Q4 2024 Toronto-Dominion Bank Earnings Call
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Speaker Change: Good morning, everyone. Welcome to the TD Bank Group Q4 2024 Earnings Conference Call.
Speaker Change: I would now like to turn the meeting over to Ms. Brooke Hales, Head of Industrial Relations.
Please go ahead, Ms. Hales.
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.
Speaker Change: 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.
Speaker Change: We also acknowledge that Toronto is covered by Treaty 13, signed with the Mississaugas of the Credit, and the Williams Treaty signed with multiple Mississaugas and Chippewa bands.
Speaker Change: We will begin today's presentation with remarks from Bharat Masrani, the bank's CEO, followed by Ray Chun, the bank's COO, after which Kelvin Tran, the bank's CFO, will present our fourth quarter operating results.
Speaker Change: Ajai Bambawale, Chief Risk Officer, will then offer comments on credit quality, after which we will invite questions from pre-qualified analysts and investors on the phone.
Speaker Change: Also present today to answer your questions are Sona Mehta, Group Head, Canadian Personal Banking, Barbara Hooper, Group Head, Canadian Business Banking, Leo Solong, President and CEO, TD Bank, America's Most Convenient Bank,
Speaker Change: Tim Wiggin, Group Head, Wholesale Banking and President and CEO TD Securities and Paul Clark, Senior Executive Vice President, Wealth Management.
Please turn to slide 2.
Speaker Change: As noted on slide 2, our comments during this call may contain forward-looking statements which involve assumptions and have inherent risks and uncertainties.
Speaker Change: Actual results could differ materially. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. The bank believes that adjusted results provide readers with a better understanding of how management views the bank's performance.
Speaker Change: Bharat, Ray, and Kelvin will be referring to adjusted results in their remarks. Additional information about non-GAP measures and material factors and assumptions is available in our 2024 Annual Report. With that, let me turn the presentation over to Bharat.
Bharat Masrani: Thank you, Brooke, and thank you everyone for joining us today. I'd like to welcome Sona Mehta, Group Head, Canadian Personal Banking, and Paul Clark, Senior Executive Vice President, Wealth Management, who are joining this call for the first time.
I will begin with the USAML remediation update.
Bharat Masrani: We have continued to onboard talent and deploy new data-driven technology solutions.
Bharat Masrani: This quarter, we implemented further improvements in transaction monitoring and refinements in our customer risk rating methodology.
Bharat Masrani: We also rolled out additional training for risk, governance, and control colleagues.
Bharat Masrani: We expect to have the majority of the management remediation actions implemented by the end of calendar 2025, with additional management actions planned for calendar 2026.
Bharat Masrani: Remediation actions will then be subject to internal challenge and validation, including sustainability and testing activities, which are planned for Calendar 26 and 27, followed by review and acceptance by the monitorship.
Bharat Masrani: Our AML remediation will be a multi-year endeavor, and we will continue to provide updates on our progress.
Bharat Masrani: USAML remediation is our main focus. However, as we have discussed previously,
Bharat Masrani: Through this work and other ongoing review, we've had an opportunity to examine the effectiveness and capabilities of our enterprise AML program.
Bharat Masrani: We have learned from the U.S. experience and are applying those learnings globally.
Bharat Masrani: Though we have not identified issues to the same extent or experienced the same severe AML-related events in markets outside the U.S., we do need to improve and strengthen our enterprise-wide program. It is critical that we do so, and we will.
Bharat Masrani: We are tackling this work with the same determination and urgency.
Bharat Masrani: When we are done with this effort, we will have the AML risk and control environment that befits a G-CIV in the U.S. and in every market in which we operate.
Turning to resolves.
Bharat Masrani: We have seen momentum in our markets-related businesses, and we believe we are well positioned to benefit from any improvement in the environment in the coming months.
catastrophic claims.
Bharat Masrani: This strong revenue growth was driven by higher fee income in market-related businesses and higher volumes in Canada.
Bharat Masrani: Expenses this quarter reflected investments in our risk and control infrastructure and several notable items totaling approximately $150 million, including costs associated with our Nordstrom Program Agreement extension and legal and regulatory costs.
Bharat Masrani: We also saw record catastrophic claims in our insurance business and increased impaired PCLs in our non-retail lending portfolios.
Bharat Masrani: This quarter, earnings were $3.2 billion, and EPS was $1.72, down 8% and 5% year-over-year respectively.
Bharat Masrani: As of quarter end, the Bank's CET1 ratio was 13.1%, reflecting the sale of Schwab shares in August, partially offset by the operational risk RWA impact of last quarter's AML provision.
Bharat Masrani: We remain confident in the earnings power of our franchise and have today declared a $0.03 dividend increase, bringing our dividend to $1.05 per share.
Speaker Change: Let me now turn it over to Ray in his new role as Chief Operating Officer.
Thank you, Bharat, and good morning, everyone.
Ray Chun: I'll start with how I've been how I spent the past few months since succession announcements and share my early thoughts on our path forward.
Ray Chun: and I'll review our Q4 results across each of our businesses.
Ray Chun: Since September, I've met with colleagues, customers, clients, and investors. It has reaffirmed my confidence that TD is a fantastic franchise.
Ray Chun: with scale businesses in every market in which we operate and products and services that resonate with our nearly 28 million customers.
Ray Chun: These solid business fundamentals have enabled the bank to deliver strong underlying performance over the past few quarters.
We've also seen opportunities for TD to improve execution.
and becoming even more digital and mobile-enabled.
can simplify process to drive efficiency.
Ray Chun: creating more capacity to invest in risk and controls, customer experience
and future capabilities.
Speaker Change: In light of the global resolution and in my role as incoming CEO, we are undertaking a broad and detailed review of the bank's strategies and investment priorities to best position TD to compete over the medium and longer term.
Speaker Change: We are looking at our business mix, including profitability and risk-adjusted return on capital, and where we need to invest and divest to improve.
Everything is on the table.
As this work takes shape, I'll provide updates.
Speaker Change: and we plan to hold a bank-wide investor day in the second half of 2025 to update you on this strategic review.
AML remediation remains our top priority.
Speaker Change: We have assembled an AML team with experienced executives and specialists from across the industry.
Speaker Change: And I've been clear that my expectation is that accountability goes beyond the AML team.
Speaker Change: We've established clear accountability and alignment across all three lines of defense.
Speaker Change: starting on the front line and carrying through to risk management and audit teams, both for the U.S. and the enterprise more broadly.
Speaker Change: We are driving change and working to prevent this type of failure from happening again.
Speaker Change: We will also continue to execute against the U.S. balance sheet restructuring strategy that we outlined on October 10th.
Kelvin will share some details on our progress.
Speaker Change: For the U.S. retail segment, we will focus on client sectors where we have scale, market share and competitive advantage, with the objective of enhancing ROE over time.
Speaker Change: In Canada, we are focused on building on our momentum. This year, across our businesses, we delivered against the growth strategies outlined at our 2023 Canadian Retail Investor Day.
Speaker Change: And we believe we can do even more to deepen customer relationships across the bank.
Speaker Change: As we highlighted at our investor day, with TD's scale in Canada, we have a powerful 1TD organic opportunity.
We also have strong growth opportunities in TD Securities.
Speaker Change: We have made significant investments in capabilities to enhance our offerings and in partnership with commercial banking colleagues, we are focused on leveraging our existing deployed balance sheet to generate additional fee revenue, a highly ROE accretive strategy.
Speaker Change: Although we have significant work ahead, I am optimistic that we will rebuild confidence in the bank as we chart our future and deliver for all stakeholders.
I will now turn to our Q4 results.
Speaker Change: Overall, we are not where we want to be on profitability. However, I am pleased with the momentum and top-line results across our businesses.
demonstrating the power of our customer franchises.
Speaker Change: We had a strong quarter in Canadian personal and commercial banking, with record revenues, positive operating leverage, and robust loan and deposit growth.
Speaker Change: We built on our momentum in key businesses over the quarter.
Speaker Change: In our market-leading core deposit franchise, we delivered strong performance on checking account acquisition.
capping off a record year.
Speaker Change: In fact, this year we achieved one of the medium-term aspirations that we outlined at our 2023 Investor Day. We have grown New to Canada acquisition by 50%.
Speaker Change: As our newcomer customers settle into life in Canada, and we deepen our relationships, this becomes an important growth engine for the Canadian Personal Bank and Across TV.
Speaker Change: In real estate secure lending, we deliver year-over-year market share gains.
Speaker Change: with strong distribution and continued scaling of capabilities like TD Mortgage Direct, which is delivering conversion rates approximately three times the rate of our traditional LEED programs.
In business banking, we've seen deposit growth momentum.
Speaker Change: and TD Auto Finance delivered record originations this quarter for the fiscal year.
Now turning to the U.S. Retail Bank.
Deposits remained stable and loans grew 3% year-over-year.
and we continue to support customers across our footprint.
Speaker Change: Net income declined 13% year-over-year, driven by higher PCLs and higher expenses.
Speaker Change: I am delighted to announce that we have extended our program agreement with Nordstroms to 2039.
Speaker Change: and that upon conversion, TD will handle Nordstrom's card servicing activities in-house.
Speaker Change: This is an important strategic step for TD in our U.S. credit card business and will allow us to continue to build scale and drive profitability with simplified technical infrastructure and upgraded servicing capabilities.
Speaker Change: In addition, for the eighth year in a row, the bank ranked number one in Small Business Administration lending in its footprint, and ranked number two in SBA loans nationally.
Speaker Change: and Forbes ranked our health care team as the number one lender for health care professionals for the second consecutive year.
in Wealth Management and Insurance.
Speaker Change: We saw revenue growth driven by higher insurance premiums, asset growth, and increased trades per day.
with the Wealth Business delivering record revenue this quarter.
Speaker Change: Our insurance business was impacted by the Calgary hailstorm and Montreal floods.
A few highlights from the quarter.
Speaker Change: We launched TD ActiveTrader Live, a new weekly streaming program designed to enhance clients trading experience with in-depth analysis and insights.
Speaker Change: Since TD ActiveTraders launched in Q2, we've seen a 38% increase in new and existing ActiveTraders utilizing the platform.
Speaker Change: GD Asset Management grew market share in ETFs and now offers 48 ETFs across asset classes, geographies, and currencies.
Speaker Change: In insurance, over 40% of eligible customers now buy their insurance online from end to end, extending our digital leadership as Canada's number one direct insurer.
Speaker Change: Wholesale banking continue to demonstrate the power of the combined TD security TD Cowen franchise.
Speaker Change: with revenues of 1.8 billion in a number of firsts where the team is winning mandates together that neither legacy business would have won alone.
Speaker Change: We expect to continue to optimize the platform with the goal of improving our efficiency ratio and increasing returns.
Some highlights this quarter for TD Securities.
Speaker Change: TD Securities was joint lead on TD's secondary sale of Schwab shares.
Speaker Change: in a $2.5 billion U.S. dollar block trade, one of the ten largest U.S. block trades since 2010.
Speaker Change: C. D. Cowan's research platform continue to shine in the 2024 XDAL research surveys.
Speaker Change: In Canada, we finished in third place, increasing the number of ranked sectors from 4 in 2023 to 11 in 2024, and ranked number one in telecom and media.
Speaker Change: In the U.S. survey, T.D. Cowan's Washington Research Group was ranked number one.
Speaker Change: In addition, this quarter TD Securities was recognized in four categories at the Euromoney FX Awards.
Speaker Change: For fiscal 2025, it will be challenging to generate earnings growth as the bank navigates a transition year, continues to advance its AML remediation with investments in risk and control infrastructure and investments in its businesses.
As I mentioned, we are undertaking a broad-based strategic review.
Speaker Change: We will reassess organic opportunities and priorities, productivity and efficiency initiatives, and capital allocation alternatives.
Speaker Change: with the objective of delivering competitive returns for all our shareholders.
as a result of this.
Speaker Change: We are suspending our medium-term adjusted EPS growth ROE and operating leverage targets.
Speaker Change: Expect to provide updates on our strategic review and median term financial targets in the second half of 2025.
Speaker Change: I remain confident in the earnings growth potential of our Canadian personal and commercial banking, wealth management, insurance and wholesale banking segments.
Speaker Change: And while we expect that the U.S. balance sheet restructuring and AML remediation will impact the U.S. retail segment,
Speaker Change: We remain committed to the U.S. market and confident in the strength of our franchise.
We're going to close.
Speaker Change: I want to recognize our TD colleagues for their tremendous efforts in supporting the customers and communities impacted by the Calgary hailstorm, Montreal floods, and Hurricanes Helene and Milton.
More broadly, I want to thank all our TD colleagues.
Through a challenging year, you have demonstrated resolve and commitment.
Speaker Change: And as we look ahead, I am energized to embark on a journey to shape the future of the bank together. With that, I'll turn things over to Kelvin.
Kelvin Tran: Thank you, Ray. Good morning, everyone. Please turn to slide 9.
For 2024, earnings were $14.3 billion, down 5%.
and EPS was $7.81 down 1% year-over-year.
Overall, 2024 was a challenging year.
Kelvin Tran: Revenue grew year-over-year driven by momentum in non-markets driven businesses and higher volumes and deposit margins in Canadian personal and commercial banking.
Kelvin Tran: Expenses also increase year-over-year reflecting investments in our risk and control infrastructure, higher employee related expenses including TD Cowen,
and Higher Technology Spans Supporting Business Growth.
Kelvin Tran: Last quarter, we guided to fiscal 2024 expense growth in the high single digit.
While there were many moving parts...
Speaker Change: The variance was mainly due to the $150 million in notable items that Bharat mentioned earlier.
In addition,
Speaker Change: Occupancy costs increased this quarter by approximately $90 million reflecting timing of building exits and store renovations.
Speaker Change: We continue to prioritize our U.S. AML remediation program while working to manage expenses diligently.
Speaker Change: We expect fiscal 2025 expense growth to be in the five to seven percent range.
reflecting investments in our risk and control infrastructure.
and Investments Supporting Business Growth.
Speaker Change: including employee-related expenses, net of expected productivity, and restructuring run rate savings.
Total bank PTPP was up 2% year-over-year.
Speaker Change: Consistent with prior quarters, slide 27 shows how we calculated adjusted total bank PPP and operating leverage, removing the impact of the U.S. strategic card portfolio, along with the impact of foreign currency translation.
and the insurance fair value chart.
Please turn to slide 10.
Speaker Change: This quarter, earnings were impacted by higher investments in our risk and control infrastructure, record catastrophe claims in our insurance business, and increased impaired PCLs across our businesses.
Speaker Change: Revenue grew 12% of which 5% reflected reinsurance recoveries for catastrophe claims.
Speaker Change: The remaining increase was driven by higher fee income in our markets-driven businesses, volumes in Canadian personal and commercial banking, deposit margins, and insurance premiums.
and other operating expenses.
Speaker Change: Total bank PTPP was down 2% year over year after removing the impact of the U.S. strategic card portfolio along with the impact of foreign currency translation and the insurance fair value charge. Please turn to slide 11.
Speaker Change: Canadian personal and commercial banking delivered a strong quarter with record revenue and robust loan and deposit growth.
Average loan volumes rose 5% year-over-year.
Speaker Change: with 4% growth in personal volumes driven by real estate secured lending up 4% and cards up 9% and 6% growth in business volumes.
Speaker Change: Average deposits rose 5% year over year, reflecting 6% growth in personal deposits and 4% growth in business deposits.
Order recorder, deposit growth, outpace, loan growth.
Speaker Change: TD's large base of stable retail and commercial deposits remain the primary source of long-term funding for the bank.
Speaker Change: Their interest margin was 2.8%, down one basis point quarter over quarter as expected, primarily due to changes in balance sheet mix reflecting the transition of BAs to CORA-based loans.
Do not expect any further limb impact from this transition.
Speaker Change: As we look forward to Q1, while many factors can impact margins, including the impact of any future Bank of Canada rate cuts, competitive market dynamics, tractor on and off rates, we expect NIM to remain relatively stable.
Speaker Change: Expenses increase reflecting high technology and marketing spend supporting business growth.
The business delivered positive operating leverage again this quarter.
Please turn to slide 12.
Speaker Change: We have reduced assets from $434 billion dollars as of September 30th to approximately $431 billion dollars US as of October 31st.
Speaker Change: using proceeds from investment maturities plus cash to pay down certain short-term borrowings.
Speaker Change: Since quarter end, we have paid down an additional $14 billion U.S. of bank borrowings using mainly cash, contributing to a further reduction in U.S. assets.
Speaker Change: As a reminder, TD's two U.S. banking subsidiaries must comply with the asset limitation beginning March 31, 2025.
Speaker Change: The total asset tax is performed quarterly and is an average of the combined asset balances at the end of the current year, current quarter, sorry, and the preceding quarter.
Speaker Change: Before, we also sold approximately $2.8 billion U.S. of bonds as part of our investment portfolio repositioning, resulting in an upfront loss of $226 million U.S. pre-tax and an expected benefit of $89 million U.S. in net interest income in fiscal 2025.
Speaker Change: Since quarter end, we have sold an additional $3.3 billion U.S. of bonds, resulting in an upfront loss of approximately $236 million pre-tax U.S., and an estimated benefit of $80 million to $90 million U.S.
and that interest income in fiscal 2025.
Speaker Change: We are focused on maintaining flexibility to continue to serve our current and future customers in the markets in which we operate, while ensuring we comply with the asset limitation. Please turn to slide 13.
Speaker Change: This quarter, the U.S. Retail Bank delivered average loan volumes of 3% year-over-year and flat average deposit volumes excluding sweep deposits.
Speaker Change: Substantially all of this decrease was driven by maintaining elevated liquidity levels as a prudent risk management measure.
excluding this impact, NIM would have been relatively stable.
Speaker Change: As we look forward to Q1, while many factors can impact margins, we expect NIM to expand more modestly.
Speaker Change: driven by balance sheet restructuring actions partially offset by deposit spread compression driven by Fed rate actions and competitive market dynamics.
Speaker Change: Expenses increased 4% year-over-year, largely reflecting costs associated with the extension of our credit card program agreement with Nordstrom.
Speaker Change: Higher Legal and Regulatory Expenses, and Higher Operating Expenses Partially Offset by Ongoing Productivity Initiatives.
As a reminder,
Speaker Change: We intend to reflect U.S. governance and control costs in the U.S. retail segment effective in Q1 2025.
Speaker Change: For fiscal 2024, these expenses were largely in line with our forecast of approximately $350 million pre-tax.
What?
Please turn to slide 14.
Speaker Change: Wealth Management and Insurance delivered record revenue and strong underlying business performance this quarter.
Speaker Change: Excluding the impact of reinsurance recoveries for catastrophe claims, the year-over-year increase in revenue reflected higher insurance premiums, fee based revenue, transaction revenue, and deposit margins.
Well, we saw net asset growth across all business lines.
Speaker Change: Insurance service expenses increased 76%, of which 66% is attributable to higher-capacity claims in the bond.
Speaker Change: Meaning increase reflects less favorable prior year's claims development and increased claim severity.
Speaker Change: We saw record capacity claims of $388 million this quarter due to severe weather-related events in Calgary and Montreal in August.
Speaker Change: As you may have seen, to help support analysts and investors' analysis in our insurance business performance, we disclosed this number on November 5th.
Speaker Change: Going forward, we intend to continue this practice and provide disclosure of catastrophe claims and of reinsurance shortly after the end of the fiscal quarter.
Speaker Change: expenses were up 16% year-over-year. More than half of this increase reflected higher variable compensation with the remainder driven by higher technology and marketing spend in part related to our recent launch of TD partial shares.
Assets under management increase year-over-year, reflecting market appreciation.
Speaker Change: Assets under administration increase year over year, reflecting market appreciation and net asset growth.
Please turn to slide 15.
Also, banking continued to perform.
Speaker Change: The over-year revenue growth reflects higher lending revenue, underwriting fees, and trading-related revenue.
Speaker Change: We saw higher PCLs this quarter, reflecting a small number of impairments across various industries.
Speaker Change: Expenses increased 1% year-over-year, and the business delivered positive offering leverage this quarter. Please turn to slide 16.
Speaker Change: The net loss for corporate for the quarter was 361 million dollars. Net corporate expenses increased 323 million dollars compared to the prior year, primarily reflecting higher investments in risk and control infrastructure. Please turn to slide 17.
Speaker Change: Internal capital generation was partially offset by the increase in RWA excluding the FX impact.
Speaker Change: inclusive of risk transference transactions done in the ordinary course of managing portfolio exposures.
Speaker Change: We had a negative 35 basis point impact to CEP-1 from the operational risk RWA impact of the bank's provisions for investigations into the U.S. BSA AML program last quarter.
Speaker Change: As a reminder, consistent with the Basel III reforms, operational risk RWA impacts take effect on a one-quarter land.
We have begun our U.S. balance sheet restructuring.
Speaker Change: This resulted in an upfront loss of $234 million pre-tax or negative 4 basis points to CP1.
dot RJ, over to you.
Ray Chun: Okay, thank you Kelvin and good afternoon everyone. Please turn to slide 18.
Ray Chun: an increase of six basis points quarter over quarter driven by the Canadian and U.S. commercial and wholesale banking lending portfolios.
Ray Chun: related to a small number of borrowers across a number of industries.
Please turn to slide 19.
Ray Chun: Plus impaired loans increased 779 million or eight basis points quarter over quarter to 52 basis points.
The increase was largely recorded in
Canadian and U.S. Commercial and Wholesale Banking.
Please turn to slide 20.
Ray Chun: We call that our presentation reports PCL ratios, both gross and net, of the partner's share of the U.S. strategic card PCLs.
Ray Chun: 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.
Banks' provision for credit losses was stable quarter over quarter.
Ray Chun: For 2024, the bank's full year PCL rate was 46 basis points, up 12 basis points from the prior year.
Ray Chun: reflecting normalization of credit performance and consistent with our PCL guidance provided at the start of the year.
Please turn to slide 21.
Ray Chun: Banks' impaired PCL was $1.15 billion, an increase of $233 million quarter-over-quarter.
largely related to
Credit Migration in the Non-Retail Lending Portfolios
A performing PCL release of 44 million was recorded across
Ray Chun: the Canadian Personal and Commercial Banking and U.S. Retail segments this quarter.
Ray Chun: reflecting an improvement in the economic outlook including the impact of lower interest rates and migration from performing to impaired.
Please turn to slide 22.
Ray Chun: The allowance for credit loss is increased by $303 million quarter over quarter to $9.1 billion on 95 basis points.
Ray Chun: primarily due to higher impaired allowance in the business and government lending portfolios and a 54 million impact from foreign exchange.
Now let me briefly summarize the year.
The bank exhibited strong credit performance throughout 2024.
As credit normalization has occurred as anticipated.
Ray Chun: Looking forward, while results may vary by quarter and are subject to changes to economic conditions,
Ray Chun: We expect fiscal 2025 PCLs to be in a range of 45 to 55 basis points.
Ray Chun: As some further pressure on credit is expected to play out as we move through this credit cycle.
Speaker Change: With that operator, we are now ready to begin the Q&A session.
Thank you.
Speaker Change: We will now take questions from the telephone lines. If you have a question, please press star 1.
Speaker Change: You may cancel your question at any time by pressing star 2.
Speaker Change: So please press star 1 at this time if you have a question. There will be a brief pause while the participants register for the questions.
Speaker Change: The first question is from Gabrielle Deschain from National Bank Financial. Please go ahead. Your line is open. Good morning. Just a quick one. Like, there's a lot of moving pieces in this balance sheet optimization. I'm going back to, you know, the presentation, I think it was on Q3, whatever. And it was said you're going to dispose of $50 billion of securities, and that would generate the...
Speaker Change: nearly, you know, mid-range, $400 million U.S. benefit to NII. If I look at what you disclosed so far, I've got about $6 billion, including what happened after December 4th.
Speaker Change: And we're at around half of that, the NII benefit. What am I missing here? So you've sold a lot less than $50 billion, but you're already at half of the expected benefit.
Hi, it's Kelvin, I can take that.
Speaker Change: It's not every bonds have the same maturity and are impacted by level of rates and spread the same way. And so depending on which bonds you sell, the ones that we sold happen to have more losses up front.
Speaker Change: So it's just a matter of you know the nature of what you sold not some
Speaker Change: Weird thing that I overlook And then professional fees, I guess just to get a you did highlight or Barrett and Kelvin You both highlighted expense items like the the real estate stuff and then there's the Nordstrom costs and then professional fees And that one jumped out at me a bit. Oh, it popped up over a billion dollar billion dollars this quarter
Speaker Change: disclose already to disclose remediation costs and how much of that is kind of Call it ad-hoc and and you know is this Something that we could be bearing for a while because I think a lot of
Speaker Change: People, myself actually, are wondering about the unintended or unexpected indirect costs related to this remediation program and AMLSU because I appreciate you can.
Speaker Change: You know, isolate everything, but there's bound to be stuff that comes out of nowhere.
Speaker Change: So, if you're looking at the Outlook, the expense guidance we provided in 2025, which
Speaker Change: is an increase of 5-7%. That would be inclusive of professional fees and remediation costs.
Okay.
Thank you.
Speaker Change: This increase that I saw, it went over a billion dollars. Does that include the remediation costs and then other costs that may have not been anticipated?
Speaker Change: you know, bills or some of the BAU work because of the fact that, you know, we needed help in the short term.
Thank you for joining us. Thanks for having me.
Speaker Change: Okay, a quick one just on the securities positioning and repositioning again the losses that you're recording on disposition That's being adjusted out of earnings But then the benefit the four hundred million or so to an eye that's going to be kept in your Adjusted figure or we take? Remain in your adjusted figures that
What we're doing here
Correct, yeah. All right, thank you.
Speaker Change: Thank you. The next question is from Manny Raman from Scotiabank. Please go ahead.
Speaker Change: Good morning. A few questions on the strategic review. First off, I just want to understand when you actually began the strategic review. That would be helpful to know.
Speaker Change: Hey, it's Raymond. Let me take that. So we've started the strategic review as of last month and certainly are starting to dig into it.
Speaker Change: I think the process is going to take somewhere between 4-5 months to get through and as I outlined in my comments it will be quite comprehensive and we will look at all of the moving parts and that really is. I mean we're going to build off the fact that we do have a terrific franchise as I've looked at it but I really do believe there are opportunities to get even stronger, more competitive.
Speaker Change: And so I look forward to sharing more with you in the second half of 2025.
Speaker Change: I guess the reason I'm asking is that I was a little surprised that it wouldn't have started earlier. I mean, the bank has known about...
Speaker Change: these issues for a while. So I'm just trying to understand, maybe don't fully appreciate.
It's my opportunity.
Speaker Change: to dive deep and make sure that we're putting TD in the best position possible as we think about how we're going to compete in the medium and long term.
Speaker Change: And then, thanks for that. When you talk about everything's on the table, does that include divestitures and does that include potential divestitures in the U.S.?
Speaker Change: As I said, we're going to be a thorough, comprehensive review, and everything is on the table.
Welcome. Thank you.
Speaker Change: Thank you. The next question is from Ibrahim Poonawala from Bank of America. Please go ahead.
Good morning.
I guess maybe just following up on the...
Speaker Change: Is the shareholder's takeaway that we could have even stronger ROE medium term targets when we come out of all of this? Or is the message that there are things that you identified as not quite performing as well, which may impede your ability to achieve those prior targets? I'm just trying to figure out.
Speaker Change: and align your messaging around foundation is strong, get even stronger, does it mean that even though you've suspended these targets, our expectation should be things will be even stronger and better when you've completed this process? Is that the right take away?
Speaker Change: Another question, Ibrahim. I'd say again, let me start by saying I do have confidence.
Speaker Change: in our businesses across TD and you've seen the momentum that we've had and whether it's the Canadian Personal and Commercial Bank, Wealth Management, TD Securities and certainly we built a fantastic franchise in the US.
Speaker Change: But I think it's important that we go through this process. It's going to be a thorough process.
Speaker Change: It's a prudent thing to do, but before I comment on anything further, I look forward to sharing that with you at the Investor Day in 2025, but we're building off a position of strength.
Thank you.
that
that's all I would offer it.
Thank you.
Thank you. Thank you.
Speaker Change: Thank you. The next question is from Paul Holden from CIDC. Please go ahead.
Speaker Change: Thank you. Sorry, I might have missed a little bit of that last question, but I think it's an important one just in terms of the growth expectation for Canada. Obviously, you held a big investor day not that long ago, focusing on the growth opportunities in Canada. I want to make sure there's no message that any of that has changed. Maybe the targets end up changing a bit, but all those growth opportunities you highlighted back in 2023 are still on the table.
Speaker Change: and our Canadian business leads just comment on the progress that we've made on the Investor Day, but we're certainly tracking to those commitments. Sona, do you want to lead us off? Yeah, thanks very much, Ray, and thanks for the question. No, absolutely. We are tracking to each of the priorities we outlined at Investor Day. We've seen good growth on both sides of the balance sheet, personal deposits, you've seen 6% growth year over year.
Speaker Change: We've grew our share and term materially. We've seen good growth on the loan side with 4% year over year.
Speaker Change: So all in all, the strong quarter has led to capping off a record year this year for day-to-day checking acquisition, so really a position of strength and momentum.
Speaker Change: Maybe I can just briefly comment on the two other items that we focused on yesterday. On the credit card side, as you heard from us earlier this year, we've now crossed 8 million active credit card accounts.
Speaker Change: We have a robust and resonant partner roster, we're seeing now that translate to some strong results with our strong quarter-over-quarter loan growth on the credit card book.
Speaker Change: On the real estate secured lending, we continue to have strong multi-channel presence right throughout our proprietary channels as well as strong broker relationships.
Speaker Change: So we now have placed specialized bankers in our branches for real estate secured lending and actually as well for investing.
Speaker Change: And they work as an ecosystem between the branches and our mobile mortgage sales force. We just started that this November and we're already seeing really strong results. That ecosystem delivers.
Speaker Change: Across the board, you'll see us stay committed to the strategic pillars that we outlined at Investor Day. I'll just maybe close by saying we feel we have very strong momentum.
Speaker Change: We continue to have a sizable growth opportunity, maybe even bigger by our record acquisition in the last two years And we know how to execute and so we're very excited to deliver on the growth ahead
Speaker Change: Okay, good to hear. And then last question for me, just want to drill down on the
and Danielle. Thank you for joining us today.
Speaker Change: maybe into the strategic review. Maybe it's going invested, being invested for your future revenue growth. It would be helpful to get a sense of kind of where those additional expenses are being allocated. Thanks.
Speaker Change: Absolutely, we continue to invest in the business and that is a big part of the increase.
Speaker Change: We are on track on achieving the savings that we set out through the restructuring.
Speaker Change: as part of our forecast. But as you know, there are many, many moving parts, but that is our expected view today.
That's it for me. Thank you.
Thank you.
Speaker Change: The next question is from Darko Mijelic from RBC Capital Markets, please go ahead.
Speaker Change: provide evidence that you've sort of done what you want to do but what I don't understand is why they would ever give you permission if you have a three- and four-year monitorship on the go
Speaker Change: presumably they wouldn't be satisfied until you complete that, so why would they
next year or whatever on an early basis.
Thank you.
Bharat Masrani: This is Bharat. The main entity we have in the US is a company that owns all the banks and what we call our intermediate holding company.
Bharat Masrani: Any dividends declared from that requires a certification from the Board that we have allocated enough funds to our remediation, etc. And if we are able to certify that, then you can declare the dividend.
So there's nothing preventing the OCC from saying no.
Bharat Masrani: Well, it's hard to predict what the future would bring, but that's in the consent order. You can see in the consent order from the Fed, which is our main holding company that owns all the assets in the United States.
Speaker Change: My second question relates to the Schwab deposits. They're now down to U.S. $83 billion. And again, I just want to understand the mechanics of this program.
You know, that fell $17 billion.
Speaker Change: from last year actually from a peak of 153 billion and in my mind the way this might work is if interest rates keep going down
Speaker Change: and equity markets keep performing well these these deposits could grow and so what goes up what goes down could go out
Speaker Change: So what if that does occur? How does that work in your plan? How do you remediate if these deposits grow $17-20 billion in a year for your asset cap?
Speaker Change: Thanks for the question and I think you've summarized that well. We have seen a decline from a peak of about 155 billion dollars to the current spot.
Speaker Change: of about $83 billion in size. And when the markets run, you tend to see more of those sweep deposits get invested in the marketplace. And when there's a pause or
Speaker Change: any sort of profit-taking in the marketplace. Those sweep deposits do increase somewhat and we would see and in fact we're seeing a slight stabilization
in overall balances.
Speaker Change: As you know, when we renegotiated the agreement with Schwab, we actually provided Schwab with the flexibility.
to bring down the overall levels of deposits.
Speaker Change: down to a floor of $60 billion, and they've been executing against that. Most recently, we've seen a pause in that reduction, particularly on a spot basis in this quarter. We could expect to see some increase in the short term if there is some sort of market dislocation. The reality is we plan for that. One of the
Speaker Change: Going back to our October 10th discussion, one of the reasons why we're executing against the balance sheet restriction with so much purpose is to create the capacity to be able to comply with the asset cap. And so we'll continue to do that because deposit growth does factor into asset cap, you know, the overall asset cap calculation as well.
just to add.
Speaker Change: You know, the swap can take up, the sweep deposits can go up, but there's a cap as to how it can go. It's $30 billion above the minimum required to be held at TD.
Speaker Change: Okay, thank you for that. That's good detail. I'll recue. Thank you.
Speaker Change: Thank you. The next question is from Saurabh Movahedi from BMO Capital Markets. Please go ahead.
Saurabh Movahedi: I just wanted to clarify, as you do this strategic review,
Speaker Change: I assume you've put any capital allocation, for example, buybacks on hold. Is that the right way to think about it, Ray?
Ray Chun: I think until we go through the strategic review, at this moment, we'll look at all of the options as to how we deploy our capital, but at this moment, that would be the right way to look at it. But again, let's see how, as we work our way through the review, how we keep everybody updated along the way.
Speaker Change: And so you have, I mean you yourself are the chief operating officer now. I think a number of the business heads are on the table.
Speaker Change: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show.(Monday nights at 7pm on www.israelnationalradio.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC. Member NYSE & SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-financial.com.
Speaker Change: What are they doing as far as the base business? What is Tim Mugen doing as far as TD Securities is concerned? Is he in a holding pattern or if they want to deploy capital they are allowed to do that in advance of the strategic review being done?
Speaker Change: Hey Saurabh, it's Tim Wiggin calling and thanks for the question. We are absolutely not in a holding pattern if you look at the quarter we've reported.
Speaker Change: and the year as a whole, you're truly seeing the power of the combined wholesale franchise.
Speaker Change: I think it's important to note that, as you're aware, this transaction and our combination is within two years, so closing March 1st.
So, in my view, we're well ahead of schedule.
Speaker Change: in terms of leveraging the existing client base or existing capital with the combined platform.
Speaker Change: To put things in perspective and make this tangible, just last month our continuing membership agreement with FINRA was approved and I mention that because in some cases we're literally bringing people together on the same trading floor and that's happening over the next couple of weeks.
Speaker Change: But if we take a step back and maybe to provide you a bit of color and context in terms of how far we've come.
Speaker Change: The fiscal year as a whole was $7.3 billion in revenue, up 25%. The adjusted number, as you know, was $1.4 billion in NIAT. If you add back the off-channel communication...
which was obviously industry-wide. We came in at $1.5 billion.
So roughly $380 million per quarter.
Speaker Change: that you would have heard us talk about previously. So again, we have strong revenue, we have the right clients, we're adding capabilities to the equation and that obviously takes the ROE up.
Speaker Change: which is a continued focus within Wholesale as well as across the bank. So, very pleased with where we are and absolutely growing, executing and frankly winning.
Speaker Change: Douglas Goldstein, financial planner & investment advisor, interviewed Bambawale on Arutz Sheva
Thank you very much.
Speaker Change: People are always our primary concern in any business I've been involved in and they've always been capital markets I've continually said that you can have you know, the best capabilities and the best platforms the best technology
Speaker Change: But we need people and I believe we will have and continue to have a team of people That will allow us to execute and frankly when we're through this TD and TD Securities will be a destination of choice for professionals in the markets that we operate in
I appreciate you taking my questions. Thank you.
Speaker Change: Thank you. The next question is from Darko Mielic from RBC Capital Markets. Please go ahead.
Darko Mielic: Hey, thank you. All right, my last question is for is for Leo. Leo, can you give me a sense of how I should expect
Your non-interest income?
Darko Mielic: to behave over the course of the next year. It's been under pressure. If you can just give me any sort of a view on that, that would be helpful. Thank you.
Speaker Change: I think in a previous quarter we talked a little bit about the fact that we had
a significant drag force, cumulatively.
Speaker Change: between both retail and small business overdraft fee reduction that was nearly a half a billion dollar reduction in terms of overall annual revenues and that has now fully cycled through
Speaker Change: Account fees in particular to grow in proportion to the growth.
Speaker Change: that we're experiencing in the business. So I feel good about that. Obviously, there are some things that we watch on a regular basis, regulatory changes. There are presently a number of fee cap proposals in the marketplace right now under litigation. And we do have an administration change. So there's a lot of intangibles and a lot of questions that are still out there with regards to how that might impact the future. But in terms of our core, what we can control,
Speaker Change: which is driving good solid retail deposit growth and continue to grow our bank card business which by the way grew at 13% on a year-on-year basis in the quarter. I feel like we're doing the fundamentals and that we should see non-interest income growth return back to a more stabilized growth profile.
Okay, great. That's helpful. Thank you. Happy holidays, everyone.
Speaker Change: Thank you. There are no further questions registered at this time. I will now turn the call back to Mr. Masrani.
Bharat Masrani: Thank you very much, operator, and great, great questions, great to see that the fundamentals of our businesses, particularly the momentum we have in each of our segments, is terrific. We do have headwinds, as we discussed, but good to see that there is good momentum in each of our operating businesses.
Bharat Masrani: Before we close, I'd like to recognize Riaz Ahmed, who will retire at the end of January.
Bharat Masrani: His impact on our business will be felt for years to come. I want to extend my personal thanks to Riaz for his close partnership and invaluable counsel over many years. I wish him the very best in his next exciting chapter.
Bharat Masrani: Like I said earlier, while 2024 was a difficult year, TD remains a strong bank with tremendous advantages.
Bharat Masrani: In the weeks and months ahead as Ray takes the reins, I know he, with the support of a strong bench of leaders, will successfully chart the path forward for TD. Thank you and best wishes for the holidays.
Thank you very much.
Speaker Change: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.