 but today i suggest that we focus on the bank'sq three earnings
Speaker Change: Some highlights from Q3.
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: Across the segment, we are enhancing products and offerings through personalization and execution against our 1TD strategy.
Speaker Change: Including strong momentum in referrals from our retail branch network to wealth.
Speaker Change: with that operator we are now ready to begin the q na session
Speaker Change: In real estate secured lending, the bank continued to deliver market share gains while supporting our growing customer base.
Speaker Change: NTD, 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 No.
Speaker Change: 1 across major issuers in program loyalty.
Speaker Change: 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.
Speaker Change: TD grew its leading deposit franchise with another strong quarter for account openings.
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 ke ad you may answer your questionat any time by pressing star two
Speaker Change: 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.
Speaker Change: 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.
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 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: 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.
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, and Leverage Relationships to capture sponsor-backed finance opportunities.
Bharat Masrani: To support the communities impacted by wildfires, TD has made donations to the Canadian Red Cross and its facilitating customer donations that branches across Canada. All cell banking continued its growth with revenues up 14% year-over-year on broader, stronger capabilities. We continue to make good progress, integrating our teams, deepening our client relationships and gaining momentum across our banking and markets businesses. In addition, we enhance U.S, shared trading execution for our clients with the fully-launched and automated TDSX private room.
Speaker Change: please press star one at this time if you have a question there will be a brief pause will participants register for questions thank you for your patients
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.
Many Groundman: and the first question is from many groundman from school sha bank please go ahead
Many Groundman: J.D.
Many Groundman: 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.
Many Groundman: 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.
Many Groundman: In direct investing, a leadership position is the result of, consistent innovation to bring market-leading capabilities to our clients. You saw that last quarter with the launch of TD ActiveTrader, and we have continued to innovate.
Many Groundman: For the last few years, we have seen an increase in the frequency of weather events, 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.
Many Groundman: 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.
Many Groundman: Our advice business saw significant retail net asset growth across all our channels, coupled with market appreciation driving total assets up 15% year-over-year.
Many Groundman: Our insurance business was impacted by the severe weather events in the Greater Toronto Area, and the wildfires in Alberta in 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: ka 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 on operational r wa coming in q four
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 continued its growth with revenues up 14% year-over-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. In addition, we enhanced U.S. shared trading execution for our clients with a fully launched, and automated TD SX private room.
Speaker Change: Overall, our businesses performed well in Q3, and I'm confident in the strength of our franchise.
Speaker Change: so if you could help me understand sort of the thought process there seem like there's something outseploring on year in terms ofother considerations again and especially in the context of buying back a billion dollars in shares in the quarter as well so hopefully you could help me understand that
Bharat Masrani: Overall, our businesses perform well in Q3 and I am 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. 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: We are operating in a challenging environment with significant market volatility, rapidly evolving rate expectations, and heightened geopolitical risks.
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: any this is where you know that traditionally any historically the bank likes to be well capitalized and frankly like to carry more capital
Speaker Change: then what make generally be necessary in line with that you know we think it's is prudent to have capital there is still a lot of volatility and
Speaker Change: and know economic conditions are not as predictable as one would like so you know this is just to be prudent then it makes sense now 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: As always, TD will be there for them as we navigate the coming months together.
Bharat Masrani: And those of you in Toronto have likely noticed in addition to the city's skyline, the new TD Terrace Building. Inside the building is the state of the RTD branch, built as the next generation innovation center, enabling 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 2024 Disability Equality Index for the 10th consecutive year in the US, 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: 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: 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: Our colleagues live our commitment to our customers every day, and I want to thank them, for all their efforts.
Speaker Change: so with this sort of capital stands conservative capital and signal that
Speaker Change: the and l science could end up being larger materially larger
Speaker Change: I'm confident that together, we will continue to deliver for all our stakeholders.
Speaker Change: we we announced in know two point six billion yesterday additionally we announced four hundred and fifty in the second quarter and together this is the current estimate we have on what it will take to put these matters behind us
Speaker Change: With that, I'll turn things over to Kelvin.
Speaker Change: Thank you, Barrett.
Bharat Masrani: 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 Thanksgiving campaign to showcase our gratitude for their unwavering support. In this milestone year, we've taken our appreciation to the skies to spectacular drone light shows in cities across Canada. Our colleagues live our commitment to our customers every day, and I want to thank them for all their efforts.
Speaker Change: 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 to move forward
Speaker Change: and'm just another follow up so is it fairitissume that you're not comfortable going below twelveand percent ct one is that sort of where you're thinking that in terms of your comfort level
Speaker Change: that we are targeting twelve percent in our twelve between twelve welve to havehalf so we continue to be comfortstable with that target but obviously we review this on an ongoing basis depending on economic conditions
Bharat Masrani: I'm confident that together we will continue to deliver for all our stakeholders.
Kelvin Tran: With that, I'll turn things over to tell them. Thank you, Barrett.
Speaker Change: Thank you, Broke, and thank you everyone for joining us today.
Speaker Change: thank you
Kelvin Tran: Good morning, everyone. Please turn to slide 11. Reported earnings this quarter include a $2.6 billion US AML investigations provision. On an adjusted basis, earnings were $3.6 billion, flat year-over-year, and earnings per share was $2.5 up 5% year-over-year. Overall, we saw good fundamentals across our businesses, reflecting in our strong top line growth. This was partially offset by two items in the wealth management and insurance segment. The impact of claims from severe, rather 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: thank you the next question is from john acon from jeffre
Speaker Change: In Q3, TD delivered earnings of $3.6 billion in EPS of $2.05. Business fundamentals were strong across the bank.
john acon: 's goahead to persuit
Speaker Change: sorry cmmy
Speaker Change: and okay sorry about that myapologies with the with this sale the chwab stke isn' safe to assume that some future point weed up below ten percent you'll lose board representation and it will no longer be accounted under the equity ity method
Speaker Change: Before I get into the details, I want to spend a few minutes on the announcement we made late yesterday.
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 out the case
Speaker Change: it's a strategic investment for us you we were very happy as through this investment is performed and our view is that our governance requirements and where we are we are very comfortable with that would'would like to continue at these levels
Kelvin Tran: Revenue increased year-over-year, driven by high fee income in our markets, driven businesses, and higher volumes, and deposit margins in Canadian personal and commercial banking. We saw record revenues in two segments this quarter, Canadian personal and commercial banking and wealth management and insurance. Expenses increased year-over-year, reflecting investments in our risk and control infrastructure, and higher employee-related expenses. We continue to prioritize our investments and manage expenses diligently. While we continue to look for efficiencies in our cost space, we have now concluded our restructuring program.
Baron: okay baron is it safe to assume that the sale ake has no bearing in terms of the agram you haveonthe sweep accounts
Baron: yes
Speaker Change: thank you all would you
matthew leave: thank you the next question is from matthew leave from canaccorduity please go ahead
matthew leave: Good morning, everyone.
matthew leave: We continue to actively pursue a resolution of our AML matters.
Matthew Levi: anymor i thanks for taking my question maybe one on expenses so your guidance is now high single digit growth in twenty four
matthew leave: Discussions have been productive and while we are not through the tunnel yet, we can see the light at the end of this journey.
matthew leave: a bitof an increase versus mid-ing le the did mention prior maybe just breingaking it down is the core expense growth buill two percent and now the investments have push it to high single digits or are other factors that maybe a played in terms of upd he guidance
Kelvin Tran: We have provided more details on slide 27. Now we're standing 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 the irrigation. ECLs were stable quarter to quarter.
matthew leave: Please turn to slide 11.
matthew leave: Reported earnings this quarter include a $2.6 billion U.S. AML investigations provision. 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.
matthew leave: We saw record revenues in two segments this quarter, Canadian personal and commercial, banking and wealth management and insurance.
matthew leave: Overall, we saw good fundamentals across our businesses, reflecting in our strong top-line, growth.
matthew leave: This was partially offset by two items in the wealth management and insurance segment.
matthew leave: 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.
Kelvin: i kelvin ok that question there these three factors one is risk and control costs being harder than previously but also
Kelvin: Revenue increased year-over-year, driven by higher fee income in our market-driven businesses, and higher volumes and deposit margins in Canadian personal and commercial banking.
Kelvin: Expenses increased year-over-year, reflecting investments in our risk and control infrastructure, and higher employee-related expenses.
Kelvin: We continue to prioritize our investments and manage expenses diligently.
Kelvin: 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.
Kelvin: 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.
Kelvin: Congratulations.
Speaker Change: our markets related businesses perform are performing really really well and so therefore the revebel compensation nor driven by higher revenues and we'll take that trade any day and then plus a few discrete items like the litigation that we just talked about in wealth this point
Speaker Change: 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.
Kelvin Tran: 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 offering leverage. Average loan volumes rose 6% 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 volume. Average deposits rose 5% over year, reflecting 7% growth in personal deposits and 2% growth in business deposits.
Speaker Change: 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: Expenses increased reflecting high spend supporting business growth, including employee-related, expenses and technology costs.
Speaker Change: the three me factors
Speaker Change: then then maybe a follow-up just on the aml cost themselves you know itsounds a lot of the investmentments' being made is predicate on a hiring additional talent kind of building outon and maintaining some sort of amount infrastructure should be just just to those ft will kind of remain with t d even after that d is complete and does that essentially mean the opex associated is kind of occurring
Speaker Change: let me take that one matap this leo alone
Speaker Change: just to give you a sense and i think theyre outlined 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 jesi from the department of homeland security from the treasury department
Kelvin Tran: Net interest margin was 2.81%, down three basis point quarter to quarter as expected, reflecting the migration of BA's 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 rate. Expenses increase reflecting 5% supporting business growth including employee related expenses in technology costs.
Speaker Change: you know as well as
Speaker Change: the fbi under law enforcement 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
Speaker Change: 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
Kelvin Tran: Please turn to slide 13. The US retail bank continued to deliver a strong operating momentum with sequential earnings growth and peer leading loan growth year over year. Average loan volumes increased 5% 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% of business that is also driving fee income. Average deposit volumes excluding sweep deposits were relatively flat year over year as the US retail bank demonstrated deposit stability in a competitive environment.
Speaker Change: in advanced analytics and i would suspect that those would stay so to give you a sense there would be 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: and the helpful thanks so
Gabriel Dechaan: thank you the next question is some gabriel dis shaan from national bank financial
Speaker Change: please go ahead
Kelvin Tran: Net interest margin was 3.02% up three basis point quarter during by higher deposit margins. As we look forward to Q4, while many factors can impact margins, we expect a modest name expansion due to the benefit of tractor on and off rates, partially offset by any potential fat rate cuts. Reported expenses include a $2.6 billion US EML investigations provision. On an adjusted basis, expenses were relatively flat year over year, primarily due to higher operating expenses offset by ongoing productivity initiatives.
Gabriel Deschaine: good morning the expense commentary i guess kelvin you're saying that the corporate loss could be above that guidance ruring the two hundred to two hundred and fifty again in q four because of risk controls investments in that typeofstu if i look at your full year consolidated adjusted expense growth adjusted for the strategic card portfolio your
Speaker Change: you're running a ten percent growth nine percent if i exclude 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: no so if you're looking at corporread so remember earlier when i talked about the items to talk about the corporate losses and then the expenses or expenses i talked about three drivers that cost the increase
Kelvin Tran: Please turn to slide 14. Wealth management and insurance delivered record revenue and strong fundamentals across its diversified businesses. Revenue grew 13% 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, last 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 and July.
Speaker Change: and remember that the higher expense growth rate also had partly tdcoen in impact as well because last year was partial year this year's full year
Speaker Change: Please turn to slide 13.
Speaker Change: yeah
Speaker Change: well no i mean not i think it'was on the q four call you you' mid-single digits including these ltype costs and count
Speaker Change: The U.S. Retail Bank continues 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.
Speaker Change: We continue to deliver growth in mid-market commercial lending, with volumes up 18%, a, business that is also driving fee income.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: i sing le digits are the three factors that i've talked about earlier there's the ris k control fonger markets related businesses and then discrete items like dedigation and so
Speaker Change: ok now what refreshed by memory please this year i think it was a you'd quantified five hundred million aftertax of the you know risk control type expenses and then another amount of that magnitude in two thousand andtwent five of that correct
Kelvin Tran: In addition, there have been two significant weather events so far in August, the Calgary health storms and the Montreal floods. For these two events, we expect claim and related costs of more than $300 million in Q4. To help support analyst investors, analysis of our insurance business performance, we have added disclosure of current quarter claims cost net of insurance 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 increase year over year, both reflecting market appreciation and net asset growth.
Speaker Change: so i think the five hundred million talked about the the cost that we've spend up into that point of time we have in talp about anything for twenty
Speaker Change: nothing for two thousand andtwenty five is it like it it seems likely that these costscould persist though into twothousand andtwenty five years that un reasonable to expect
Speaker Change: that'scorrect it's a multiyear program
Speaker Change: okay
Speaker Change: and then look i get 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 pent penalties
Speaker Change: what are you thinking of there is an asset cap on the table for the u us and business
Kelvin Tran: Please turn to slide 15. Also banking continued its growth, delivering revenues of $1.8 billion, reflecting higher trading related revenue, landing 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, and menstruate with higher revenues. The business delivered positive offering leverage and inefficiency ratio of 69% as we continue to optimize the platform.
Speaker Change: nonmonetary means anything that is nothing to do with money we
Speaker Change: Expected expenses include a $2.6 billion U.S. AML 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.
Speaker Change: but he said the two point six that is monetary so anything that doesn't fit into that category is non monetary
Speaker Change: Wealth management and insurance delivered record revenue and strong fundamentals across, diversified businesses. Revenue grew 13% year-over-year, reflecting higher insurance premiums, fee-based revenue, deposit margins, and transaction revenues.
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: Please turn to slide 15.
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: Postal banking continued its growth, delivering revenues of $1.8 billion, reflecting higher, trading-related revenue, lending revenue, advisory, and underwriting fees.
Speaker Change: Please turn to slide 16.
Speaker Change: 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.
Speaker Change: This quarter, we also saw higher PCLs, reflecting a few new impairments across different sectors.
Speaker Change: 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 the prior year.
Speaker Change: Assets under management and assets under administration increased year over year, both reflecting, market appreciation and net asset growth.
Speaker Change: Expenses increased 12% year over year, primarily reflecting higher variable compensation commensurate, with higher revenues.
Speaker Change: Please turn to slide 17.
Speaker Change: The business delivered positive operating leverage and an efficiency ratio of 69% as, we continue to optimize the platform.
Speaker Change: The common equity tier one 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.
Speaker Change: i can't speculate know we'rein the middle of 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 you know as we put out in our press release
Speaker Change: We repurchased approximately 13 million shares in Q3.
Speaker Change: 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.
Speaker Change: With that, Ajay, over to you.
Speaker Change: TD sold its common shares in First Horizon this quarter, generating six basis points, of CET1.
Speaker Change: We had a negative 71 basis point impact to CET1 from AML investigation provision this, quarter, reflecting the earnings impact of this quarter's provision and the operational risk RWA impact the provision announced last quarter. We expect a negative 35 basis point impact from this quarter's AML investigation provision, in Q4. 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 co-op shares.
Speaker Change: Okay, thank you, Kelvin, and good morning, everyone.
Speaker Change: Please turn to slide 18. 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.
Speaker Change: 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: 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 segments.
Speaker Change: Performing PCL decreased 49 million quota over quarter to 152 million. The smaller current quota performing build was primarily recorded in the Canadian personal, and commercial and U.S. retail segments.
Speaker Change: Please turn to slide 22. The allowance for credit losses increased by 288 million quota 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. The bank's allowance coverage remains elevated to account for ongoing uncertainty relating, to the economic trajectory and credit performance.
Speaker Change: we expect to come to a resolution by calendar year-ends i think you know best year is to remain patient
Speaker Change: In summary, the bank exhibited continued strong credit performance this quarter as evidenced, by stable gross impaired loan formations and PCL.
Speaker Change: Our year-to-date PCL result is 46 basis points.
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.
Kelvin Tran: Please turn to slide 16. The corporate net loss for the quarter was $324 million. As you recall, we guided to adjusted net losses in the $200 to $250 million range, although we expected it to bounce around from quarters 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 litigating events in the prior year.
Speaker Change: With that, I will turn it back over to Bharath.
Speaker Change: and when we have more to say we will be happy to engage
Speaker Change: Thank you, Ajay.
Speaker Change: right but at that you know nonmonetary can involve financial impacts so we're going to ree on that correct
Speaker Change: but i don't want to speculate you know there might be compliance requirements can be various other the requirements hard to be speculate
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: We do not have additional information to share at this time.
Speaker Change: We've hired from other banks, regulators, government and even law enforcement.
Speaker Change: we are in the middle of this
Speaker Change: and 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: We've invested in data and technology to enable improved transaction monitoring and data analytics capabilities.
Speaker Change: allright well in any case appreciate the transparency you private provided the last night
Speaker Change: thank hogging to you gays thank you
Kelvin Tran: Please turn to slide 17. The common equity tier one 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 FFX, increased slightly, primary reflecting the operational risk RWA impacts of certain provisions taken last quarter. We repurchased approximately 13 million shares in Q3, and Nunn in August to date. Our current NCIB expires on August 31 and we do not intend to repurchase any additional shares prior to expiry.
abrahamponinwa: thank you the next question is from abrahamponinwa from bank of america please go ahead
Abraham Poninwa: he good morning
abrahamponinwa: you just wanted to follow up leer to your response earlier i going to figure outis
abrahamponinwa: 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
Speaker Change: from
Speaker Change: a shareholder standpoint i think the two questions are the risk of expense creep right mid-single digit move to high single digit could this become low double-digit and then
Kelvin Tran: Across the 90 million share-by-back program and our previous 30 million share-by-back program, TD repurchase over 100 million shares, almost 85% of the shares authorize, delivering returns for shareholders while managing our capital appropriately. TD sold is common shares in first rise in this quarter generating six basis points of CT1. We had a negative 71 basis points impact to CT1 from AML investigation provision this quarter, reflecting the earnings impact of this quarter's provision and the operational risk RWA impact the provision announced last quarter.
Speaker Change: some more next year so that's what i'm try to handicenap and the second is
Speaker Change #100: isgiven 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 l controls to be
Speaker Change #101: thank you very much everybody it's a very good question let me let me first just assure you that we've spent a lot of time in building a very comprehensive a l program and
Speaker Change: And we've implemented new cross-functional procedures for preventing detecting and reporting suspicious activity.
Speaker Change #101: it really looks at program and it's in its entirety all pillars to ensure that we've got one of the most robust lil programs in the country
Kelvin Tran: We expect a negative 35 basis point impact from this quarter's AML investigation provision in Q4. As a reminder, consistent with the Basel III reforms, operational risk RWA impact take effect on a one quarter lag. This will be partially offset by a positive 54 basis point impact to CT1 in Q4 from the cell of 40.5 million shares.
Speaker Change #101: 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
Speaker Change #101: bethe increase in complement in investigators and program managers and data specialist in the technology areas
Speaker Change #101: and we are sparing
Speaker Change #101: we're really moving as quickly as we can to be able to make sure that we've got that mature infrastructurein place we're also making investments in data and technology so i feel quite comfortable that we have a road map to execute against and that we're doing
Ajay Bambawale: With that, RJ, over to you. Okay, thank you, Kelvin and good morning everyone. Please turn to slide 18. Gross impaired loan formations were stable at 22 basis points for the bank. As higher impaired loan formations in wholesale and US commercial were largely offset by lower formations in Canadian commercial. Please turn to slide 19. Gross impaired loans increased three basis points, quote over quarter to 44 basis points, driven by a few new impairments across the number of industries in each of wholesale and US commercial.
Speaker Change: While there is still much work ahead, we are pleased with the progress we've made.
Speaker Change: This is the priority.
Speaker Change: A US business is an important part of the bank and of our future.
Speaker Change #101: we are executing against that plan certainly over over the course of the next year two years
Speaker Change #101: as our sophistication and advance analytics increases we are going to be even more effective at identifying and thwarding the risk
Speaker Change #101: that are present the financial industry but that's by design that's exactly what we're trying 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 i just want to stress
Speaker Change #101: we just we're not looking to simply meet the minimum standard here
Speaker Change #102: the instructions from bart has been very clear from the beginning we want a world-class program we're making investments required and it will create an infrastructure that will allow us to continue to grow sustainably and build a franchise because we have
Ajay Bambawale: Partially offset by lower impairments in Canadian commercial. Please turn to slide 20. Recall that our presentation reports PCL ratios both gross and net of the partners share of the US strategic card PCLs. We remind you that US card PCLs recorded in the corporate segment are fully absorbed by our partners and do not impact the bank's net income. 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 20 million.
Speaker Change #102: and an exceptional franchise in the u us and it's one that we want to continue to build
Speaker Change #103: right and reason m trying because sortof drill into this is i think you said looklike it's going to be a multiyear program to get to the endpoint
Speaker Change #104: and i think i mean obvly don't want to comment on the non-me moneary penalties but in the world where does an asset cap the concern is if this is going to be a two to three or deal the u franchise is going to be under an asset cap
Speaker Change #105: and the risk of theattrition like how how is there a way that you can make a feel better about the u s franchiseif there's an asset cap and this is thisdist thinginktakes multiyears as you said as someone who runs that business day to day of why that should be ok and there's norisk copepatrition
Ajay Bambawale: An increase of 50 million, quote over quarter, reflecting higher provisions in the wholesale segment partially offset by lower provisions in the Canadian personal and commercial segments. The performing PCL decreased 49 million quota over quota to 152 million. The smaller current quota performing build was primarily recorded in the Canadian personal and commercial and US retail segments. He's turned to slide 22. The allowance for credit losses increased by 288 million quota over quota 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. The banks allowance coverage remains elevated to account for ongoing uncertainty relating to the economic trajectory and credit performance.
Speaker Change #106: i i would say first five just one emphasize this is a priority force
Speaker Change #107: you know getting the same ml program complete
Speaker Change #108: and making sure that we've got that sustainable foundation is a first priority for me personal so as i' outlined we're making the requisite investments there but i i do want to just pivot for a moment
Speaker Change #108: I look forward to providing additional clarity as soon as I can, but today I suggest that, we focus on the bank's Q3 earnings.
Speaker Change #108: With that, operator, we are now ready to begin the Q&A session.
Speaker Change #108: and just point to the performance of the underlying franchise if you look at the third quarter performance we did have sequential nad m ptppp growth
Speaker Change #108: Thank you.
Speaker Change #108: We will now take questions from the telephone lines.
Speaker Change #108: that was powered by three basis point increase in themim and pure leading loan growth in strong and stable deposit performance we saw some of the areas that we've identified previously like our bankard business was up sixteen percent
Speaker Change #108: If you have a question, please press star 1 on your device's keypad.
Speaker Change #108: You may cancel your question at any time by pressing star 2.
Speaker Change #108: Please press star 1 at this time if you have a question.
Speaker Change #108: on a year on your basis our mid-market business where
Speaker Change #108: i've indicated we have an opportunity to be able to leverage the partnershipofppt securities and td talent
Speaker Change #108: to be able to scale that business was up eighteen percent even our core small business franchise where we are
Speaker Change #108: the largest sb lender in our footprint was up eight percent in what has been a relatively
Speaker Change #108: subduue 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 the governnorance to control standpoint we want to continue to build a franchise that we'revery prou of and that we think
Ajay Bambawale: In summary, the bank exhibited continued strong credit performance this quarter as evidence by stable cross-impaired loan formations and PCL. Our year-to-date PCL result is 46 basis points. My prior guidance of 40 to 50 basis points for fiscal 2024 remains appropriate, although results may vary by quota and are subject to changes in economic conditions.
Speaker Change #108: can continue to consolidate itself in the u s marketplace
Speaker Change #109: i'll leak you thank you
Speaker Change #109: There will be a brief pause while participants register for questions.
Speaker Change #109: hiibiting
Speaker Change #109: thank you the next question is tern paul holden from c ib c please glad
Speaker Change #109: Thank you for your patience.
Speaker Change #109: And the first question is from Manny Grauman from Scotiabank.
Paul Holden: thank you good morning i want to follow up on my question a little bit rio and i think you've already answered it to some degree but when i look at the numbers for the u s segmentac see efficiency ratio
Bharat Masrani: With that, I will turn it back over to Barrett. Thank you, Ajay. 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. We do not have additional information to share at this time. I look forward to providing additional clarity as soon as I can, but today I suggest that we focus on the bank's Q3 earnings.
Speaker Change #111: fectively flat year over year which i think is pretty impressed gi the additional investments you've to make in risk of control i guess the counter the counter argument to that wouldbe while then you've had to reduce branch count you've had to reduce headcount and so you know the concern would be how does that impact
Speaker Change #109: We must focus on the work required to meet our obligations and responsibilities and build that future on stronger foundations.
Speaker Change #109: As I've said before, the failures were serious.
Speaker Change #112: revenue and productivity of the u s segment again i think you've adjusted a little bit already butmaybe can talk us a little bit through in terms of you know the strategies you're using
Speaker Change #109: We own it.
Speaker Change #113: to maintain market share and to grow productivity per branch and fe that's kind of what i am saying in the numbers
Speaker Change #109: We know what the issues are and we are fixing them.
Bharat Masrani: With that operator, we are now ready to begin the Q&A session. Thank you. We will now take questions from the telephone lines. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. 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 patience.
Speaker Change #109: I look forward to providing additional clarity as soon as I can.
Speaker Change #109: 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. ECLs were stable quarter-over-quarter, reflecting continued strong credit performance.
Speaker Change #113: Please go ahead.
Speaker Change #113: We completed our restructuring program announced in the fourth quarter last year delivering efficiencies across the enterprise and continued to prioritize investments in our risk and control infrastructure.
Speaker Change #114: noi thank you very much for the question just to start maybe i'd say
Speaker Change #114: Hi.
Speaker Change #114: Good morning.
Speaker Change #115: we have been very focused on creating the space to be able to make these critical investors
Speaker Change #115: so on a year-on-your basis in segment expenses were flat
Meny Grauman: And the first question is from many Grownman from Scotia Bank. Please go ahead. Hi, good morning. I want to talk about capital and specifically, it's not clear to me why you needed to sell down your Schwab State to Schwab Capital, especially, even if I take into account the guidance on operational RWA coming in Q4. So if you could help me understand some of the thought process there, it seems like there's something else going on here in terms of other considerations. Again, and especially in the context of buying back a billion dollars in shares in the quarter as well, so hopefully you could help me understand that.
Speaker Change #115: and i think i think i communicated three quarters ago that we h we were prosecuting a productivity program that really had four five major pillars
Speaker Change #114: 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 upset 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 #115: one we were looking at organizational health both the first horizon transaction we were looking to rightsize the organization and overall teams are down about three percent on a year-on-year basis
Speaker Change #115: second we looked at our corporate real estate including our store optimization program
Speaker Change #115: 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
Bharat Masrani: 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 and you know economic conditions are not as predictable as one would like so you know this is just to be prudent and it makes sense you know 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.
Speaker Change #114: 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 #115: and then finally we've been looking at both our technno architecture as wellasour data architects fined opportunities to be able to simplify fact
Speaker Change #116: i'm very pleased that this past weekend we did consolidate our retail card services business
Speaker Change #114: 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. Announcing scalability, security and speed, TD's cloud-based platform is a key foundation for our forward focus, data-driven organization.
Speaker Change #114: 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 #116: onto our target cards operating platform and that will represent about a fifteen million dollar reduction operating cost so we are doing the things we need to do to be able to create
Speaker Change #116: operating leverage so that we can invest those proceeds not only in the governance and control programs
Speaker Change #116: but also in some of the critical areas that we've identified like our digital and mobile environment like
Speaker Change #114: Let me now turn to each of our businesses and review some highlights from Q3.
Bharat Masrani: So would this sort of capital stands conservative capital stands signal that AML science could end up being larger maturely larger. We announced you know 2.6 billion yesterday additionally we 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 you know 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.
Speaker Change #114: Our Canadian personal and commercial banking segment delivered record revenues reaching $5 billion for the first time in 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 #116: investments in our next generation store design in cards in wealth
Speaker Change #116: areas that we think we're still underpenetrated
Speaker Change #116: and where the franchise our ten million cant base would benefit
Speaker Change #114: Across the segment, we are enhancing products and offerings through personalization and execution against our one TD strategy, including strong momentum and referrals from our retail branch network to wealth.
Speaker Change #116: from a greater in a deeper relationship over time so 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 control standpoint there could be some elevated expenses
Speaker Change #116: 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: It really states secured lending, the bank continued to deliver market share gains while supporting our growing customer base.
Speaker Change #114: 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.
Bharat Masrani: And just another follow up so is it fair to assume that you're not comfortable going below 12.5% CT one is that sort of where you're thinking that it was of your comfort level. We're targeting 12% you know 12 between 12 12 and a half 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.
Speaker Change #116: 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 #117: try to thinkick for that and second question is a little bit of follow up on i think what many us to begin with and sort of the second part of his question on why the sharebackag buy backs this quarter
Speaker Change #117: So if you could help me understand sort of the thought process there, it seems like there's, something else going on here in terms of other considerations, again, and especially in the context of buying back a billion dollars in shares in the quarter as well.
Speaker Change #117: So hopefully, you could help me understand that.
Speaker Change #117: 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.
Speaker Change #118: and then so the schab stock like that's a decision you must await i assume sort around thebeginning of the quarter when you had a fairlygood ideaof where the provisions may come in
Speaker Change #117: TD grew its leading deposit franchise with another strong quarter for account openings.
Speaker Change #117: And in the new to Canada market, we extended our package, 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.
Speaker Change #117: In business banking, TD grew loans by 7% year-over-year. This quarter, the bank launched TD innovation partners, a new team offering broad suite of services to further address the needs of technology and innovation companies.
John Aiken: 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.
Speaker Change #119: so obviouslyit's a decision you weighed why did you decide to go ahead and repurchase teditty stock seswab like why does that benefit shareholders
Speaker Change #117: 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 journeys.
Speaker Change #119: the accounting rules on this paul very straightforward our view is that the two point six billion dollars is our current estimate and
John Aiken: With the with the sale of the Schwab state is it safe to assume that you have some future point when you double out 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 better but 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 and and our view is that our governance requirements and and where we are we are we comfortable with that and would like to continue at these levels.
Speaker Change #119: in addition to the fourhundred and fifty we had taken
Speaker Change #119: and so we make sure that 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 you i don't think i add anymore you know we we will always prudently capitalize conservatively capitalize in the bank
Speaker Change #120: and it madekes sense for us to do exactly what we outlined and it makes sense in a sense that
Speaker Change #120: in our capital levels will will continue to be where one would expect given tds history and the way we manage capital the way comfortable with you know how we got to where we did
John Aiken: Okay Baron is it safe to assume that the sale of the stake has no bearing in terms of the the agreement you have on the sweep accounts. Yes thank you all with you.
Speaker Change #121: okay with there thank you
Speaker Change #121: Manny, this is Bharat.
sa overheady: thank you the next question is from sa overheady from bemo capital markets please goahead
Speaker Change #121: Turning to the US, the US retail bank continue to deliver strong operating momentum with sequential earnings growth and stable deposits excluding sweeps and peer leading loan growth year-over-year.
Matthew Lee: 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 expensive so your guidance is now high single digit growth in 24.
sa overheady: 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 is still a lot of volatility, and you know, economic conditions are not as predictable as one would like, so you know, this is just to be prudent and it makes sense, you know, 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.
sa overheady: So would this sort of capital stance, conservative capital stance signal that AML science could, end up being larger, maturely larger?
sa overheady: TD grew consumer loans 8% year-over-year with proprietary bank card balances up 16%.
sa overheady: We announced, you know, $2.6 billion yesterday. Additionally, we announced $4.5 billion in the second quarter and together, this is the, current estimate we have on what it will take to put these matters behind us.
sa overheady: You know, that's how we follow this, the accounting rules are very clear on this.
sa overheady: 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.
sa overheady: okay thank you maybe just for reas
sa overheady: So our current estimate is that this is the amount it will take, you know, to move forward.
Speaker Change #124: if if there was a desire on the part of the bank
sa overheady: In commercial banking, middle market loan balances grew 18%.
Kelvin Tran: 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 other factors that may be played in terms of updated guidance. It's Kelvin I'll pick that question yeah there are mainly three factors you know one is risk and control costs being higher than previously. Leslie, Scott, also, our markets, related businesses, are performing really, really well.
Speaker Change #125: for the wholesale bank to grow faster
Speaker Change #125: then maybe what had been contemplated when you
Speaker Change #126: executed on the coen acquisition how much faster could you grow and what sort of resources would you need for each incremental hundred basis points of growth
sa overheady: These strong results were driven in part by continued execution of our one TD strategies.
Speaker Change #127: thanks so that sort of look i think if you just just look at
sa overheady: 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 #128: historic development or revenue over the last five years the wholes bank has more than doubled
sa overheady: 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.
Kelvin Tran: And so, therefore, the Rebel Compensation, Northern Japan, by higher revenues, and we'll take that trade any day. And then plus, there are a few discrete items, like the litigation that we just talked about in wealth this quarter.
Speaker Change #128: and i think that this is a business that
sa overheady: JD Power also awarded TD Bank America's most convenient bank the highest ranking in online banking satisfaction among national banks, according to his 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 #129: thatit does move quickly into your point it can be grown faster slow
Kelvin Tran: Those are the three main factors.
Speaker Change #130: but i think we have to make a balance and growing out our strategy as well as weight our risk considerations
Leovigildo Salom: All right then, and maybe a follow-up, just on the AMR cost themselves. You know, it sounds a lot of the investment being made is predicate on hiring additional talent, kind of building out and maintaining some sort of AMR infrastructure. Should we just assume those FTEs will kind of remain with TD even after that bill out is complete? And does that essentially mean the off-ex associated kind of occurring? Let me take that one, Matt.
Speaker Change #131: from the perspective of making sure that we have the right talent in seats and we' 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
Leovigildo Salom: This is Leo Salom. Just to give you a sense, and I think Bharat outlined where we're making critical investments in the program, 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 G-Sibs, from the Department of Homeland Security, from the Treasury Department, as well as the FBI and other law enforcement organizations. So we're really pleased with the leadership team that we've brought on board.
Speaker Change #131: the risks in the business but look i think we've been
Speaker Change #131: there's a lot of room for us to
Speaker Change #131: continue to grow whether it been prime businesses transaction banking businesses electronic trading sponsors leverage plants
Speaker Change #131: we've been able to bring up our revenue now to a consistent performance of a billion eight a quarter through through this bill period of integration and build
Leovigildo Salom: We've added over 500 colleagues to support this effort. 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 in advanced analytics. And I would suspect that those would stay. So to give you a sense, there would be a portion of it that will be repurposed to other initiatives as we move forward.
Speaker Change #131: and market conditions that seemed like they're only getting more supportive right now so
Speaker Change #132: i do feel that the growth 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 #132: And just another follow-up, so is it fair to assume that you're not comfortable going, below 12.5% CT1?
Speaker Change #133: okay thank you appreciate that and then just le maybe one last look at the u s retail segment expenses may be coming out it from a slightly different perspective i think you were doing about
Speaker Change #133: Is that sort of where you're thinking that in terms of your comfort level?
Speaker Change #133: We're targeting 12%, you know, 12, between 12, 12.5, so you know, we continue to be comfortable, with that target, but obviously we review this on an ongoing basis depending on economic conditions.
Leovigildo Salom: 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. All right, that's helpful.
Speaker Change #133: Thank you.
Speaker Change #134: u s billion and a half and non interest expenses a quarter in two thousand and twenty three excluding the three billion u s of theillegal provision maybe you're trending out around the billion
Matthew Lee: Thanks, guys.
Gabriel Dechaine: Thank you. The next question is some Gabriel Deschein from National Bank Financial. Please go ahead.
Speaker Change #133: 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 #133: For the last few years, we have seen an increase in the frequency of weather events.
Speaker Change #135: six maybe a little bit higher than that does that does that billion six this year quarterly
Speaker Change #133: 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 in attractive return on equity over time.
Speaker Change #133: Our advice business is so significant retail net asset growth across all our channels coupled with market appreciation, driving total assets up 15 percent year over year.
Gabriel Dechaine: Good morning. The expense commentary. I guess, Calvin, you were saying that the, you know, corporate loss could be above that guidance rate, the 200 to 250 again in Q4 because of risk controls, investments in that type of stuff. If I look at your full year consolidated adjusted expense growth adjusted for the strategic card portfolio, you're running a 10% growth, 9% of the exclude variable comp. At the start of the year, you'd guided to mid-single digits.
Speaker Change #133: Direct investing a leadership position is the result of consistent innovation to bring market leading capabilities to our clients.
Speaker Change #136: that structures in the investments or sort of the run rate isupose of the investments in risk and control or do you anticipate
Speaker Change #137: further investments that will drag that quarterly run rate of fighteror no one point six billion
Speaker Change #133: You saw that last quarter with the launch of TD Active Creator and we have continued to innovate.
Speaker Change #138: even higher from here as aside from inflation traditional business growth
Speaker Change #139: there i but 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 us continued focus on productivity
Speaker Change #133: This month, TD was the first making 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 one TD with TD securities providing the backend execution to support this new functionality.
Speaker Change #133: Our insurance business was impacted by the severe weather events in the greater Toronto area and the wildfires in Alberta and Q3 and by health storms and calorie and floods in Montreal this month.
Gabriel Dechaine: Is that Delta solely because of, you know, additional investments of this nature? No, so if you're looking at corporate, so remember earlier when I talked about the two items, you talk about the corporate losses and then the expenses, or expenses I talked about the three drivers that caused the increase. And remember, the higher expense growth rate also had partly TD Cohen in part as well because last year was partial year this year's full year.
Speaker Change #133: A TD insurance, we are there for our customers in their moment of need.
Speaker Change #139: and it is my objective to drive positive operating leverage at the local segment level
Speaker Change #139: 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 #133: I want to thank TD colleagues for their tremendous efforts for our customers through these events.
Speaker Change #133: To support the communities impacted by wildfires, TD has made donations to the Canadian Red Cross and its facilitating customer donations that branches across Canada.
Speaker Change #139: so i i think that that operating model
Speaker Change #139: will be in place i believe that the changes we're making our multiyear nature but i would expect
Speaker Change #133: All cell banking continued its growth with revenues up 14% year-over-year on broader, stronger capabilities.
Gabriel Dechaine: Well, no, I mean, I think it was on the QFAR call you, you'd said mid-single digits including these AML-type costs and count, and I think all 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 dedication and so forth. Okay.
Speaker Change #139: 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 concentrating that period of time with regards to the focus i do want to give us the opportunity to leverage the productivity initiatives that we're running
Speaker Change #133: We continue to make good progress, integrating our teams, deepening our client relationships and gaining momentum across our banking and markets businesses.
Speaker Change #133: In addition, we enhance U.S, shared trading execution for our clients with the fully-launched and automated TDSX private room.
Speaker Change #133: Overall, our businesses perform well in Q3 and I am confident in the strength of our franchise.
Gabriel Dechaine: Now, what a refresh by memory, please. This year, I think it was a you'd quantified 500 million after tax. Of the risk control type expenses and then another amount of that magnitude in 2025. Is that correct? No, I think the 500 million talked about the cost that we've spent up into that point of time. We haven't talked about anything for 25. Nothing for 2025. Is it like it seems likely that these costs could persist though into 2025.
Speaker Change #139: at the local level
Speaker Change #139: to be able to reduce our run costs
Speaker Change #133: We are operating in a challenging environment with significant market volatility, rapidly evolving rate expectations and heightened geopolitical risk.
Speaker Change #139: give us more capacity for change allows 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 ofthe thought process
Speaker Change #133: 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.
Speaker Change #133: As always, TD will be there for them as we navigate the coming months together.
Speaker Change #133: And those of you in Toronto have likely noticed in addition to the city's skyline, the new TD Terrace Building.
Speaker Change #139: is one of grading 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 ' certainly provide regular updates with regard to our progress against that
Speaker Change #133: Inside the building is the state of the RTD branch, built as the next generation innovation center, enabling the bank to test new capabilities in a live environment.
Speaker Change #139: The next question is from John Aiken from Jeffries.
Gabriel Dechaine: Is that unreasonable to expect? Correct. It's a multi-year program. Okay. 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 a, you know, total penalties would be and I don't dispute that number at all. But there's also mentioned a non-monetary penalties. What are you thinking of there? Is an asset cap on the table for the US business?
Speaker Change #140: thank you for taking my questions
Speaker Change #141: all right
Speaker Change #142: thank you the next question is some nigeof the suser from very tal' investment research please goahead
Speaker Change #142: Please, go ahead.
Speaker Change #142: Sorry, can you hear me?
Speaker Change #142: Yeah, now.
Speaker Change #142: Yes, yes, John.
Speaker Change #142: Okay, sorry about that.
Speaker Change #142: My apologies.
Speaker Change #143: 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 #144: and as bit change in last quarter so trying to understand why that has income down given the aml provision if taken this qut are there any other legal or regulatory matters outside il that could lead to outsized fins of palties
Gabriel Dechaine: Non-monetary means anything that is nothing to do with money. So we said 2.6 that is monetary. Anything that doesn't fit into that category is non-monetary. 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. And you know, as we put out in our press release, you know, we expect to come to a resolution by calendar year ends.
Kevin: ice kevin have
Speaker Change #146: we don't comment on rpl i mean there's a lot of plusittake in the op we can changely makea
Speaker Change #147: and assessment was the appropriate amount and updated accordingly
Speaker Change #147: 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?
Speaker Change #147: Our current intention is not to go below where we are.
Speaker Change #148: okay and then on sswab we' talked about capital but was liquidity a consideration in the decision to sell those swapabs shares
Gabriel Dechaine: I think, you know, this year is to remain patient. And when we have more to say, we'll be happy to engage. Right. But then, you know, non-monetary can involve financial impact. So we can agree on that, correct? I don't want to speculate, you know, there might be compliance requirements. It can be various other requirements. It's hard to speculate. We're in the middle of this in negotiations and investigations. And so we just want to make sure that we give you full sum disclosures when it is appropriate, rather than speculating what it may or may not be. All right.
Speaker Change #149: could you have source liquidity from other avenues other than selling your equity stakke and swab you have the securities portfolio are the unrealized losses that re preventing you through i guess telling that liquidity to crstalize or understand is is what put at all one of the considerations here
Speaker Change #149: I understand that, Barrett, but if you do go below that, is that the case?
Speaker Change #149: You know, it's a strategic investment for us.
Calvin: ice callvin the answer is no
Speaker Change #151: okay and then just switching to credit loss prorevisions
Speaker Change #152: could you kind of provide some color on performing psal this quarter we'have seen some deterioration and unemployment grates in the labor market but you're performing pce ceals are moving a loweror any color there on what's offsetting the unemployment trends that 're seeing that that'slead to lower provisions
Gabriel Dechaine: Well, in any case, appreciate the transparency you provided last night. Thank you.
Speaker Change #152: You know, we're very happy as to how this investment is performed, 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.
Speaker Change #153: you would have no it' rj youwould have noticed that performing pc quarter over quarter camedown
Ibrahim Poonawala: The next question is from Ibrahim Punewala from Bank of America. Please go ahead. Yeah, good morning. You just want to follow up Leo to your response earlier. What I'm trying to figure out is how much of the remediation action 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, move to high single digit, could this become low double digit and then some more next year.
Speaker Change #154: forty nine million dollars
Speaker Change #155: some of that was u s retail so u s retail was down twenty-three million dollars
Speaker Change #156: and it's a really coming from resle and auto with macrofactors and seasonality contributing to that corporate segment is also down again itits some seasonality and macrofactors
Speaker Change #156: old ceal performing was down for two reasons one
Speaker Change #156: there were repayments so when there were repayments any performing we held in was released
Speaker Change #156: 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 pl is down quarter over aquarter
Ibrahim Poonawala: 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 these. The EML controls to be. Thank you very much, but it's a very good question. Let me first just to assure you that we've spent a lot of time in building a very comprehensive AML program.
Speaker Change #157: got it a lowered inimpair ps and the cane banking specifically i assume that's not driven by ratecuts d do a laged effect so anything else you could pointed that's leading to provisions improving quarter over the quarter
Speaker Change #158: are youre talking about canadian pnc crack canadian penc really it's mainly driven by commercial and as you know
Speaker Change #152: The bank's unique and inclusive culture continues to attract talent.
Speaker Change #152: TD received a top score of 100 in the 2024 Disability Equality Index for the 10th consecutive year in the US, 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.
Ibrahim Poonawala: 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 in data specialist in the technology areas.
Speaker Change #159: impedacts in commercial can be lumpy so there were lower impbeds in commercial that was the big driver of psales impared psals coming down
Speaker Change #152: Across our businesses, our customers are at the heart of who we are and what we do.
Speaker Change #160: okay that's it for me thank you
Speaker Change #152: That's why, 10 years ago, we launched our first TD Thanksgiving campaign to showcase our gratitude for their unwavering support.
Speaker Change #160: thank you the next question is from lamar ad
Speaker Change #152: In this milestone year, we've taken our appreciation to the skies to spectacular drone light shows in cities across Canada.
Speaker Change #152: Our colleagues live our commitment to our customers every day, and I want to thank them for all their efforts.
Speaker Change #152: I'm confident that together we will continue to deliver for all our stakeholders.
Corremark: from corremark please go ahead
Speaker Change #152: With that, I'll turn things over to tell them.
lamar ad: yes thanks so maybe for leo and just kind of following up on the conversation with paul neiabraham would it be fair to suggest that regardless of what comes out from these nonmonetary fins
Speaker Change #152: Thank you, Barrett.
Ibrahim Poonawala: 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. 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 #152: Good morning, everyone.
Speaker Change #163: bottom line you feel confident in the ability to grow earnings in in two thousand and twentyfive 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 s franchise kind of play out
Speaker Change #152: Please turn to slide 11.
Speaker Change #163: Okay, Barrett, 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?
Speaker Change #163: Yes.
Speaker Change #163: Thank you.
Speaker Change #164: or i won'tum
baried: i won't front run any any discussions on the non monetary penalty or any shape really want to wait to see the final global resolution baried said well we'll certainly bring that forward as quickly as we possibly can' because i know important certainty is as we try to you know project forward i just come back to
Ibrahim Poonawala: But that's by design. That's exactly what we're trying to drive towards. I believe that the cost that we have forecasted internally are appropriate for the program that we've outlined. And I feel quite comfortable with the outcome. And I just want to stress. We just we're not looking to simply meet the minimum standard here. The instructions from Barrett has been very clear from the very beginning. We want a world-class program. We're making investments required.
baried: i think what we're trying to do is is structure ourselves so that we can essentially continue to drive the governance changes in the core business
baried: but still grow the franchise that we have and so i think you've seen the operating momentum
Ibrahim Poonawala: 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 US. And it's one that we want to continue to build. Right. And Leo, this is the reason why I'm trying to sort of grill 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 #166: over over the last several quarters has remained strong in fact in many cases it's been pure leading
Speaker Change #166: and we've been very deliveberate around trying to compartmentalize as best we can
Ibrahim Poonawala: And I think, I mean, obviously, don't want to comment on the non-memmonically 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 US 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 US franchise? If there's an asset cap and this thing takes multi years, as you said, as someone who runs that business day today of why that should be okay. And there's no risk of attrition.
Speaker Change #166: the veryarious efforts so that we can continue to grow the franchise though it's i won't provide a guidance to what two thousand and twentyfive looks like today but you can there are some some areas that really point in our quite favorable for the outlook
Speaker Change #167: 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 #167: i do think we have been
Speaker Change #167: from from an operating expense standpoint we've tried to be disciplined without compromising the investments that we need to make
Speaker Change #167: in 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 #163: Reported earnings this quarter include a $2.6 billion US AML investigations provision.
Leovigildo Salom: I would say, first of all, I just want to emphasize, this is a priority force. Getting the SAML program complete and making sure that we've got that sustainable foundation is a first priority for me personally. So, as I've outlined, we're making the requisite investments there, but I do want to just pivot for a moment, and just point to the performance of the underlying franchise. If you look at the third quarter performance, we did have sequential niat MPTP growth.
Speaker Change #167: and potentially sparks of 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 #168: okay maybe maybe if i maybe let me try this this way maybe this would
Speaker Change #163: On an adjusted basis, earnings were $3.6 billion, flat year-over-year, and earnings per share was $2.5 up 5% year-over-year.
Speaker Change #163: Overall, we saw good fundamentals across our businesses, reflecting in our strong top line growth.
Speaker Change #169: will be helpful if we park any of the additional operating expense goes related to this a l is there any tangible reason to suggest that t's underlying performance would lag u s peers
Speaker Change #163: This was partially offset by two items in the wealth management and insurance segment.
Leovigildo Salom: That was powered by a three basis point increase in them and pure leading loan growth and strong and stable deposit performance. We saw some of the areas that we've identified previously, like our bank card business was up 16% on a year on your basis, our mid market business where I've indicated we have an opportunity to be able to leverage the partnership with TD securities and TD Cowan to be able to scale that business was up 18%.
Speaker Change #163: The impact of claims from severe, rather 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 #170: because it seems like the answer to that is no
Speaker Change #171: but just curious thoughts 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 #163: Revenue increased year-over-year, driven by high fee income in our markets, driven businesses, and higher volumes, and deposit margins in Canadian personal and commercial banking.
Leovigildo Salom: 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. 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 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 US marketplace. Thank you.
Speaker Change #172: okay okay thanks and then i know you guysdon't want to talk about this al investigation but i did notice some worry about overlapping class actions related to the nl investigation now i'm not a bank an expert in litigation
Speaker Change #163: We saw record revenues in two segments this quarter, Canadian personal and commercial banking and wealth management and insurance.
Speaker Change #163: Expenses increased year-over-year, reflecting investments in our risk and control infrastructure, and higher employee-related expenses.
Speaker Change #173: and i know you can't comment on these cases specifically but more broadly can you comment on how successfully class actions typically are against
Speaker Change #163: We continue to prioritize our investments and manage expenses diligently.
Speaker Change #173: have been against the canadian banks historically like my thoughts so that the banks have these large legal budgets and a number of these things come up but you know it never really announced amountsced too much because the banks are able to success successfully kind of defend themselves is that is not a fair statement any thoughts on that
Speaker Change #163: While we continue to look for efficiencies in our cost space, we have now concluded our restructuring program. We have provided more details on slide 27.
Paul Holden: The next question is from Paul Holden from CIBC. Please go ahead. Thank you.
Speaker Change #163: Now we're standing good execution against our restructuring initiatives.
Speaker Change #163: We expect fiscal 2024 adjusted expense growth to be in the high single digits, reflecting higher investments in our risk and control infrastructure.
Speaker Change #163: Strong performance in our markets related businesses and certain items including the irrigation.
Paul Holden: Good morning. I want to follow up on my question a little bit. Leo and I think you've already answered it to some degree. But when I look at the numbers for the US segment, I see efficiency ratio effectively flat year over year, which I think is pretty impressive because in the additional investments you've had to make in risk of control. I guess the counter argument to that would be well, then you've had to reduce branch count, you've had to reduce head count.
Speaker Change #163: ECLs were stable quarter to quarter.
Speaker Change #163: Please turn to slide 12.
Speaker Change #174: 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 #163: Canadian personal and commercial banking delivered a strong quarter with record net income and revenue, reflecting loan and deposit volume growth and substantial positive offering leverage. Average loan volumes rose 6% 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 volume. Average deposits rose 5% over year, reflecting 7% growth in personal deposits and 2% growth in business deposits.
Speaker Change #175: best is to wait out is do you know what those class actions might be evenven the type of business we have large financial services company serving
Speaker Change #163: Net interest margin was 2.81%, down three basis point quarter to quarter as expected, reflecting the migration of BA's 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 rate.
Paul Holden: And so the concern would be how does that impact revenue and productivity of the US segment? 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. That's kind of what I am seeing in the numbers. No, thank you very much for the question, Paul.
Speaker Change #176: there of millions of customers we do encounter you know many of these issues and it's hardtopredict accurately how each one might turn out
Speaker Change #177: i'mjust i'm just kind of went thinking about like you know maybe there's like one hundred of these that come on average per year but we hear about one like is there any thoughts 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 are levy against the banks
Paul Holden: Just to start maybe, I'd say we have been very focused on creating the space to be able to make these critical investments. So on a year on your basis in segment expenses were flat. 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% on a year on your basis.
Speaker Change #178: sorry anything you can share on matter
Speaker Change #179: fortunately i cannot i mean these are allle
Speaker Change #180: there are many cases and we'll see how each you in terms out
Speaker Change #163: Expenses increase reflecting 5% supporting business growth including employee related expenses in technology costs.
Speaker Change #181: i get thanks that's it for me
Speaker Change #163: Please turn to slide 13.
Paul Holden: 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. 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. 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 operating costs.
Speaker Change #182: thank you the next question is from jillsha from u b s please go ahead
Speaker Change #182: I'll recue.
Speaker Change #182: Thank you.
Speaker Change #183: thanks good morning in canedian tnc the results 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
Speaker Change #182: The US retail bank continued to deliver a strong operating momentum with sequential earnings growth and peer leading loan growth year over year. Average loan volumes increased 5% over year, reflecting 8% growth in personal loans and 3% growth in business loans.
Speaker Change #183: The next question is from Matthew Lee from Canaccord Genuity.
Speaker Change #183: Please, go ahead.
Ray: thanks for their question jail it's ray maybe i'll start then a barble handed over to you from on the commercial site i think from pandc perspective let me first start by saying we're just incredibly pleased how we continue to deliver for our customers
Ray: Hey, morning, guys.
Ray: Thanks for taking my question.
Ray: Maybe one on expenses.
Speaker Change #185: 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 #185: So your guidance is now high single-digit growth in 24, a bit of an increase versus, mid-single-digit mentioned prior.
Speaker Change #186: and if i start from a revenue perspective the canadian pc businesses are up nine percent on a year-on-year expenses wewerere continuing to have disciplin expense management at four percent
Speaker Change #186: 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 at play in terms of that updated guidance?
Paul Holden: So 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 we're still under penetrated and where the franchise our 10 million client base would benefit from a greater and a deeper relationship over time.
Speaker Change #186: Hi, it's Calvin.
Speaker Change #186: and so we're achieving our goal of having strong positive operating leverage not only this quarter but for the second quarter in our role were above five hundred basis points
Speaker Change #187: and so i think that at the what's a driving that
Speaker Change #187: 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
Paul Holden: So that's really the strategy that we've been executing against. There's no doubt that as we execute on some of these programs from a governance 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. We have such a signature differentiated platform. We want to make sure that we've got the license and the capability to continue to grow at scale.
Speaker Change #187: by our strategy around the new to canada and we're seeing another record quarter for new to canada acquisitions and c personal bank
AR: you heard from ar at the enhancements that we' continue 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
Speaker Change #189: and then from a loans perspective you saw a good strong loan growth of six percent
Speaker Change #189: and really that's across the portfolio resl continues to be
Paul Holden: Thanks for that. And second question is a little bit of a 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 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.
Speaker Change #189: a strength for us it's our fourteenth consecutive month of market share gain were' up six percent there
Speaker Change #189: credit cards at ten percent loan balance growth
Speaker Change #189: and we're seeing very strong acquisition momentum in our credit card portfolio and i think going forward will 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
Paul Holden: So obviously it's a decision you weighed. Why did you decide to go ahead and repurchase? [inaudible] on I think I'm going to do a little bit of a follow up on I think I'm going to do a little bit of a follow[inaudible] of a follow up on I think I'm going to do a little bit of a follow up on I think I'm going to do a little bit of a follow up on[inaudible] There's a lot of room for us to continue to grow, whether it be in prime businesses, transaction banking businesses, electronic trading, sponsors, leverage finance, we've been able to bring up our revenue now to a consistent performance of a billionaire quarter through this period of integration and build, and market conditions seem like they're only getting more supported right now, 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.
Speaker Change #189: and so the other thing i'd la add is from a resl perspective what's driving our growth and we think 'll continue to drive growth as we moveforward as we launched a new channel in our restal business called mortgage direct
Speaker Change #186: We continue to deliver growth in mid market commercial lending with volumes up 18% of business that is also driving fee income.
Speaker Change #189: and we've actually seen terrific results and we're seeing what conversion rates of our leads that are three times higher
Speaker Change #189: than our traditional leads in the mortgage direct program that welaunch just a about a year ago and so overall from a canadian personal banking could be more pleased with the momentumand that we have
Speaker Change #189: whether it's on a deposit side or the lending side and i think in our momentum will continue as we move forward intotwo thousand and twenty five
Speaker Change #189: I'll take that question.
Joe: bar maybe on the erion yeah 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
Joe: Yeah, there are mainly three factors.
Speaker Change #191: deposits were strong up two percent year over year that's a bit of an inflection point for us coming out of dece a loan repayments
Speaker Change #191: and the you know optimization of client balance sheets
Speaker Change #191: and so we're quite encouraged by that
Speaker Change #191: margins have been relatively stable absent the impacts of interest rate impacts and so you the interest rate environment will have an impact going forward
Speaker Change #191: the market remains very competitive but but we're optimistic that will continue to be able to attract further growth at appropriate margins
Speaker Change #192: may one thing i would add is we are really seeing the benefit of our increased one td efforts
Speaker Change #192: 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 #193: helpful thank you
Darko Mhyillage: thank you and we have time for one last question darko mhyillage from rbc capital markets please go ahead
Darko Mhyillage: You know, one is risk and control costs being higher than previously. , Well, no, I mean, I think it was on the Q4 call, you said mid-single digits, including these AML-type costs and CALIN.
Darko Mhyillage: hi thank you good morning i will honor the no questions on al and instead 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 in
Darko Mhyillage: in a manner that highlights my concerns with the quarter and maybe you can beat them down
Speaker Change #195: the first part is the five hundred basis points of operating leverage
Speaker Change #196: i mean historically whenever we saw td's canada business produced revenues nine percent
Speaker Change #197: 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 #197: even if you were taking restructuring charges in the past then again i've been following to keep a very long time that was the sort of approach that there was always a reinvestment
Speaker Change #198: and today id 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 breaks really hardened expenses because you need to overearn here for a timefor a period of time only to later half to spend again
Speaker Change #199: so maybe you can beat down that thesis for me and explain why this is maybe transitory will you in fact try to revert back to 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 tv thank you
Darko Mhyillage: Average deposit volumes excluding sweep deposits were relatively flat year over year as the US retail bank demonstrated deposit stability in a competitive environment. Net interest margin was 3.02% up three basis point quarter during by higher deposit margins.
Paul Holden: Okay, thank you, I appreciate that, and then just Leo, maybe one last kick at the US retail segment, expenses, maybe coming at it from a slightly different perspective, I think you were doing about US billion and a half and non-interest expense as a quarter in 2023, excluding the US, the US, the legal provision, maybe you're trending at around a billion, six, maybe a little bit higher than that, does that, does that billion, six, this year, quarterly, that's factors 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 up, I don't know, 1.6 billion, even higher from here, aside from, you know, inflation and traditional business growth. So I would prefer not to provide specific quarter on quarter expense guidance now, but let me just take a step back for a moment, 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.
Speaker Change #199: The five single digits are the three factors that I talked about earlier.
Speaker Change #199: There's the risk and control, stronger markets-related businesses, and then discrete items like litigation, and so forth.
Speaker Change #199: Okay.
Speaker Change #200: i think to dark lib 'll started it's right and thanks for the question
Speaker Change #201: the way it's lear to think about our business as over the last few quarters and moving forward
Speaker Change #201: Now, refresh my memory, please.
Speaker Change #202: first and foremost we are looking to consistently deliver positive operating leverage i think your statement around positive operating leverage in the history that we have with that is accurate
Speaker Change #202: This year, I think it was, you'd quantified $500 million after tax of the, you know, risk-control-type, expenses, and then another amount of that magnitude in 2025, is that correct?
Speaker Change #202: No, I think the $500 million talked about the cost that we've spent up until that point, in time.
Speaker Change #202: from an expense perspective a few different levers that we're looking at managing as we move forward
Speaker Change #202: and certainly one of them is around finding the right mix within the complements and when you actually look at
Speaker Change #203: the traffic within our branches transaction traffic within branches are actually down fifty percent
Speaker Change #203: 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 #202: As we look forward to Q4, while many factors can impact margins, we expect a modest name expansion due to the benefit of tractor on and off rates, partially offset by any potential fat rate cuts.
Speaker Change #203: totwo 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 canadian branch network on that side andso i see that plane through from a productivity perspective
Paul Holden: There's no question that some of the governance programs that, and the expenses thereof are being reflected in the corporate segment as the investments that we're making in the US will undoubtedly ladder up to the broader global program. So I think that operating model will be in place, I believe that the changes we're making are multi-year 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 #203: the other thing that we're looking at is likely we are looking across the entire spectrum on expense management indicadian personal bank whether it's real estate
Speaker Change #203: whether it's from the actual the head office complements and what have you
Speaker Change #203: and so ll continue to be
Speaker Change #203: looking at that as we line up our strategies as we move forward
Speaker Change #204: we makeking no mistake darker we are continuing to make investments to accelerate our growth in digital mobile and omny to make surethatwe'remeeting the needs of our customers and so 're able to balance on a go-forward basis growing revenue on both sides of a balance sheet
Paul Holden: 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. And that is at a very high level, 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 again. Thank you for taking my questions. Alright. Thank you.
Speaker Change #204: while managing our expenses and making the necessary investments from a digital mobbot and also improving our risk and control environment hear in canada
Speaker Change #205: so what would be your long-term target for operating leverage for this business
Speaker Change #206: the goal continues to always be just to deliver on a positive operating leverage as we move forward and that's always been the al for tdbank and wewill continue to be the goal for the canian personal bank
Speaker Change #207: so would it be
Speaker Change #208: would would be fair to sit five hundred basis poin
Speaker Change #209: it's hard to provide guidance at that level i think the point to make here
Speaker Change #210: is we ve got very strong revenue momentum driven by account acquisition particularly in the new to canada segment
Nigel D'Souza: The next question is from Nigel D'Souza from very thousand investment research. Please go ahead. Thank you. Good morning. I want 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 is a little change from last quarter. So try and understand why that hasn't come down given the email provision if taken this quarter.
Speaker Change #210: in addition to that you know we are finding ways to have the business be more productive to technology r talked about 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 #202: Reported expenses include a $2.6 billion US EML investigations provision.
Speaker Change #202: On an adjusted basis, expenses were relatively flat year over year, primarily due to higher operating expenses offset by ongoing productivity initiatives.
Speaker Change #202: Please turn to slide 14.
Barb: given the strength of of raise business and barb's business you know we should see good positive operating leverage
Speaker Change #202: Wealth management and insurance delivered record revenue and strong fundamentals across its diversified businesses. Revenue grew 13% over year, reflecting higher insurance premiums, fee-based revenue, deposit margins, and transaction revenue.
Kelvin Tran: Are there any other legal or regulatory matters outside of the MML that could lead to outsized fines or penalties? Hi, Kelvin. We don't comment on RPOs. I mean, there's a lot of push and take in the RPO. We continuously make an assessment. What's the appropriate amount and updated accordingly? Okay.
Speaker Change #202: Insurance service expenses were up 20% year over year, primarily reflecting increased claim severity, last 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 and July.
Speaker Change #212: okay thank you for taking my questions
Speaker Change #202: In addition, there have been two significant weather events so far in August, the Calgary health storms and the Montreal floods. For these two events, we expect claim and related costs of more than $300 million in Q4.
mr mranny: thank you ladies and gentlemen this will conclude today's question and answer session i'll now turn the call over to mr mranny
Speaker Change #202: To help support analyst investors, analysis of our insurance business performance, we have added disclosure of current quarter claims cost net of insurance to page 12 of the supplemental financial information package.
mr mranny: We haven't talked about anything for 2025.
mr mranny: Nothing for 2025?
mr mranny: thanks very much operator
mr mranny: It seems likely that these costs could persist, though, into 2025, is that unreasonable to, expect?
mranny: and thank you all for for joining this morning really appreciated i know you you have lots of questions
mranny: That's correct.
Kelvin Tran: And then on Schwab. You know, 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 know, you have the securities portfolio. Are you unrealized losses there preventing you from, I guess, selling back a liquidity to crystallize? I just don't understand. Is liquidity at all one of the considerations here? Hi, Kelvin. The answer is no. Okay.
Speaker Change #215: on the l matters but is you can probably understand you know we cannot tell you more than then we already have
Speaker Change #215: i understand that you want to know more and i'm looking forward to the day that we can provide you all the details that you need
Speaker Change #215: the meantime you know very happy with our business is are perfor if look at the fundamentals in each of our segments not only in canada in the united states wholesale
Speaker Change #215: It's a multi-year program.
Speaker Change #215: Okay.
Speaker Change #215: All right.
Speaker Change #215: 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 mention of non-monetary penalties.
Speaker Change #215: Well, in any case, I appreciate the transparency you provided last night.
Speaker Change #215: What are you thinking of there?
Speaker Change #215: It was nice talking to you, Gabe.
Speaker Change #215: it's been terrific is 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 td maagers around the world and once again want to thank them
Speaker Change #215: Is an asset cap on the table for the U.S. business?
Speaker Change #215: Non-monetary means anything that is nothing to do with money.
Speaker Change #215: So we said 2.6, that is monetary.
Speaker Change #215: Thank you.
Speaker Change #215: So anything that doesn't fit into that category is non-monetary.
Speaker Change #215: Right.
Speaker Change #215: Yep.
Speaker Change #215: 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.
Speaker Change #215: 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.
Ajay Bambawale: And then just switching to credit loss provisions. Could you kind of provide some color on performing PCL 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? You would have noticed, it's Ajay. You would have noticed that performing PCL quarter over quarter came down $49 million.
Speaker Change #215: And, you know, as we put out in our press release, we expect to come to a resolution, by calendar year-end.
Speaker Change #215: So I think, you know, best year is to remain patient.
Speaker Change #215: And when we have more to say, we'll be happy to engage.
Speaker Change #215: Right.
Speaker Change #215: Assets under management and assets under administration increase year over year, both reflecting market appreciation and net asset growth.
Speaker Change #215: But, you know, non-monetary can involve financial impacts, so we can agree on that, correct?
Speaker Change #215: I don't want to speculate, you know, there might be compliance requirements, there can, be various other requirements.
Speaker Change #215: It's hard to, you know, speculate.
Speaker Change #215: Please turn to slide 15.
Speaker Change #215: 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.
Speaker Change #215: for their dedication in delivering for all our stakeholders look forward to seeing you again at the next quarter end thanks very very much
Speaker Change #215: Also banking continued its growth, delivering revenues of $1.8 billion, reflecting higher trading related revenue, landing revenue, advisory, and underwriting fees.
Speaker Change #215: Thank you.
Speaker Change #215: The next question is from Ibrahim Poonawalla from Bank of America.
Speaker Change #215: The conference has now ended.
Speaker Change #215: Please go ahead.
Speaker Change #215: Please disconnect your lines at this time, and we thank you for your participation.
Speaker Change #215: Hey, good morning.
Speaker Change #215: I just wanted to follow up, Leo, to your response earlier.
Speaker Change #216: thank you the conference has now ended please disconnect your lines at this time and we thank you for your participation
Speaker Change #216: What I'm trying to figure out is 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 #216: And from… So, from a shareholder standpoint, I think the two questions are the risk of expense creep, right?
Speaker Change #216: Mid-single digit moved to high-single digit.
Speaker Change #216: Could this become low-double digit and then some more next year?
Speaker Change #216: This quarter, we also saw higher PCLs reflecting a few new impairments across different sectors.
Speaker Change #216: So that's what I'm trying to handicap.
Speaker Change #216: 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 #216: Expenses increased 12% year over year, primarily reflecting higher variable compensation, and menstruate with higher revenues.
Speaker Change #216: Yeah, thank you very much, Ebrahim.
Speaker Change #216: It's a very good question.
Speaker Change #216: Let me first just assure you that we've spent a lot of time in building a very comprehensive, AML program.
Speaker Change #216: 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 #216: That's been the objective from the very beginning.
Speaker Change #216: 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 #216: I talked about the leadership attraction.
Speaker Change #216: The business delivered positive offering leverage and inefficiency ratio of 69% as we continue to optimize the platform.
Ajay Bambawale: Some of that was US retail. So US retail was down $23 million. And it's really coming from Resil and Auto with macro factors and seasonality contributing to that. Corporate segment is also down. Again, it's some seasonality in macro factors. Old sale performing was downed 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. So those would be the contributing factors. Why are performing PCL is down quarter over quarter? Got it.
Speaker Change #216: I've talked about the increase in complement in investigators and program managers and, data specialists in the technology areas.
Speaker Change #216: 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 #216: We're also making investments in data and technology.
Speaker Change #216: Please turn to slide 16.
Speaker Change #216: So I feel quite comfortable that we have a roadmap to execute against and that we're, doing – we are executing against that plan. 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 #216: But that's by design.
Speaker Change #216: That's exactly what we're trying to drive towards.
Speaker Change #216: 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 #216: And I just want to stress, we just – we're not looking to simply meet the minimum standard, here.
Speaker Change #216: I mean, the instructions from Barrett have been very clear from the very beginning.
Speaker Change #216: We want a world-class program.
Speaker Change #216: 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 #216: Right.
Speaker Change #216: 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 #216: 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 #216: Yeah.
Speaker Change #216: I mean, I would say, first of all, I just want to emphasize, this is a priority for, us.
Speaker Change #216: The corporate net loss for the quarter was $324 million. As you recall, we guided to adjusted net losses in the $200 to $250 million range, although we expected it to bounce around from quarters 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 litigating events in the prior year.
Speaker Change #216: Getting this AML program complete and making sure that we've got that sustainable foundation, is a first priority for me, personally.
Speaker Change #216: So as I've outlined, we're making the requisite investments there.
Speaker Change #216: Please turn to slide 17.
Speaker Change #216: But I do want to just pivot for a moment.
Speaker Change #216: And just point to the performance of the underlying franchise.
Speaker Change #216: If you look at the third quarter performance, we did have sequential NIAT and PTPP growth. That was powered by a three basis point increase in NIM and peer leading loan growth and strong, and stable deposit performance.
Speaker Change #216: 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, our mid-market business where I've indicated we have an opportunity to be able to leverage the partnership with TD Securities and TD Kalen to be able to scale that business was up 18%.
Speaker Change #216: The common equity tier one ratio ended the quarter at 12.8% down 57 basis points sequentially. We had strong internal capital generation this quarter.
Speaker Change #216: 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 #216: 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.
Speaker Change #216: Got it.
Speaker Change #216: I'll leave you.
Speaker Change #216: RWA, excluding the impact of FFX, increased slightly, primary reflecting the operational risk RWA impacts of certain provisions taken last quarter.
Speaker Change #216: Thank you.
Speaker Change #216: Thank you, Eveline.
Speaker Change #216: We repurchased approximately 13 million shares in Q3, and Nunn in August to date.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Paul Holden from CIBC.
Speaker Change #216: Please go ahead.
Speaker Change #216: Thank you.
Speaker Change #216: Our current NCIB expires on August 31 and we do not intend to repurchase any additional shares prior to expiry. Across the 90 million share-by-back program and our previous 30 million share-by-back program, TD repurchase over 100 million shares, almost 85% of the shares authorize, delivering returns for shareholders while managing our capital appropriately.
Speaker Change #216: Good morning.
Speaker Change #216: I want to follow up on that question a little bit, Leo, and I think you've already answered, it to some degree.
Speaker Change #216: 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 #216: 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.
Speaker Change #216: And so the concern would be how does that impact revenue and productivity of the U.S, segment?
Speaker Change #216: 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 #216: No, thank you very much for the question, Paul.
Speaker Change #216: TD sold is common shares in first rise in this quarter generating six basis points of CT1.
Speaker Change #216: Just to start, maybe I'd say we have been very focused on creating the space to be able, to make these critical investments.
Speaker Change #216: So on a year-on-year basis in segment, expenses were flat.
Speaker Change #216: And I think I communicated three quarters ago that we were prosecuting a productivity, program that really had four or five major pillars.
Speaker Change #216: One, we were looking at organizational health.
Speaker Change #216: Post the First Horizon transaction, we were looking to right-size the organization.
Speaker Change #216: And overall, FTEs are down about 3 percent on a year-on-year basis.
Speaker Change #216: 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.
Speaker Change #216: And that has been able – we have been able to generate some productivity savings there.
Ajay Bambawale: And I loaded a pair of PCLs in the community banking specifically. I assume that's not driven by rate cuts to the aligned effect. So anything else that you could point to that's leading to provisions improving quarter over quarter? Are you talking about Canadian PNC? Correct Canadian PNC. It's mainly driven by commercial. And as you know, impaired in commercial can be lumpy. So there were lower impaired in commercial. That was the big driver of impaired PCLs coming.
Speaker Change #216: 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 #216: 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 #216: So 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 deeper relationship over time.
Speaker Change #216: So that's really the strategy that we've been executing against.
Ajay Bambawale: Okay, that's it from me. Thank you.
Speaker Change #216: 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.
Speaker Change #216: And I'm comfortable with that because I want to drive to that sustainable platform in the, U.S. We have such a signature differentiated platform.
Speaker Change #216: We want to make sure that we've got the license and the capability to continue to grow at, scale.
Speaker Change #216: Thanks for that.
Speaker Change #216: 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.
Speaker Change #216: Like that's a decision you must await I would assume sort of around the beginning of the quarter when you had a fairly good, idea of where the provisions may come in.
Speaker Change #216: So obviously it's a decision you weighed.
Speaker Change #216: Why did you decide to go ahead and repurchase TD stock, sell Schwab?
Speaker Change #216: Like why does that, benefit shareholders?
Speaker Change #216: You know, the accounting rules on this, Paul, are very straightforward.
Speaker Change #216: You know, our view, is that the $2.6 billion is our current estimate.
Speaker Change #216: And in addition to the 450 we had taken.
Speaker Change #216: And so we made sure that, you know, we follow that standard.
Speaker Change #216: I think our buybacks have been continuing right through the year.
Speaker Change #216: And as Kelvin said, you know, we have now completed, 85 percent of what we had targeted.
Speaker Change #216: And the program now expires at the end of August.
Speaker Change #216: So I don't think I can add any more.
Speaker Change #216: You know, we always prudently capitalized, conservatively, capitalized in the bank.
Speaker Change #216: And it made sense for us to do, you know, exactly what we outlined.
Speaker Change #216: And it makes sense in a sense that, you know, 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 #216: Okay.
Speaker Change #216: I'll leave it there.
Speaker Change #216: Thank you.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Saurabh Movahedi from BMO Capital Markets.
Speaker Change #216: Please, go ahead.
Speaker Change #216: Okay.
Speaker Change #216: Thank you.
Speaker Change #216: 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 #216: Thanks for that, Saurabh.
Speaker Change #216: 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 #216: And I think that this is a business that it does move quickly.
Speaker Change #216: And to your point, it can be grown fast or slow.
Speaker Change #216: 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.
Lemar Persaud: The next question is from Lemar Persaud, from Kormark. Please go ahead. Yes, thanks. Maybe for Leo and just kind of falling up on the conversation with Paul and Abraham. 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 US franchise kind of play out?
Speaker Change #216: 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.
Speaker Change #216: 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.
Speaker Change #216: And market conditions seem like they're only getting more supportive right now.
Speaker Change #216: So I do feel that the growth trajectory that we're on is a good one for the bank in aggregate.
Speaker Change #216: 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.
Speaker Change #216: Okay, thank you.
Speaker Change #216: I appreciate that.
Speaker Change #216: And then just, Leo, maybe one last kick at the, U.S. retail segment expenses, maybe coming at it from a slightly different perspective.
Speaker Change #216: I think you were doing about U.S. billion and a half in non-interest expenses a quarter in 2023, excluding the $3 billion U.S. of the legal provision.
Speaker Change #216: Maybe you're trending at around a $1.6 billion, maybe a little bit higher than that.
Speaker Change #216: 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 #216: 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 #216: So, Rob, I'd prefer not to provide specific quarter-on-quarter expense guidance now.
Speaker Change #216: But let me just take a step back for a moment.
Speaker Change #216: I think you should expect from us continued focus on productivity.
Speaker Change #216: We had a negative 71 basis points impact to CT1 from AML investigation provision this quarter, reflecting the earnings impact of this quarter's provision and the operational risk RWA impact the provision announced last quarter. We expect a negative 35 basis point impact from this quarter's AML investigation provision in Q4. As a reminder, consistent with the Basel III reforms, operational risk RWA impact take effect on a one quarter lag.
Speaker Change #216: And it is my objective to drive positive operating leverage at the local segment level.
Speaker Change #216: 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.
Speaker Change #216: So, I think that operating model will be in place.
Speaker Change #216: 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 #216: 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 #216: And that is at a very high level.
Speaker Change #216: The thought process is one of creating capacity to make the, investments required to continue to grow the franchise.
Speaker Change #216: And we're going to stick to that operating framework, and I'll certainly provide regular updates with regards to our progress.
Speaker Change #216: Thank you for taking my questions.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Nigel D'Souza from Veritas Investment Research.
Speaker Change #216: This will be partially offset by a positive 54 basis point impact to CT1 in Q4 from the cell of 40.5 million shares.
Speaker Change #216: Please go ahead.
Speaker Change #216: With that, RJ, over to you.
Speaker Change #216: Thank you.
Speaker Change #216: Good morning.
Speaker Change #216: I wanted to turn to your disclosure on reasonably possible, losses.
Speaker Change #216: I noticed that the high end of that range is still at around $1.3 billion and is a little changed from last quarter.
Speaker Change #216: So trying to understand why that hasn't come down given the AML provision you've taken this quarter.
Speaker Change #216: Are there any other legal or regulatory matters outside from AML that could lead to outsized fines or penalties?
Speaker Change #216: Hi, it's Kelvin.
Speaker Change #216: We don't comment on RPLs.
Speaker Change #216: I mean, there's a lot of puts and takes in, the RPL.
Speaker Change #216: We continuously make an assessment with the appropriate amount and update it accordingly.
Speaker Change #216: Okay.
Speaker Change #216: Okay, thank you, Kelvin and good morning everyone.
Lemar Persaud: Bharat Masrani, I won't 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.
Speaker Change #216: 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 #216: Could you have sourced liquidity from other avenues other than selling your equity stake in Schwab?
Speaker Change #216: You know, you have the securities portfolio.
Speaker Change #216: Are the unrealized losses there preventing you from, I guess, selling back the liquidity to crystallize?
Speaker Change #216: Just trying to understand, is liquidity at all one of the considerations here?
Speaker Change #216: Hi, it's Kelvin.
Speaker Change #216: The answer is no.
Speaker Change #216: Please turn to slide 18.
Speaker Change #216: Okay.
Speaker Change #216: And then just switching to credit loss provisions, could you kind of provide some, color on performing PCLs this quarter?
Speaker Change #216: We've seen some deterioration in unemployment rates in the labor market, but your performing PCLs are moving lower.
Speaker Change #216: So any color there on what's offsetting the unemployment trends that we're seeing that's leading to lower provisions?
Speaker Change #216: You would have noticed, it's Ajay, you would have noticed that performing PCL quarter over, quarter came down $49 million.
Speaker Change #216: Some of that was U.S. retail.
Speaker Change #216: 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 #216: Corporate segment is also down.
Speaker Change #216: Again, it's some seasonality and macro factors.
Speaker Change #216: 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 #216: So those would be the contributing factors.
Speaker Change #216: Why are performing PCLs down quarter over, quarter?
Speaker Change #216: Got it.
Speaker Change #216: 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 #216: So anything else that you could point to that's leading to provisions improving quarter over quarter?
Speaker Change #216: Are you talking about Canadian PNC?
Speaker Change #216: Correct.
Speaker Change #216: Canadian PNC.
Speaker Change #216: Really, it's mainly driven by commercial.
Speaker Change #216: And as you know, impaireds in commercial can, be lumpy.
Speaker Change #216: So there were lower impaireds in commercial.
Speaker Change #216: That was the big driver of impaired, PCLs coming down.
Speaker Change #216: Okay, that's it for me.
Speaker Change #216: Thank you.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Lemar Persaud from, Cormark.
Speaker Change #216: Please go ahead.
Speaker Change #216: Yeah, thanks.
Lemar Persaud: 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 pure 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 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 #216: 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 #216: Is that a fair statement?
Speaker Change #216: I'm really just trying to understand, you know, just given the peak in expenses in 2025, how will the earnings power of the US franchise kind of play out?
Speaker Change #216: I won't front run any discussions on the non-monetary penalty or any shape.
Speaker Change #216: I, really want to wait to see the final global resolution.
Speaker Change #216: As Barrett 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.
Speaker Change #216: 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 #216: And so I think you've seen the operating momentum over the last several quarters has remained strong.
Speaker Change #216: In fact, in many cases, it's been peer leading.
Speaker Change #216: 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 #216: 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 #216: 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 #216: 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 #216: 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.
Speaker Change #216: But I wouldn't want to comment right now with regards to what the final global resolution would bring forward.
Speaker Change #216: Okay.
Speaker Change #216: Maybe, let me try this this way.
Speaker Change #216: Maybe this would be helpful.
Speaker Change #216: 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 #216: Because it seems like the answer to that is no.
Speaker Change #216: But I'm just curious your thoughts.
Speaker Change #216: 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 #216: Okay.
Speaker Change #216: Okay.
Speaker Change #216: Thanks.
Speaker Change #216: 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 #216: Now, I'm not an expert in litigation, but I'm not an expert in litigation.
Speaker Change #216: 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 #216: 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 #216: Is that a, is that a fair statement?
Speaker Change #216: Any thoughts on that?
Speaker Change #216: Gross impaired loan formations were stable at 22 basis points for the bank. As higher impaired loan formations in wholesale and US commercial were largely offset by lower formations in Canadian commercial.
Lemar Persaud: Clearly, loan growth has been strong, deposit performance has been stable, and NIMM performance has been pure leading in terms of, you know, 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 macro economic environment, the states, to the extent that we do get the benefit of some fed rate, because we'll take some pressure off both consumers and businesses and potentially sparks of loan demand.
Speaker Change #216: It's hard to comment on that, Lemar.
Speaker Change #216: 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 #216: You know, best is to wait out as to, you know, what those class actions might be.
Speaker Change #216: 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 #216: 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, we hear about one, like, is there any thoughts you can provide on that?
Speaker Change #216: 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 #216: Is there anything you can share on that?
Speaker Change #216: Unfortunately, I cannot.
Speaker Change #216: I mean, these are all, there are many cases and we will see, you know, how each one turns out.
Speaker Change #216: Okay, thanks.
Speaker Change #216: Please turn to slide 19.
Speaker Change #216: That's it for me.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Jill Shea from UBS.
Speaker Change #216: Please go ahead.
Speaker Change #216: Thanks.
Speaker Change #216: Good morning.
Speaker Change #216: In Canadian PNC, the results were strong this quarter with revenue and volume growth.
Speaker Change #216: 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 #216: Thanks.
Speaker Change #216: Gross impaired loans increased three basis points, quote over quarter to 44 basis points, driven by a few new impairments across the number of industries in each of wholesale and US commercial. Partially offset by lower impairments in Canadian commercial.
Speaker Change #216: Thanks for the question, Jill.
Speaker Change #216: It's Ray.
Speaker Change #216: Maybe I'll start and then Barb, I'll hand it over to you from, on a commercial site.
Speaker Change #216: 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 #216: 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 #216: 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 #216: We're continuing to have disciplined expense management at 4%.
Speaker Change #216: 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 #216: And so I think that at the, you know, what's driving that is really both sides of the balance, sheet in the Canadian personal bank.
Speaker Change #216: You're seeing deposit growth at 7%, and we're continuing to see leadership in core deposits.
Speaker Change #216: And that's really being driven by our strategy around the New to Canada.
Speaker Change #216: And we're seeing another record quarter for New to Canada acquisitions in the Canadian, personal bank.
Speaker Change #216: 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 #216: Please turn to slide 20.
Lemar Persaud: So there are reasons to be optimistic about the US, US operation, but I wouldn't want to comment right now with regards to what, what, what, what the final global resolution would bring forward. Okay, maybe, maybe if, maybe, let me try this, this way, maybe this would, 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 TDs underlying performance would lag US peers?
Speaker Change #216: And then from a loans perspective, you saw a good, strong loan growth of 6%.
Speaker Change #216: And really that's across the portfolio, RESO continues to be a strength for us.
Speaker Change #216: It's our 14th consecutive month of market share gain. We're up 6% there.
Speaker Change #216: 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 #216: We've got what we believe are market leading partnerships that are resonating with Canadians.
Speaker Change #216: And so the other thing I'd add is from a Rezo 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 Rezo business called Mortgage Direct.
Speaker Change #216: 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 #216: 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 #216: And I think the and our momentum will continue as we move forward into 2025.
Speaker Change #216: Bart, maybe on the commercial side?
Speaker Change #216: Yeah, thank you, Joe, for the question.
Speaker Change #216: On commercial, you know, we feel like we have, very strong momentum as well.
Speaker Change #216: We saw loans up 7% year over year.
Speaker Change #216: Recall that our presentation reports PCL ratios both gross and net of the partners share of the US strategic card PCLs. We remind you that US card PCLs recorded in the corporate segment are fully absorbed by our partners and do not impact the bank's net income.
Speaker Change #216: That is moderated a little bit from recent quarters reflecting the macro environment.
Speaker Change #216: Deposits were strong up 2% year over year. 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 #216: 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 #216: 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 #216: Maybe one thing I would add is, you know, we are really seeing the benefit of our increased 1TD efforts.
Speaker Change #216: And so with our business clients, you know, we are, we have been able to serve more of their financial needs, their personal financial needs.
Speaker Change #216: The bank's gross provision for credit losses was stable quarter over quarter.
Speaker Change #216: And we're seeing the relationships deepen as a result.
Speaker Change #216: And customers are very happy.
Speaker Change #216: Very helpful.
Speaker Change #216: Thank you.
Speaker Change #216: Thank you.
Speaker Change #216: And we have time for one last question.
Speaker Change #216: Darko Mihelic from RBC Capital Markets.
Speaker Change #216: Please go ahead.
Speaker Change #216: Hi, thank you.
Speaker Change #216: Good morning.
Speaker Change #216: I will honour the no questions on AML and instead focus on Canada, one more time.
Speaker Change #216: I want to come back to what you just spoke about with respect to Canada.
Speaker Change #216: In a manner that highlights my concerns with the quarter, and maybe you can beat them down.
Speaker Change #216: The first part is the 500 basis points of operating leverage.
Speaker Change #216: I mean, historically, whenever we saw TD's 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 ready to go.
Speaker Change #216: And so, you know, I think that's a really important point.
Speaker Change #216: You know, the idea that you're reinvesting in the business, even if you were taking restructuring, charges.
Lemar Persaud: Because it seems like the answer to that is no, but just curious your thoughts. 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. 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.
Speaker Change #216: 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 #216: And today, I see 400 or 500 basis points of operating leverage of all time low on efficiency ratio.
Speaker Change #216: And it begs the question for me.
Speaker Change #216: The question is, are you hitting the brakes really hard on expenses because you need to over earn, only to later have to spend again?
Speaker Change #216: So, maybe you can beat down that thesis for me and explain why this is maybe transitory.
Speaker Change #216: 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 #216: Thank you.
Speaker Change #216: Thank you, Darko.
Speaker Change #216: Maybe I'll start.
Speaker Change #216: It's Ray, and thanks for the question.
Speaker Change #216: 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 #216: 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 #216: 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 #216: 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 #216: That's driving significant productivity while we're able to actually take down costs in, our Canadian branch network on that side.
Speaker Change #216: And so, I see that playing through from a productivity perspective.
Speaker Change #216: 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 #216: And so, we'll continue to be looking at that as we line up our strategies as we move forward.
Speaker Change #216: 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 #216: 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.
Speaker Change #216: So, what would be your long-term target for operating leverage for this business?
Speaker Change #216: The goal continues to always be just to deliver on a positive operating leverage as we move, forward.
Speaker Change #216: And that's always been the goal for TD Bank and it'll continue to be the goal for the, Canadian personal bank.
Speaker Change #216: Would it be fair to say that you have 500 basis points?
Speaker Change #216: It's hard to provide guidance at that level.
Speaker Change #216: 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 #216: In addition to that, we are finding ways to have the business be more productive through, technology.
Speaker Change #216: Ray talked about what's happening to traffic and how can we tweak our models.
Speaker Change #216: 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.
Lemar Persaud: Now I'm not a bank expert in litigation. 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? Like my thoughts is that the banks have these large legal budgets and a number of these things come up, but you know, never really amounts to much because the banks are able to successfully kind of defend themselves.
Speaker Change #216: Okay, thank you for taking my questions.
Speaker Change #216: Thank you.
Speaker Change #216: Ladies and gentlemen, this will conclude today's question and answer session.
Speaker Change #216: I'll now turn the call over to Mr. Masrani.
Speaker Change #216: Thanks very much, operator.
Speaker Change #216: And thank you all for joining this morning.
Speaker Change #216: Really appreciate it.
Speaker Change #216: 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 #216: I understand that you want to know more, and I'm looking forward to the day that we, can provide you all the details that you need.
Speaker Change #216: In the meantime, you know, very happy with how our businesses have performed.
Speaker Change #216: Look at the fundamentals in each of our segments, not only in Canada, but in the United States, wholesale.
Speaker Change #216: It's been terrific.
Speaker Change #216: It's great to see the momentum we have in new account growth, revenue growth, loan growth.
Speaker Change #216: So it's good to see.
Speaker Change #216: And you know, I could not be more proud of our bankers around the world, TD bankers around, the world.
Speaker Change #216: And once again, I want to thank them for their dedication in delivering for all our stakeholders.
Speaker Change #216: Look forward to seeing you again at the next quarter end.
Speaker Change #216: Thanks very much.
Speaker Change #216: Thank you.
Lemar Persaud: Is that a fair statement? Any thoughts on that? Hard to comment on that, Lemar, 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 best is to wait out as to what those class actions might be. Even the type of business we have, you know, large financial services company serving tens of millions of customers, you know, we do encounter, you know, many of these issues and it's hard to predict.
Lemar Persaud: Accurately how each one might turn out. Yeah, 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 we hear about one like is there any thoughts 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 levied against the banks. Is there anything you can share on that or? Fortunately, I cannot, I mean, these are all. There are many cases and we will see, you know, how each one turns out. Okay, thanks. That's it for me. Thank you.
Jill Shea: The next question is from Jill Shay from UBS. Please go ahead. Thanks.
Speaker Change #216: As an increase in the wholesale segment was offset by decreases in the Canadian 20 million.
Raymond Chung: Good morning. In Canadian PNC, the results were strong this quarter with revenue and volume growth. Could you just talk about the outlook there, given the macro backdrop and your expectations for loan into positive growth and how we should think about margins going forward. Thanks. Thanks for their question, Jill. It's Ray. Maybe I'll start in a bar behind it over to you from a commercial site. I think from a P and C perspective, let me first start by saying we're just incredibly pleased how we continue to deliver for our customers.
Speaker Change #216: An increase of 50 million, quote over quarter, reflecting higher provisions in the wholesale segment partially offset by lower provisions in the Canadian personal and commercial segments. The performing PCL decreased 49 million quota over quota to 152 million. The smaller current quota performing build was primarily recorded in the Canadian personal and commercial and US retail segments.
Speaker Change #216: He's turned to slide 22.
Speaker Change #216: The allowance for credit losses increased by 288 million quota over quota 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. The banks allowance coverage remains elevated to account for ongoing uncertainty relating to the economic trajectory and credit performance.
Speaker Change #216: In summary, the bank exhibited continued strong credit performance this quarter as evidence by stable cross-impaired loan formations and PCL.
Speaker Change #216: Our year-to-date PCL result is 46 basis points. My prior guidance of 40 to 50 basis points for fiscal 2024 remains appropriate, although results may vary by quota and are subject to changes in economic conditions.
Raymond Chung: 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. And, you know, if I start from a revenue perspective, the Canadian PNC businesses are up 9% on a year on year. Expenses were continuing to have discipline 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 #216: With that, I will turn it back over to Barrett.
Speaker Change #216: Thank you, Ajay.
Speaker Change #216: 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 #216: We do not have additional information to share at this time.
Raymond Chung: And so I think that at the, you know, what's driving that is really both sides of the balance sheet in the Canadian personal bank. You're seeing the positive 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. And we're seeing another record quarter for new to Canada acquisitions in a Canadian personal bank. And you heard from Barrett the enhancements that we continue 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.
Speaker Change #216: I look forward to providing additional clarity as soon as I can, but today I suggest that we focus on the bank's Q3 earnings.
Speaker Change #216: With that operator, we are now ready to begin the Q&A session.
Speaker Change #216: Thank you.
Speaker Change #216: We will now take questions from the telephone lines.
Speaker Change #216: If you have a question, please press star one on your device's keypad.
Speaker Change #216: You may cancel your question at any time by pressing star two.
Raymond Chung: And then from a loans perspective, you saw a good strong loan growth of 6%. And really that's across the portfolio. Resil continues to be a strength for us. It's our 14th consecutive month of market share gain. We're up 6% there. 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 will continue to see strong acquisition momentum in our credit cards. We've got what we believe are market leading partnerships that are resonating with Canadians.
Speaker Change #216: Please press star one at this time.
Speaker Change #216: If you have a question, there will be a brief pause while participants register for questions.
Speaker Change #216: Thank you for your patience.
Speaker Change #216: And the first question is from many Grownman from Scotia Bank.
Speaker Change #216: Please go ahead.
Speaker Change #216: Hi, good morning.
Raymond Chung: And so the other thing I'd add is from a rezo perspective what's driving our growth and we think we'll continue to drive growth as we move forward is we launched a new channel in our rezo business called mortgage direct 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 and so overall from a Canadian personal banking can be more pleased with the momentum that we have whether it's on the deposits side or the lending side and I think in our momentum will continue as we move forward into 2025. Mark, maybe on the commercial.
Raymond Chung: Yeah, thank you, Jill, for the question. Uncommercial, you know, we feel like we have very strong momentum as well. 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. That's a bit of an inflection point for us coming out of the sea below and repayments and the, you know, optimization of client balance sheets.
Raymond Chung: 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, but, but we're optimistic that we'll continue to be able to attract further growth at appropriate margins. Maybe one thing I would add is, you know, we are really seeing the benefit of our increased one TD efforts.
Raymond Chung: And so with our business clients, you know, we are, we have been able to serve more of their financial needs, their personal financial needs. And we're seeing the relationships deep and as a result and customers are very happy. Thank you. And we have time for one last question. Darko Mehlich from RBC Capital Markets. Please go ahead. Hi, thank you. Good morning. I will honor the no questions on AML and instead focus on Canada one more time.
Speaker Change #216: I want to talk about capital and specifically, it's not clear to me why you needed to sell down your Schwab State to Schwab Capital, especially, even if I take into account the guidance on operational RWA coming in Q4.
Raymond Chung: I want to come back to what you just spoke about with respect to Canada. And I'll ask this in a manner that highlights my concerns with the quarter and maybe you can beat them down. The first part is the 500 basis points of operating leverage. 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 #216: So if you could help me understand some of the thought process there, it seems like there's something else going on here in terms of other considerations.
Speaker Change #216: Again, and especially in the context of buying back a billion dollars in shares in the quarter as well, so hopefully you could help me understand that.
Speaker Change #216: Many, this is bad.
Speaker Change #216: 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.
Raymond Chung: Even if you were taking restructuring charges in the past, then again, I've been following TD for a very long time. That was the sort of approach that there was always a reinvestment. And today I see 400 or 500 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 breaks really hard and expenses because you need to over earn here for a period of time.
Raymond Chung: Only to later have to spend again. So maybe you can beat down that thesis for me and explain why this is maybe transitory. Will you in fact try to revert back to a historical kind of operating levers that never really exceeds 200 basis points? Or is this a new paradigm that we're looking at for TD? Thank you. Thank you, Darko. Maybe I'll start it. It's right. And thanks for the question. The way to learn to think about our business as we're over the last few quarters and moving forward.
Speaker Change #216: There's still a lot of volatility and and you know economic conditions are not as predictable as one would like so you know this is just to be prudent and it makes sense you know 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.
Raymond Chung: First and foremost, we are looking to consistently deliver positive operating levers. So I think your statement around positive operating leverage and the history that we have with that is accurate. 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 compliments. 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 #216: So would this sort of capital stands conservative capital stands signal that AML science could end up being larger maturely larger.
Speaker Change #216: We announced you know 2.6 billion yesterday additionally we 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 you know that's how we follow this where the accounting rules are very clear on this.
Speaker Change #216: So our current estimate is that this is the amount it will take you know to move forward.
Speaker Change #216: And just another follow up so is it fair to assume that you're not comfortable going below 12.5% CT one is that sort of where you're thinking that it was of your comfort level.
Speaker Change #216: We're targeting 12% you know 12 between 12 12 and a half so you know we continue to become stable with that target but obviously we review this on an ongoing basis depending on economic conditions.
Raymond Chung: 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 called that's driving significant productivity while we're able to actually take down costs in our Canadian branch network on that side. And so I see that playing through from a productivity perspective.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from John Aiken from Jeffries.
Raymond Chung: 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 the head office compliments and what have you. And so continue to be looking at that as we line up our strategies as we move forward, but make no mistake. 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 #216: Please go ahead.
Speaker Change #216: Sorry can you hear me?
Speaker Change #216: Yeah now.
Raymond Chung: 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. So what would be your long term target for operating leverage for this business? The goal continues to always be just to deliver on a positive operating leverage as we move forward. And that's always been the goal for a TD bank and it'll continue to be the goal for the Canadian personal bank.
Speaker Change #216: Okay sorry about that my apologies.
Speaker Change #216: With the with the sale of the Schwab state is it safe to assume that you have some future point when you double out 10% you'll lose board representation and it will no longer be accounted under the equity equity method.
Speaker Change #216: Our current intentions is not to go below where we are.
Speaker Change #216: I understand that better but if you do go below that is that the case.
Raymond Chung: So would it be would it be fair to say 500 basis points? It's hard to provide guidance at that level. 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. In addition to that, we are finding ways to have the business be more productive to technology, re-talk about what's happening to traffic and how can we tweak our models.
Raymond Chung: As long as those factors remain where the account acquisition continues to be strong driving revenue growth, given the strength of race business and Barb's business, we should see good positive operating leverage. 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.
Raymond Chung: 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 I'm looking forward to the day that we can provide you all the details that you need. The meantime, you know, very happy with how our business is performed. You look at the fundamentals in each of our segments, not only in Canada but in the United States, wholesale.
Speaker Change #216: It's a strategic investment for us you know we'll be very happy as to how this investment is performed and and and our view is that our governance requirements and and where we are we are we comfortable with that and would like to continue at these levels.
Speaker Change #216: Okay Baron is it safe to assume that the sale of the stake has no bearing in terms of the the agreement you have on the sweep accounts.
Speaker Change #216: Yes thank you all with you.
Raymond Chung: 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.
Speaker Change #216: Thank you the next question is from Matthew Lee from Canacorn Genuity.
Speaker Change #216: Please go ahead.
Speaker Change #216: Hey morning guys thanks for taking my question maybe one on expensive so your guidance is now high single digit growth in 24.
Speaker Change #216: 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 other factors that may be played in terms of updated guidance.
Speaker Change #216: It's Kelvin I'll pick that question yeah there are mainly three factors you know one is risk and control costs being higher than previously.
Bharat Masrani: 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 #216: Leslie, Scott, also, our markets, related businesses, are performing really, really well.
Speaker Change #216: And so, therefore, the Rebel Compensation, Northern Japan, by higher revenues, and we'll take that trade any day.
Speaker Change #216: And then plus, there are a few discrete items, like the litigation that we just talked about in wealth this quarter.
Speaker Change #216: Those are the three main factors.
Speaker Change #216: All right then, and maybe a follow-up, just on the AMR cost themselves.
Speaker Change #216: You know, it sounds a lot of the investment being made is predicate on hiring additional talent, kind of building out and maintaining some sort of AMR infrastructure.
Speaker Change #216: Should we just assume those FTEs will kind of remain with TD even after that bill out is complete?
Speaker Change #216: And does that essentially mean the off-ex associated kind of occurring?
Speaker Change #216: Let me take that one, Matt.
Speaker Change #216: This is Leo Salom.
Speaker Change #216: Just to give you a sense, and I think Bharat outlined where we're making critical investments in the program, and obviously hiring the right leadership has been a first priority.
Speaker Change #216: And I think we've been very fortunate to bring really subject matter leaders from other G-Sibs, from the Department of Homeland Security, from the Treasury Department, as well as the FBI and other law enforcement organizations.
Speaker Change #216: So we're really pleased with the leadership team that we've brought on board.
Speaker Change #216: We've added over 500 colleagues to support this effort.
Speaker Change #216: 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.
Speaker Change #216: But we're also making some important investments in investigative capacity in advanced analytics.
Speaker Change #216: And I would suspect that those would stay.
Speaker Change #216: So to give you a sense, there would be a portion of it that will be repurposed to other initiatives as we move forward.
Speaker Change #216: 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.
Speaker Change #216: All right, that's helpful.
Speaker Change #216: Thanks, guys.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is some Gabriel Deschein from National Bank Financial.
Speaker Change #216: Please go ahead.
Speaker Change #216: Good morning.
Speaker Change #216: The expense commentary.
Speaker Change #216: I guess, Calvin, you were saying that the, you know, corporate loss could be above that guidance rate, the 200 to 250 again in Q4 because of risk controls, investments in that type of stuff.
Speaker Change #216: If I look at your full year consolidated adjusted expense growth adjusted for the strategic card portfolio, you're running a 10% growth, 9% of the exclude variable comp. At the start of the year, you'd guided to mid-single digits.
Speaker Change #216: Is that Delta solely because of, you know, additional investments of this nature?
Speaker Change #216: No, so if you're looking at corporate, so remember earlier when I talked about the two items, you talk about the corporate losses and then the expenses, or expenses I talked about the three drivers that caused the increase.
Speaker Change #216: And remember, the higher expense growth rate also had partly TD Cohen in part as well because last year was partial year this year's full year.
Speaker Change #216: Well, no, I mean, I think it was on the QFAR call you, you'd said mid-single digits including these AML-type costs and count, and I think all digits are the three factors that I talked about earlier.
Speaker Change #216: There's the risk and control, stronger markets related businesses, and then discrete items like dedication and so forth.
Speaker Change #216: Okay.
Speaker Change #216: Now, what a refresh by memory, please.
Speaker Change #216: This year, I think it was a you'd quantified 500 million after tax.
Speaker Change #216: Of the risk control type expenses and then another amount of that magnitude in 2025.
Speaker Change #216: Is that correct?
Speaker Change #216: No, I think the 500 million talked about the cost that we've spent up into that point of time.
Speaker Change #216: We haven't talked about anything for 25.
Speaker Change #216: Nothing for 2025.
Speaker Change #216: Is it like it seems likely that these costs could persist though into 2025.
Speaker Change #216: Is that unreasonable to expect?
Speaker Change #216: Correct.
Speaker Change #216: It's a multi-year program.
Speaker Change #216: Okay.
Speaker Change #216: 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 a, you know, total penalties would be and I don't dispute that number at all. But there's also mentioned a non-monetary penalties.
Speaker Change #216: What are you thinking of there?
Speaker Change #216: Is an asset cap on the table for the US business?
Speaker Change #216: Non-monetary means anything that is nothing to do with money.
Speaker Change #216: So we said 2.6 that is monetary.
Speaker Change #216: Anything that doesn't fit into that category is non-monetary.
Speaker Change #216: 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.
Speaker Change #216: And you know, as we put out in our press release, you know, we expect to come to a resolution by calendar year ends.
Speaker Change #216: I think, you know, this year is to remain patient.
Speaker Change #216: And when we have more to say, we'll be happy to engage.
Speaker Change #216: Right.
Speaker Change #216: But then, you know, non-monetary can involve financial impact.
Speaker Change #216: So we can agree on that, correct?
Speaker Change #216: I don't want to speculate, you know, there might be compliance requirements.
Speaker Change #216: It can be various other requirements.
Speaker Change #216: It's hard to speculate.
Speaker Change #216: We're in the middle of this in negotiations and investigations.
Speaker Change #216: And so we just want to make sure that we give you full sum disclosures when it is appropriate, rather than speculating what it may or may not be.
Speaker Change #216: All right.
Speaker Change #216: Well, in any case, appreciate the transparency you provided last night.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Ibrahim Punewala from Bank of America.
Speaker Change #216: Please go ahead.
Speaker Change #216: Yeah, good morning.
Speaker Change #216: You just want to follow up Leo to your response earlier.
Speaker Change #216: What I'm trying to figure out is how much of the remediation action 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 #216: And from A shareholder standpoint, I think the two questions are the risk of expense creep, right, mid-single digit, move to high single digit, could this become low double digit and then some more next year.
Speaker Change #216: So that's what I'm trying to handicap.
Speaker Change #216: 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 these.
Speaker Change #216: The EML controls to be.
Speaker Change #216: Thank you very much, but it's a very good question.
Speaker Change #216: Let me first just to assure you that we've spent a lot of time in building a very comprehensive AML program.
Speaker Change #216: 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 #216: That's been the objective from the very beginning.
Speaker Change #216: I believe we have a very robust program.
Speaker Change #216: And we're executing.
Speaker Change #216: We're well underway in terms of the actual execution program.
Speaker Change #216: I talked about the leadership attraction.
Speaker Change #216: I've talked about the increase in complement in investigators and program managers and in data specialist in the technology areas.
Speaker Change #216: And we are sparing.
Speaker Change #216: 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 #216: We're also making investments in data and technology.
Speaker Change #216: 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 #216: 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 #216: But that's by design.
Speaker Change #216: That's exactly what we're trying to drive towards.
Speaker Change #216: I believe that the cost that we have forecasted internally are appropriate for the program that we've outlined.
Speaker Change #216: And I feel quite comfortable with the outcome.
Speaker Change #216: And I just want to stress.
Speaker Change #216: We just we're not looking to simply meet the minimum standard here.
Speaker Change #216: The instructions from Barrett has been very clear from the very beginning.
Speaker Change #216: We want a world-class program.
Speaker Change #216: We're making investments required.
Speaker Change #216: 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 US.
Speaker Change #216: And it's one that we want to continue to build.
Speaker Change #216: Right.
Speaker Change #216: And Leo, this is the reason why I'm trying to sort of grill 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 #216: And I think, I mean, obviously, don't want to comment on the non-memmonically penalties.
Speaker Change #216: 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 US franchise is going to be under an asset cap.
Speaker Change #216: And the risk of attrition, like, how is there a way that you can make us feel better about the US franchise?
Speaker Change #216: If there's an asset cap and this thing takes multi years, as you said, as someone who runs that business day today of why that should be okay.
Speaker Change #216: And there's no risk of attrition.
Speaker Change #216: I would say, first of all, I just want to emphasize, this is a priority force.
Speaker Change #216: Getting the SAML program complete and making sure that we've got that sustainable foundation is a first priority for me personally.
Speaker Change #216: So, as I've outlined, we're making the requisite investments there, but I do want to just pivot for a moment, and just point to the performance of the underlying franchise.
Speaker Change #216: If you look at the third quarter performance, we did have sequential niat MPTP growth.
Speaker Change #216: That was powered by a three basis point increase in them and pure leading loan growth and strong and stable deposit performance.
Speaker Change #216: We saw some of the areas that we've identified previously, like our bank card business was up 16% on a year on your basis, our mid market business where I've indicated we have an opportunity to be able to leverage the partnership with TD securities and TD Cowan to be able to scale that business was up 18%.
Speaker Change #216: 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 #216: So I think the franchise continues to perform and there's no reason why that should end.
Speaker Change #216: We're going to continue to do what we need to do from a governance control standpoint.
Speaker Change #216: 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 US marketplace.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Paul Holden from CIBC.
Speaker Change #216: Please go ahead.
Speaker Change #216: Thank you.
Speaker Change #216: Good morning.
Speaker Change #216: I want to follow up on my question a little bit.
Speaker Change #216: Leo and I think you've already answered it to some degree.
Speaker Change #216: But when I look at the numbers for the US segment, I see efficiency ratio effectively flat year over year, which I think is pretty impressive because in the additional investments you've had to make in risk of control.
Speaker Change #216: I guess the counter argument to that would be well, then you've had to reduce branch count, you've had to reduce head count.
Speaker Change #216: And so the concern would be how does that impact revenue and productivity of the US segment?
Speaker Change #216: 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.
Speaker Change #216: That's kind of what I am seeing in the numbers.
Speaker Change #216: No, thank you very much for the question, Paul.
Speaker Change #216: Just to start maybe, I'd say we have been very focused on creating the space to be able to make these critical investments.
Speaker Change #216: So on a year on your basis in segment expenses were flat.
Speaker Change #216: I think I communicated three quarters ago that we were prosecuting a productivity program that really had four or five major pillars.
Speaker Change #216: One, we were looking at organizational health post the first horizon transaction.
Speaker Change #216: We were looking to right size the organization and overall FTEs are down about 3% on a year on your basis.
Speaker Change #216: 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 #216: 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. 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 operating costs.
Speaker Change #216: So 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.
Speaker Change #216: Like our digital and mobile environment, like investments in our next generation store design, in cards, in wealth, areas that we think we're still under penetrated and where the franchise our 10 million client base would benefit from a greater and a deeper relationship over time.
Speaker Change #216: So that's really the strategy that we've been executing against.
Speaker Change #216: There's no doubt that as we execute on some of these programs from a governance control standpoint, there could be some elevated expenses.
Speaker Change #216: And I'm comfortable with that because I want to drive to that sustainable platform in the U.S.
Speaker Change #216: We have such a signature differentiated platform.
Speaker Change #216: We want to make sure that we've got the license and the capability to continue to grow at scale.
Speaker Change #216: Thanks for that.
Speaker Change #216: And second question is a little bit of a 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 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.
Speaker Change #216: So obviously it's a decision you weighed.
Speaker Change #216: Why did you decide to go ahead and repurchase?
Speaker Change #216: [inaudible] on I think I'm going to do a little bit of a follow up on I think I'm going to do a little bit of a follow[inaudible] of a follow up on I think I'm going to do a little bit of a follow up on I think I'm going to do a little bit of a follow up on[inaudible] There's a lot of room for us to continue to grow, whether it be in prime businesses, transaction banking businesses, electronic trading, sponsors, leverage finance, we've been able to bring up our revenue now to a consistent performance of a billionaire quarter through this period of integration and build, and market conditions seem like they're only getting more supported right now, 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.
Speaker Change #216: Okay, thank you, I appreciate that, and then just Leo, maybe one last kick at the US retail segment, expenses, maybe coming at it from a slightly different perspective, I think you were doing about US billion and a half and non-interest expense as a quarter in 2023, excluding the US, the US, the legal provision, maybe you're trending at around a billion, six, maybe a little bit higher than that, does that, does that billion, six, this year, quarterly, that's factors 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 up, I don't know, 1.6 billion, even higher from here, aside from, you know, inflation and traditional business growth.
Speaker Change #216: So I would prefer not to provide specific quarter on quarter expense guidance now, but let me just take a step back for a moment, 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.
Speaker Change #216: There's no question that some of the governance programs that, and the expenses thereof are being reflected in the corporate segment as the investments that we're making in the US will undoubtedly ladder up to the broader global program.
Speaker Change #216: So I think that operating model will be in place, I believe that the changes we're making are multi-year 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 #216: 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 #216: And that is at a very high level, 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 again.
Speaker Change #216: Thank you for taking my questions.
Speaker Change #216: Alright.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Nigel D'Souza from very thousand investment research.
Speaker Change #216: Please go ahead.
Speaker Change #216: Thank you.
Speaker Change #216: Good morning.
Speaker Change #216: I want to turn to your disclosure on reasonably possible losses.
Speaker Change #216: I noticed that the high end of that range is still at around 1.3 billion and is a little change from last quarter.
Speaker Change #216: So try and understand why that hasn't come down given the email provision if taken this quarter.
Speaker Change #216: Are there any other legal or regulatory matters outside of the MML that could lead to outsized fines or penalties?
Speaker Change #216: Hi, Kelvin.
Speaker Change #216: We don't comment on RPOs.
Speaker Change #216: I mean, there's a lot of push and take in the RPO.
Speaker Change #216: We continuously make an assessment.
Speaker Change #216: What's the appropriate amount and updated accordingly?
Speaker Change #216: Okay.
Speaker Change #216: And then on Schwab.
Speaker Change #216: You know, we talked about capital, but was liquidity a consideration in the decision to sell those Schwab shares?
Speaker Change #216: Could you have sourced liquidity from other avenues other than selling your equity stake in Schwab?
Speaker Change #216: You know, you have the securities portfolio.
Speaker Change #216: Are you unrealized losses there preventing you from, I guess, selling back a liquidity to crystallize?
Speaker Change #216: I just don't understand.
Speaker Change #216: Is liquidity at all one of the considerations here?
Speaker Change #216: Hi, Kelvin.
Speaker Change #216: The answer is no.
Speaker Change #216: Okay.
Speaker Change #216: And then just switching to credit loss provisions.
Speaker Change #216: Could you kind of provide some color on performing PCL this quarter?
Speaker Change #216: We've seen some deterioration in unemployment rates in the labor market, but your performing PCLs are moving lower.
Speaker Change #216: So any color there on what's offsetting the unemployment trends that we're seeing that's leading to lower provisions?
Speaker Change #216: You would have noticed, it's Ajay.
Speaker Change #216: You would have noticed that performing PCL quarter over quarter came down $49 million. Some of that was US retail. So US retail was down $23 million.
Speaker Change #216: And it's really coming from Resil and Auto with macro factors and seasonality contributing to that.
Speaker Change #216: Corporate segment is also down.
Speaker Change #216: Again, it's some seasonality in macro factors.
Speaker Change #216: Old sale performing was downed for two reasons.
Speaker Change #216: One, there were repayments.
Speaker Change #216: So when there were repayments, any performing we held, you know, was released.
Speaker Change #216: And the second reason is because they were impaired, some of the performing PCL migrated to impaired.
Speaker Change #216: So those would be the contributing factors.
Speaker Change #216: Why are performing PCL is down quarter over quarter?
Speaker Change #216: Got it.
Speaker Change #216: And I loaded a pair of PCLs in the community banking specifically.
Speaker Change #216: I assume that's not driven by rate cuts to the aligned effect.
Speaker Change #216: So anything else that you could point to that's leading to provisions improving quarter over quarter?
Speaker Change #216: Are you talking about Canadian PNC?
Speaker Change #216: Correct Canadian PNC.
Speaker Change #216: It's mainly driven by commercial.
Speaker Change #216: And as you know, impaired in commercial can be lumpy.
Speaker Change #216: So there were lower impaired in commercial.
Speaker Change #216: That was the big driver of impaired PCLs coming.
Speaker Change #216: Okay, that's it from me.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Lemar Persaud, from Kormark.
Speaker Change #216: Please go ahead.
Speaker Change #216: Yes, thanks.
Speaker Change #216: Maybe for Leo and just kind of falling up on the conversation with Paul and Abraham.
Speaker Change #216: 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 #216: Is that a fair statement?
Speaker Change #216: I'm really just trying to understand, you know, just given the peak in expenses in 2025, how will the earnings power of the US franchise kind of play out?
Speaker Change #216: Bharat Masrani, I won't run any discussions on the non-monetary penalty or any shape.
Speaker Change #216: I really want to wait to see the final global resolution.
Speaker Change #216: 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.
Speaker Change #216: 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 #216: And so I think you've seen the operating momentum over the last several quarters has remained strong.
Speaker Change #216: In fact, in many cases, it's been pure leading.
Speaker Change #216: 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 #216: 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 #216: Clearly, loan growth has been strong, deposit performance has been stable, and NIMM performance has been pure leading in terms of, you know, relative performance.
Speaker Change #216: 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 #216: And I do think that the macro economic environment, the states, to the extent that we do get the benefit of some fed rate, because we'll take some pressure off both consumers and businesses and potentially sparks of loan demand.
Speaker Change #216: So there are reasons to be optimistic about the US, US operation, but I wouldn't want to comment right now with regards to what, what, what, what the final global resolution would bring forward.
Speaker Change #216: Okay, maybe, maybe if, maybe, let me try this, this way, maybe this would, would be helpful.
Speaker Change #216: If we park any of the additional operating expense growth related to this AML, is there any tangible reason to suggest that TDs underlying performance would lag US peers?
Speaker Change #216: Because it seems like the answer to that is no, but just curious your thoughts.
Speaker Change #216: 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 #216: Okay, thanks.
Speaker Change #216: 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 #216: Now I'm not a bank expert in litigation.
Speaker Change #216: 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 #216: Like my thoughts is that the banks have these large legal budgets and a number of these things come up, but you know, never really amounts to much because the banks are able to successfully kind of defend themselves.
Speaker Change #216: Is that a fair statement?
Speaker Change #216: Any thoughts on that?
Speaker Change #216: Hard to comment on that, Lemar, 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 best is to wait out as to what those class actions might be.
Speaker Change #216: Even the type of business we have, you know, large financial services company serving tens of millions of customers, you know, we do encounter, you know, many of these issues and it's hard to predict.
Speaker Change #216: Accurately how each one might turn out.
Speaker Change #216: Yeah, 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 we hear about one like is there any thoughts you can provide on that because I have no sitting on this side of the table.
Speaker Change #216: I have no indication of how often these things are levied against the banks.
Speaker Change #216: Is there anything you can share on that or?
Speaker Change #216: Fortunately, I cannot, I mean, these are all.
Speaker Change #216: There are many cases and we will see, you know, how each one turns out.
Speaker Change #216: Okay, thanks.
Speaker Change #216: That's it for me.
Speaker Change #216: Thank you.
Speaker Change #216: The next question is from Jill Shay from UBS.
Speaker Change #216: Please go ahead.
Speaker Change #216: Thanks.
Speaker Change #216: Good morning.
Speaker Change #216: In Canadian PNC, the results were strong this quarter with revenue and volume growth.
Speaker Change #216: Could you just talk about the outlook there, given the macro backdrop and your expectations for loan into positive growth and how we should think about margins going forward.
Speaker Change #216: Thanks.
Speaker Change #216: Thanks for their question, Jill.
Speaker Change #216: It's Ray.
Speaker Change #216: Maybe I'll start in a bar behind it over to you from a commercial site.
Speaker Change #216: I think from a P and C perspective, let me first start by saying we're just incredibly pleased how we continue to deliver for our customers.
Speaker Change #216: 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. And, you know, if I start from a revenue perspective, the Canadian PNC businesses are up 9% on a year on year.
Speaker Change #216: Expenses were continuing to have discipline expense management at 4%.
Speaker Change #216: 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 #216: And so I think that at the, you know, what's driving that is really both sides of the balance sheet in the Canadian personal bank.
Speaker Change #216: You're seeing the positive growth at 7%.
Speaker Change #216: And we're continuing to see leadership in core deposits.
Speaker Change #216: And that's really being driven by our strategy around the new to Canada.
Speaker Change #216: And we're seeing another record quarter for new to Canada acquisitions in a Canadian personal bank.
Speaker Change #216: And you heard from Barrett the enhancements that we continue 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.
Speaker Change #216: And then from a loans perspective, you saw a good strong loan growth of 6%. And really that's across the portfolio.
Speaker Change #216: Resil continues to be a strength for us. It's our 14th consecutive month of market share gain. We're up 6% there.
Speaker Change #216: 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 will continue to see strong acquisition momentum in our credit cards.
Speaker Change #216: We've got what we believe are market leading partnerships that are resonating with Canadians.
Speaker Change #216: And so the other thing I'd add is from a rezo perspective what's driving our growth and we think we'll continue to drive growth as we move forward is we launched a new channel in our rezo business called mortgage direct 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 and so overall from a Canadian personal banking can be more pleased with the momentum that we have whether it's on the deposits side or the lending side and I think in our momentum will continue as we move forward into 2025.
Speaker Change #216: Mark, maybe on the commercial.
Speaker Change #216: Yeah, thank you, Jill, for the question.
Speaker Change #216: Uncommercial, you know, we feel like we have very strong momentum as well.
Speaker Change #216: We saw loans up 7% year over year.
Speaker Change #216: That is moderated a little bit from recent quarters reflecting the macro environment deposits were strong up 2% year over year.
Speaker Change #216: That's a bit of an inflection point for us coming out of the sea below and repayments and the, you know, optimization of client balance sheets.
Speaker Change #216: And so we're quite encouraged by that margins have been relatively stable absent the impacts of interest rate impacts.
Speaker Change #216: And so, you know, the interest rate environment will have an impact going forward.
Speaker Change #216: The market remains very competitive, but, but we're optimistic that we'll continue to be able to attract further growth at appropriate margins.
Speaker Change #216: Maybe one thing I would add is, you know, we are really seeing the benefit of our increased one TD efforts.
Speaker Change #216: And so with our business clients, you know, we are, we have been able to serve more of their financial needs, their personal financial needs.
Speaker Change #216: And we're seeing the relationships deep and as a result and customers are very happy.
Speaker Change #216: Thank you.
Speaker Change #216: And we have time for one last question.
Speaker Change #216: Darko Mehlich from RBC Capital Markets.
Speaker Change #216: Please go ahead.
Speaker Change #216: Hi, thank you.
Speaker Change #216: Good morning.
Speaker Change #216: I will honor the no questions on AML and instead focus on Canada one more time.
Speaker Change #216: I want to come back to what you just spoke about with respect to Canada.
Speaker Change #216: And I'll ask this in a manner that highlights my concerns with the quarter and maybe you can beat them down.
Speaker Change #216: The first part is the 500 basis points of operating leverage.
Speaker Change #216: 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 #216: Even if you were taking restructuring charges in the past, then again, I've been following TD for a very long time.
Speaker Change #216: That was the sort of approach that there was always a reinvestment.
Speaker Change #216: And today I see 400 or 500 basis points of operating leverage of all time low on efficiency ratio.
Speaker Change #216: And it begs the question for me.
Speaker Change #216: The question is, are you hitting the breaks really hard and expenses because you need to over earn here for a period of time. Only to later have to spend again.
Speaker Change #216: So maybe you can beat down that thesis for me and explain why this is maybe transitory.
Speaker Change #216: Will you in fact try to revert back to a historical kind of operating levers that never really exceeds 200 basis points?
Speaker Change #216: Or is this a new paradigm that we're looking at for TD?
Speaker Change #216: Thank you.
Speaker Change #216: Thank you, Darko.
Speaker Change #216: Maybe I'll start it.
Speaker Change #216: It's right.
Speaker Change #216: And thanks for the question.
Speaker Change #216: The way to learn to think about our business as we're over the last few quarters and moving forward.
Speaker Change #216: First and foremost, we are looking to consistently deliver positive operating levers. So I think your statement around positive operating leverage and the history that we have with that is accurate.
Speaker Change #216: From an expense perspective, a few different levers that we're looking at managing as we move forward.
Speaker Change #216: And certainly one of them is around finding the right mix within the compliments.
Speaker Change #216: 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 #216: 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 called that's driving significant productivity while we're able to actually take down costs in our Canadian branch network on that side.
Speaker Change #216: And so I see that playing through from a productivity perspective.
Speaker Change #216: 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 the head office compliments and what have you.
Speaker Change #216: And so continue to be looking at that as we line up our strategies as we move forward, but make no mistake.
Speaker Change #216: 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 #216: 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.
Speaker Change #216: So what would be your long term target for operating leverage for this business?
Speaker Change #216: The goal continues to always be just to deliver on a positive operating leverage as we move forward.
Speaker Change #216: And that's always been the goal for a TD bank and it'll continue to be the goal for the Canadian personal bank.
Speaker Change #216: So would it be would it be fair to say 500 basis points?
Speaker Change #216: It's hard to provide guidance at that level.
Speaker Change #216: 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 #216: In addition to that, we are finding ways to have the business be more productive to technology, re-talk about what's happening to traffic and how can we tweak our models.
Speaker Change #216: As long as those factors remain where the account acquisition continues to be strong driving revenue growth, given the strength of race business and Barb's business, we should see good positive operating leverage.
Speaker Change #216: Rizh.
Speaker Change #216: Okay, thank you for taking my questions.
Speaker Change #216: Thank you.
Speaker Change #216: The decent gentleman, this will conclude today's question and answer session.
Speaker Change #216: I'll now turn the call over to Mr. Masrani.
Speaker Change #216: Thanks very much, operator.
Speaker Change #216: And thank you all for joining this morning.
Speaker Change #216: Really appreciate it.
Speaker Change #216: 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.
Speaker Change #216: I understand that you want to know more, and I'm looking forward to the day that we can provide you all the details that you need.
Speaker Change #216: The meantime, you know, very happy with how our business is performed.
Speaker Change #216: You look at the fundamentals in each of our segments, not only in Canada but in the United States, wholesale.
Speaker Change #216: It's been terrific.
Speaker Change #216: It's great to see the momentum we have in new account growth, revenue growth, loan growth.
Speaker Change #216: So it's good to see.
Speaker Change #216: And you know, I could not be more proud of our bankers around the world.
Speaker Change #216: And once again, want to thank them for their dedication and delivering for all our stakeholders.
Speaker Change #216: Look forward to seeing you again at the next quarter end.
Speaker Change #216: Thanks very much.
Speaker Change #216: Thank you.
Speaker Change #216: The conference has now ended.
Speaker Change #216: Please disconnect your lines at this time.
Speaker Change #216: And we thank you for your participation.