Q1 2025 Toronto-Dominion Bank Earnings Call
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Operator: All participants, please stand by your conference is now ready to begin. Good morning, everyone, and welcome to the TD Bank Group Q1 2025 earnings conference call.
All participants please standby your conference is now ready to begin <unk>.
Speaker Change: Good morning, everyone and welcome to the TD Bank Group Q1, 2025 earnings Conference call.
Brooke Hales: I would now like to turn the meeting over to Ms. Brooke Hales, Head of Investor Relations.
Speaker Change: I would now like to turn the meeting over to MS. Brooks Hills head of Investor Relations. Please go ahead Michelle.
Brooke Hales: Please go ahead, Ms. Hales. Thank you, operator. Good morning, and welcome to TD Bank Group's first quarter 2025 results presentation.
Speaker Change: Thank you operator, good morning, and welcome to TD Bank group's first quarter 2025 results presentation. We will begin today's presentation with remarks from Raymond <unk> the bank's CEO.
Raymond Chun: We will begin today's presentation with remarks from Raymond Chun, the bank CEO, followed by Leo Salom, President and CEO, TD Bank, America's most convenient bank, after which Kelvin Tran, the bank CFO, will present our first quarter operating results.
Speaker Change: Hello, I'm, President and CEO TD Bank America's most convenient bank after which Calvin Tran the bank's CFO will present, our first quarter operating results.
Ajai Bambawale: 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.
Wiley: Wiley Chief Risk Officer will then offer comments on credit quality after which we will invite questions from prequalified analysts and investors on the phone.
Raymond Chun: Also present today to answer your questions are Sona Mehta, Group Head, Canadian Personal Banking, Barbara Hooper, Group Head, Canadian Business Banking, Tim Wiggan, Group Head, Wholesale Banking and President and CEO, TD Securities, and Paul 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-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: Also present today to answer your questions are so new meter group head Canadian personal banking.
Hooper: Hooper group head Canadian business banking.
Tim Wigan: Tim Wigan group had wholesale banking I'm, President and CEO TD Securities and Paul Clark Senior Executive Vice President wealth management, 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 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.
Speaker Change: Was it better understanding of how management views the bank's performance Ray Leo and Calvin will be referring to adjusted results in their remarks.
Raymond Chun: Ray, Leo, and Kelvin will be referring to adjusted results in their remarks.
Raymond Chun: Additional information about non-GAAP measures and material factors and assumptions is available in our Q125 report to shareholders.
Speaker Change: Additional information about non-GAAP measures and material factors and assumptions is available in our Q1 'twenty five report to shareholders with that let me turn the presentation over to Ray.
Raymond Chun: With that, let me turn the presentation over to Ray. Thank you, Brooke, and good morning, everyone. Before we discuss the quarter, I want to briefly comment on the current environment. There's no doubt that tariff and trade risks are clouding the economic outlook. Should these risks materialize, a lot depends on their depth and duration. and on the actions governments may take to support Canadians and Canadian businesses. First and foremost, whatever ultimately happens, we are focused on our customers and clients. We will continue to support the millions of businesses and households across Canada and the United States as they navigate uncertainty and new dynamics.
Ray: Thank you Brook and good morning, everyone.
Ray: Before we discuss the quarter I want to briefly comment on the current environment. There is no doubt the tariff and trade risks are clouding the economic outlook.
Ray: These risks materialize.
Ray: A lot depends on their depth and duration.
The actions governments may take to support Canadians and Canadian businesses.
Ray: First and foremost whatever ultimately happens we are focused on our customers and clients. We will continue to support the millions of businesses and households across Canada, and the United States as they navigate uncertainty and new dynamics.
Raymond Chun: Next, we are modeling multiple scenarios, including potential impacts on provision. The bank is well capitalized, with a strong balance sheet, a resilient business model, and conservative risk appetite, all of which provide us with the ability to steer through unknowns and shifts in the macroeconomic environment.
Ray: We are modeling multiple scenarios, including potential impacts on provisions.
Ray: <unk> is well capitalized with a strong balance sheet, a resilient business model and conservative risk appetite all of which provide us with the ability to steer through unknowns and shifts in the macroeconomic environment.
Raymond Chun: The current situation is also a clear signal that Canadian governments and businesses must pull together, remove the obstacles that hold back national productivity, and strengthen our competitiveness. Interprovincial trade barriers are something we must tackle. Accelerating critical projects to untap mineral, energy, and resource production and leadership is another key focus area. We also need to evaluate tax, regulatory and other policies to retain talent, create the right conditions for businesses to grow, and make Canada a top destination for foreign investors. I believe Canada has an opportunity to build on its strength and create the right conditions for our economies to thrive in the future.
Ray: The current situation is also a clear signal that Canadian governments and businesses must pull together.
Speaker Change: The obstacles that hold back national productivity and strengthen our competitiveness.
Ray: Interprovincial trade barriers are something we must tackle.
Ray: Accelerating critical projects to Untap mineral energy and resource production and leadership is another key focus area.
Ray: We also need to evaluate tax regulatory and other policies to retain talent create the right conditions for businesses to grow.
Ray: And Mccann is a top destination for foreign investment.
Ray: I believe Canada has an opportunity to build on our strengths and create the right conditions for our economies to thrive in the future with that let's turn to the next slide.
Raymond Chun: With that, let's turn to the next slide.
Raymond Chun: I'd like to start with an update on our strategic review. As we discussed, we are undertaking a comprehensive strategic review at the bank. This will culminate in an investor day in the second half of 2025, but we will provide updates along the way. Strategic review is organized around four pillars, and we are making steady progress in each. Earlier this month, we sold TD's entire 10.1% stake in Schwab to pursue compelling opportunities to invest in our own business. both by buying back TD shares and by seizing opportunities to further support our customers, drive performance, and accelerate organic growth.
Ray: I'd like to start with an update on our strategic review as we discussed we are undertaking a comprehensive strategic review at the bank. This will culminate in an investor day in the second half of 2025, but we will provide updates along the way.
Ray: The strategic review is organized around four pillars, and we are making steady progress in each.
Ray: Earlier this month, we sold Td's entire 10, 1% stake in schwab to pursue compelling opportunities to invest in our own business.
Ray: By buying back TD shares and by seizing opportunities to further support our customers drive performance and accelerate organic growth.
Raymond Chun: And on Monday, we announced that the share buyback received regulatory approval to start on March 3rd. We also gave more authority and accountability to our lines of business for the end-to-end customer experience, streamlining TD's operating model.
Ray: And on Monday, we announced that the share buyback received regulatory approval to start on March 3rd.
Ray: We also gave more authority and accountability to our lines of business for the end to end customer experience streamlining Td's operating model.
Leo Salom: In a few minutes, you will hear from Leo on our U.S. balance sheet restructuring. We are making great progress and are on track to complete the program along our previously communicated timeline.
Ray: In a few minutes you will hear from Leo on our U S balance sheet restructuring, we are making great progress and are on track to complete the program along our previously communicated timeline.
Leo Salom: Leo will also provide an update on our AML remediation. Finally, we are focused on operational excellence and on driving efficiency. AML is our number one priority, and we will continue to invest. To accelerate momentum across our businesses, we will also need to make strategic investments. We are identifying significant opportunities to restructure operations, reduce costs, and improve processes.
Ray: Leo will also provide an update on our AML remediation.
Ray: Finally, we are focused on operational excellence and on driving efficiency AML is our number one priority and we will continue to invest to accelerate momentum across our businesses. We will also need to make strategic investments, we are identifying significant opportunities to restructure operations.
Ray: <unk> reduced costs and improved <unk> and improved processes. Please turn to slide four.
Raymond Chun: Please turn to slide four. In Q1, the bank delivered earnings of $3.6 billion and EPS of $2.02. We saw volume growth in Canadian personal and commercial banking and strong trading and fee income in our markets-driven businesses.
Ray: In Q1, the bank delivered earnings of $3 6 billion and EPS of $2 and two since we.
Ray: We saw volumes volume growth in Canadian personal and commercial banking and strong trading and fee income in our markets driven businesses.
Raymond Chun: As you will hear from Ajai shortly, Q1 PCLs reflect certain overlays for policy and trade uncertainty. and Kelvin will speak more about expense growth in his remarks.
Ray: As you will hear from RJ shortly Q1, <unk> reflect certain overlays for policy and trade uncertainty.
Calvin Tran: In Calvin will speak more about expense growth in his remarks expenses. This quarter include the impact of TD shares issued to eligible nonexecutive colleagues in December to show our appreciation for their hard work and commitment to the bank in a challenging year.
Raymond Chun: Expenses this quarter include the impact of TD shares issued to eligible, non-executive colleagues in December to show our appreciation for their hard work and commitment to the bank in a challenging year. As of quarter end, the bank CET1 ratio was 13.1%.
Calvin Tran: As of quarter end the bank CET, one ratio was 13, 1%.
Raymond Chun: ...forma for the sale of our Schwab stake earlier this month and the completion of the proposed 8 billion share buyback TDC to one ratio would be approximately 14.2%. TD is very well capitalized with the flexibility to complete a significant share buyback while investing to drive organic growth and maintaining prudent capital levels.
Pro forma for the sale of our Schwab stake earlier this month and the completion of the proposed 8 billion share buyback T. D. C. At tier one ratio would be approximately 14, 2%.
TD is very well capitalized with a flexibility to complete a significant share buyback, while investing to drive organic growth and maintaining prudent capital levels. Please turn to slide five.
Raymond Chun: Please turn to slide 5. As I travel across our footprint and meet with colleagues, I am struck by their tremendous pride in TD. We have strong momentum across our businesses and that was evident in our Q1 results.
Calvin Tran: As I traveled across our footprint and meet with colleagues I am struck by their tremendous pride in T D.
Calvin Tran: We have strong momentum across our businesses and that was evident in our Q1 results.
Raymond Chun: We operate Canada's premier banking franchise and are very proud that TD was once again named Canada's most valuable brand by Brand Finance. and Canadian personal and commercial banking.
Calvin Tran: We operate Canada's Premier banking franchise and are very proud that TD was once again named Canada's most valuable brand by brand finance.
Calvin Tran: In Canadian personal and commercial banking.
Raymond Chun: We introduce Resil Specialist in-branch to enhance our proprietary distribution strategy. The distribution ecosystem deepens customer relationships and improves retention while delivering a strong, profitable profile. And in credit cards, the team delivered a record quarter in active accounts and cardholder spend. TD Auto Finance saw record originations in Q1 and added dozens of new dealer floor plan relationships.
Calvin Tran: We introduce Russell specialists in branch to enhance our proprietary distribution strategy.
Calvin Tran: The distribution ecosystem deepens customer relationships and improves retention, while delivering a strong profitable profile.
Calvin Tran: And in credit cards, the team delivered a record quarter in active accounts and cardholder spend.
Calvin Tran: TD auto finance saw record originations in Q1 and added dozens of new dealer floorplan relationships.
Raymond Chun: Turning to U.S. retail. AML remediation remains our number one priority. We have seen good customer momentum with five consecutive quarters of customer deposit growth. We're also seeing momentum in our U.S. wealth business with total client assets of $52 billion U.S. dollars up 11% year over year. As you know, our IDA with Schwab remains unchanged. We are pleased with the current arrangement and confident that we can manage the Schwab balances while complying with the asset limitation.
Calvin Tran: Turning to U S retail.
Calvin Tran: AML remediation remains our number one priority.
Calvin Tran: We have seen good customer momentum with five consecutive quarters of customer deposit growth.
Calvin Tran: We're also seeing momentum in our U S wealth business with total client assets of 52 billion U S dollars up 11% year over year.
Calvin Tran: As you know our idea with Schwab remains unchanged. We are pleased with the current arrangement and confident that we can manage the schwab balances, while complying with the asset limitation.
Raymond Chun: Wealth Management and Insurance at a Strong Quarter.
Calvin Tran: Wealth management and insurance had a strong quarter.
Raymond Chun: Let me start by congratulating the direct investing team.
Calvin Tran: Let me start by congratulating congratulating the direct investing team.
Raymond Chun: For the third year in a row, we were named the number one digital broker in Canada by the Globe and Mail, a fantastic accomplishment that further extends our leadership in this critical category. Last year TD introduced partial shares capability, unique among Canadian banks, and a big hit with young investors. Just over 50% of our clients that have traded partial shares are Gen Z and Millennials.
Calvin Tran: For the third year in a row, we were named the number one digital broker in Canada, while the globe and mail a fantastic accomplishment that further extends our leadership in this critical category.
Calvin Tran: Last year TD introduced partial shares capability unique among Canadian banks in a big hit with young investors.
Calvin Tran: Just over 50% of our clients that have traded partial shares our gen Z and millennials.
Raymond Chun: and TD Asset Management. We won $3.2 billion in new institutional mandates this quarter. Our strong performance was recognized with 24 Fund Grade A-plus awards, including 15 for ETFs. a testament to our momentum in this rapidly growing segment of the market.
Calvin Tran: And TD asset management, we won $3 2 billion in new institutional mandates. This quarter. Our strong performance was recognized with 24 fun grade eight plus awards, including 15 for Etfs.
Calvin Tran: Testament to our momentum in this rapidly growing segment of the market.
Raymond Chun: Finally, in TD Insurance, we became the first Canadian issuer to sponsor a catastrophe bond solely focused on catastrophe perils in Canada. This 150 million issuance is an example of our One TD strategy, with TD Securities acting as joint book runner on this place. Through the CAP bond issuance, TD Insurance leveraged capital markets to manage risk exposure and support resilience against natural disasters.
Calvin Tran: Finally in TD insurance, we became the first Canadian issuer to sponsor a catastrophe bond solely focused on catastrophe perils in Canada.
Calvin Tran: This 150 million issuance as an example of our one TD strategy with TD Securities acting as joint book runner on displacement.
Calvin Tran: Through the cat bond issuance TD insurance leverage capital markets to manage the risk exposure and support resilience against natural disasters.
Raymond Chun: In wholesale banking, we continue to demonstrate the power of our broader platform with quarterly revenue over $2 billion for the first time.
Calvin Tran: In wholesale banking, we continued to demonstrate the power of our broader platform with quarterly revenue over $2 billion for the first time.
Raymond Chun: PSAT, TD's leading U.S. municipal bond trading dealer, expanded into a new asset class and is now trading U.S. investment-grade corporate bonds.
Calvin Tran: VSAT Td's, leading U S municipal bond trading dealer expanded into a new asset class and is now trading U S investment grade corporate bonds.
Raymond Chun: C.D. Cowan was recently named IFR's 2024 U.S. Mid-Market Equity House of the Year, an award given to the leading underwriter of U.S. equity offerings between $50 and $500 million U.S.
Calvin Tran: PD Cowen was recently named <unk> 'twenty 'twenty four U S mid market equity house of the year.
Calvin Tran: An award given to the leading underwriter of U S equity offerings between $50 and 500 million U S dollars.
Raymond Chun: And after quarter end, TD Securities acted as lead book runner on TD's sale of its Schwab stake.
And after quarter end TD Securities acted as lead book runner on TD sale of its schwab stake.
Raymond Chun: This critical role in a milestone transaction is already opening new opportunities for a wholesale banking business. Across our Canadian personal and commercial banking and wealth management insurance segments, we continue to make progress against the medium term financial targets that we laid out at our 2023 Investor Day. Slides 29 and 30 in the appendix provide an update on our progress.
Calvin Tran: This critical role in a milestone transaction is already opening new opportunities for our wholesale banking business.
Calvin Tran: Across our Canadian personal and commercial banking and wealth management insurance segments, we continue to make progress against our medium term financial targets that we laid out at our 2023 Investor day slides 29, and 30 in the appendix provide an update on our progress please turn to slide six.
Raymond Chun: Please turn to slide 6. Digital leadership is a critical component of both customer experience and business performance, and it's an area of focus and investment in our strategic review. TD Invent is our bank-wide umbrella effort to power innovation. Last year, we deployed a Genitive AI virtual assistant in our contact centers supporting the Canadian Personal Bank. We have seen reductions in called hold times, escalations to second level support, driving efficiency while enhancing the customer experience.
Calvin Tran: Digital leadership is a critical component of both customer experience and business performance and it's an area of focus and investment in our strategic review.
Calvin Tran: TD invent is our bank wide umbrella effort to power innovation.
Last year, we deployed a generative AI virtual assistant in our contact centers supporting the Canadian personal bank, we have seen reductions in called hold times Escalations, the second level support driving efficiency, while enhancing the customer experience.
Raymond Chun: We are now rolling out this Gen AI virtual assistant to our contact center supporting our wealth and insurance business. We are determined to keep innovating, elevating the experience, and driving growth through digital leadership.
Calvin Tran: We are now rolling out this journey I virtual assistant to our contact center supporting our wealth and insurance businesses.
Calvin Tran: We are determined to keep innovating elevating the experience and driving growth through digital leadership, Please turn to slide seven.
Raymond Chun: Please turn to slide seven.
Raymond Chun: Before I turn the call over to Leo, I want to note that we will release our 2024 Sustainable Report soon. It will outline our progress and our commitment to our clients as they adapt their businesses and seize new opportunities.
Calvin Tran: Before I turn the call over to Leo I want to note that we will realize released our 2020 for sustainable reports soon.
Calvin Tran: It will outline our progress and our commitment to our clients as they adapt their businesses and seize new opportunities.
Raymond Chun: Let me conclude with a quick comment. I've been CEO for just under a month. The strategic review is advancing as planned. We will continue to drive change and unlock new opportunities. What remains constant is the commitment of our colleagues.
Calvin Tran: Let me conclude with a quick comment.
Calvin Tran: I've been CEO for just under a month the strategic review is advancing as planned we will continue to drive change and unlock new opportunities.
Calvin Tran: What remains constant is the commitment of our colleagues.
Leo Salom: I want to thank them for their tremendous effort as together we build the bank for the future with that, Leo, over to you. Thank you, Ray. And good morning, everyone.
Calvin Tran: I want to thank them for their tremendous effort as together, we build the bank for the future with that over to you.
Calvin Tran: Thank you Ray and good morning, everyone. Please turn to slide eight U S. AML remediation as we've said previously remains our top priority and I'm pleased with the progress that we've made over the past quarter were moving forward with focus and purpose and we continue to bring additional AML specialists with proven experience onto our team.
Leo Salom: Please turn to slide eight. U.S. AML remediation, as we've said previously, remains our top priority, and I'm pleased with the progress that we've made over the past quarter. We're moving forward with focus and purpose, and we continue to bring additional AML specialists with proven experience onto our team, and together with the exceptional team that we've already built, we're building the capabilities we need for the future.
Calvin Tran: And together with the exceptional team that we've already built we're building the capabilities we need for the feature an important component of our resolutions with the appointment of a monitor the Doj and Vincent have jointly selected guidepost solutions as we look forward to working with them to strengthen and enhance our U S.
Leo Salom: An important component of our resolutions was the appointment of a monitor. The DOJ and FinCEN have jointly selected guidepost solutions, as we look forward to working with them to strengthen and enhance our U.S. BSA AML compliance program. Operationally, we are making progress on the technology slide, including centralizing all investigative cases onto a new single case management system. We will also be implementing enhancements for transaction monitoring, including adding a further round of scenarios in upcoming quarters. We have designed machine learning tools to help analyze customer data more effectively to detect potential activity of interest with speed.
Calvin Tran: BSA AML compliance program.
Calvin Tran: Operationally, we are making progress on the technology slide.
Calvin Tran: Including centralizing all investigative cases onto a new single case management system.
Calvin Tran: We will also be implementing enhancements for transaction monitoring, including adding a further round of scenarios in upcoming quarters.
Calvin Tran: We have designed machine learning tools to help analyze customer data more effectively to detect potential activity of interest with speed. We expect to begin implementing these capabilities in Q3.
Leo Salom: We expect to begin implementing these capabilities in Q3. Collectively, building these capabilities will enable us to detect, escalate, and report potential activity of interest earlier and more effectively. We remain focused on completing the remediation actions as outlined.
Calvin Tran: Collectively building these capabilities will enable us to detect escalate and report potential activity or interest earlier and more effectively we remained focused on completing the remediation actions as outlined there is still much to do and this is a multiyear process, but we remain unwavering in our commitment to <unk>.
Leo Salom: There's still much to do, and this is a multi-year process, but we remain unwavering in our commitment to build the AML program we need, and we will continue to provide updates on a quarterly basis. Now, if I can ask everyone to please turn to page 9.
Calvin Tran: <unk> program, we need and we will continue to provide updates on a quarterly basis now if I can ask everyone to please turn to page nine.
Leo Salom: I'd also like to provide an update on our balance sheet restructuring activity. You will recall this effort has two critical objectives. First, to strictly comply with and maintain a buffer to the asset cap limitation. Second, to ensure that we can continue to serve our clients and communities as their needs evolve. We have made meaningful progress against our objectives. Most notably, we have reduced assets from U.S. dollar $434 billion in September to approximately $402 billion in January, due largely to the reduction of borrowings using excess cash and investment maturity. Our asset reduction is proceeding on track as well.
Calvin Tran: I'd also like to provide an update on our balance sheet restructuring activities. You will recall the separate has two critical objectives first to strictly comply with and maintain a buffer to the asset cap limitation and second to ensure that we can continue to serve our clients and communities as their needs evolve.
Calvin Tran: <unk>.
Calvin Tran: We have made meaningful progress against our objectives, most notably we have reduced assets from U S. Dollar $434 billion in September to approximately $402 billion in.
Calvin Tran: In January due largely to the reduction of borrowings using excess cash and investment maturities.
Calvin Tran: Our asset reduction is proceeding on track as well. This week, we signed an agreement to sell 9 billion corresponding lending portfolio and we do expect that transaction to close in Q2.
Leo Salom: This week, we signed an agreement to sell $9 billion corresponding lending portfolio. And we do expect that transaction to close in Q2. Our investment portfolio reposition is also proceeding well. To date, we have sold approximately $19 billion of notional bonds for an upfront loss of $1.1 billion pre-tax. In total, the investment portfolio repositioning is expected to generate an NII benefit in fiscal 2025 at the upper end of the $300 to $500 million pre-tax estimated range that we provided in October. I feel confident that we will complete the investment portfolio repositioning in the upcoming months and largely complete the identified loan sales by the end of the fiscal year.
Calvin Tran: Our investment portfolio reposition is also proceeding well to date, we have sold approximately $19 billion of notional bonds for an upfront loss of $1 $1 billion pre tax in total the investment portfolio repositioning is expected to generate an NII benefit in fiscal.
Calvin Tran: 2025 at the upper end of the $300 million to $500 million pre tax estimated range that we provided in October.
Calvin Tran: Confident that we will complete the investment portfolio repositioning in the upcoming months and largely complete the identified loan sales by the end of the fiscal year and we are assessing further portfolios with lower returns that are not scalable for potential sale or wind down as part of the broader strategic.
Leo Salom: And we are assessing further portfolios with lower returns that are not scalable for potential sale or wind down as part of the broader strategic review that Ray referenced. Collectively, we expect these actions will enable us to improve return on equity through Fiscal 2025 and into Fiscal 2026.
Ray: Review that Ray referenced.
Ray: Collectively we expect these actions will enable us to improve return on equity through fiscal 2025 and into fiscal 2026.
Kelvin Tran: With that, I'll turn it over now to Kelvin. Thank you, Leo. Please turn to slide 10. Earnings were relatively flat year-over-year, reflecting higher revenues offset by higher expenses. in Governance and Controlled Investments, and Hire PCL. The total bank PTPP was up 6% year-over-year after removing the impact of the U.S. Strategic Card Portfolio, AFFACS, and Insurance Service Expenditure. Revenue grew 9% year over year driven by higher trading related Income in our markets-driven businesses. Media & Personal & Commercial Banking, and Insurance. Expenses increase 12% year-over-year driven by... with approximately one-third of the growth driven by variable compensation commensurate with higher revenues and foreign We continue to expect fiscal 2025 expense growth.
Kelvin: With that I'll turn it over now to Kelvin.
Kelvin: Thank you Leo please turn to slide 10.
Speaker Change: Earnings were relatively flat year over year, reflecting higher revenues offset by higher expenses, including governance and control investments and higher PCL.
Speaker Change: Total bank <unk> was up 6% year over year after removing the impact of the U S strategic card portfolio.
Speaker Change: <unk> and.
Speaker Change: Insurance service expenses.
Speaker Change: Revenue grew 9% year over year, driven by higher trading related.
Speaker Change: Fee income in our markets driven business says.
Speaker Change: Volumes in Canadian personal and commercial banking and insurance premiums.
Speaker Change: Expenses increased 12% year over year driven by.
Speaker Change: With approximately one third of the growth driven by variable compensation commensurate with higher revenues and foreign exchange.
Speaker Change: We continue to expect fiscal 2025 expense growth.
Kelvin Tran: assuming fiscal 2024 levels of variable compensation, FX. The U.S. strategic cards portfolio to be in the 5 to 7 percent.
Speaker Change: Assuming fiscal 2024 levels of variable compensation, FX and the U S strategic cards portfolio to be in the 5% to 7% range.
Kelvin Tran: However, given the ramp up in our governance and control investments over the course of fiscal 2024, we expect elevated year-over-year expense growth.
Speaker Change: However, given the ramp up in our governance and control investments over the course of fiscal 2024, we expect elevated year over year expense growth in Q2.
Kelvin Tran: We have provided slide 27 in the appendix to today's presentation to help stakeholders better understand TD's expense growth profile.
We have provided slide 27.
Speaker Change: The appendix to today's presentation to help stakeholders better understand td's expense growth profile. Please turn to slide 11.
Kelvin Tran: Please turn to slide 27. Canadian personal and commercial banking delivered record revenue. Deposits and Loans Average loan volumes rose 4% year-over-year, with 4% growth in personal volumes reflecting real estate secured lending up 3% and cards up 9%. and 6% growth in business volume. Resol, we saw the uptick in customer activity that began late in Q4 carry into Q1. driven by lower interest rates with the tariff uncertainty emerging only later.
Speaker Change: Canadian personal and commercial banking delivered record revenue <unk>.
Speaker Change: TTP deposits and loans.
Speaker Change: Average loan volumes rose, 4% year over year with 4% growth in personal volumes, reflecting real estate secured lending up 3% and cards up 9% and 6%.
Speaker Change: Growth in business volumes.
Speaker Change: Russell, we saw the uptick in customer activity that began late in Q4 carried into Q1.
Speaker Change: Driven by lower interest rates with the tariff uncertainty emerging only late in Q1.
Kelvin Tran: Marshall Banking. Demand was strong in Q1, but customers are now pivoting to a wait-and-see approach. Average deposits rose 5% year over year, reflecting 4% growth in personal deposits and 7% growth in business. As a personal bank, we saw good growth in non-term deposits. monitoring growth in term deposits as customers value liquidity in the current environment.
Speaker Change: In commercial banking.
Speaker Change: Demand was strong in Q1, but customers are now pivoting to a wait and see approach.
Speaker Change: Average deposits rose, 5% year over year, reflecting 4% growth in personal deposits and 7% growth in business deposits.
Speaker Change: And the personal bank, we saw good growth in <unk>.
Speaker Change: Non term deposits and moderating growth in term deposits as customers valued liquidity in the current environment.
Kelvin Tran: This next shift was margin. Net interest margin was 2.81%, up one basis point quarter to quarter, primarily driven by changes to balance. As we look forward to Q2, while many factors can impact margins, including the impact of a further Bank of Canada rate cut. Competitive Market Dynamics and Deposit Reinvestment Rates and Retrieve Profiles, we expect NIM to be relatively stable. expenses increased reflecting higher technology spend.
Speaker Change: This mix shift was margin accretive.
Speaker Change: Net interest margin was 281% up one basis point quarter over quarter, primarily driven by changes to balance sheet mix.
Speaker Change: As we look forward to Q2, while many factors can impact margin, including the impact of a further bank of Canada rate cuts.
Speaker Change: Competitive market dynamics and deposit reinvestment rates and maturity profiles, we expect NIM to be relatively stable.
Speaker Change: Expenses increased reflecting higher technology spend.
Kelvin Tran: impact of TD shares issued to eligible employees and various other operating Please turn to slide 12. U.S. retail delivered business momentum while executing against our balance sheet restructuring program. Loans grew 1% year-over-year or 3%, excluding the impact of the loan portfolios identified for sale or runoff. Bank card balances grew 12% year-over-year. Small business and middle market verticals both grew 7% year-over-year. While our business clients generally foresee potential investment opportunities, many are proceeding with caution given uncertainty around tariffs and long-term rates. Net interest margin was 2.86%, up 9 basis points quarter over quarter, reflecting the impact of the U.S.
Speaker Change: The impact of TD shares issued to eligible employees and various other operating expenses.
Speaker Change: Please turn to slide 12.
Speaker Change: U S retail delivered business momentum, while executing against our balance sheet restructuring program.
Speaker Change: Loans grew 1% year over year or 3%, excluding the impact of the loan portfolios identified for sale or run off.
Speaker Change: Bank card balances grew 12% year over year, and the small business and middle market verticals, both grew 7% year over year.
Speaker Change: While our business clients generally foresee potential investment opportunities many are proceeding with caution given uncertainty around tariffs and long term rates.
Speaker Change: Net interest margin was 286% up nine basis points quarter over quarter, reflecting the impact of the U S balance sheet restructuring activities and normalization of liquidity levels, which positively impacted NIM by five basis points, partially offset by lower deposit.
Kelvin Tran: balance sheet restructuring activities and normalization of liquidity levels, which positively impacted NIM by 5 basis points. partially offset by lower deposit As we look forward to Q2, we expect NIM to deliver substantial expansion benefiting from ongoing balance sheet restructuring activities and further normalization of our elevated liquidity levels.
Speaker Change: Margin.
Speaker Change: As we look forward to Q2, we expect NIM to deliver a substantial expansion benefiting from ongoing balance sheet restructuring activities and further normalization of our elevated liquidity levels.
Kelvin Tran: Expenses increased 11% year-over-year, reflecting higher governance and control investments, including costs of $86 million for U.S. BSA AML remediation and higher operating As a reminder, effective this quarter, certain U.S. governance and control investments, including costs for U.S. BSA AML remediation, previously reported in the corporate segment are now reported in the U.S. We have reclassified prior periods to conform. Governance and control investments were higher this quarter compared to the first quarter last year as remediation efforts progressed over this period. We expect this year-over-year trend to continue into the second quarter. We continue to expect U.S. DSA AML remediation and related governance and control investments of approximately $500 million U.S.
Speaker Change: Expenses increased 11% year over year, reflecting higher governance and control investments, including cost of $86 million U S for U S BSA AML remediation and higher operating expenses.
Speaker Change: As a reminder, effective this quarter certain U S governance and control investments, including costs for U S. BSA AML remediation previously reported in the corporate segment are now reported in the U S retail segment.
Speaker Change: We have reclassified prior periods to conform with this approach.
Speaker Change: Governance and control investments were higher this quarter compared to the first quarter last year as remediation efforts progressed over this period.
Speaker Change: We expect this year over year trend to continue into the second quarter.
Speaker Change: We continue to expect U S BSA, AML remediation and related governance and control investments of approximately $500 million U S pre tax in fiscal 2025.
Kelvin Tran: pre-tax in fiscal 2020.
Kelvin Tran: Please turn to slide 13. Wealth Management delivered record revenue, earnings, and assets. New accounts were up 30% year-over-year, with new accounts up 44% in direct investing as the business continued to grow.
Speaker Change: Please turn to slide 13.
Speaker Change: Wealth management delivered record revenue earnings and assets.
Speaker Change: New accounts were up 30% year over year with new accounts up 44% in direct investing as the business continue to compete and win in a competitive market.
Kelvin Tran: win in the competitive market. Insurance delivered gross written premium growth of 13% year-over-year with our marketing efforts yielding leading brand awareness in a crowded California.
Speaker Change: Insurance delivered gross written premium growth of 13% year over year with our marketing efforts, yielding leading brand awareness in the crowded category.
Kelvin Tran: To help support analysts, investors' analysis of our business performance, we have provided new disclosure on return on equity for each of the wealth management and insurance companies. Expenses this quarter reflect higher variable compensation. This business is driving efficiencies at its gains scale.
Speaker Change: To help support analysts and investors analysis of our business performance. We have provided new disclosure on return on equity for each of the wealth management and insurance businesses.
Speaker Change: Expenses this quarter reflect higher variable compensation.
Speaker Change: The business is driving efficiencies as it gains scale.
Kelvin Tran: Please turn to slide 14.
Speaker Change: Please turn to slide 14.
Kelvin Tran: Wholesale Banking delivered record revenue this quarter driven by its global markets business demonstrating the power of our franchise. We saw higher PCLs this quarter, with performing PCLs reflecting policy and trade uncertainty and impaired PCLs reflecting a few new impairments. Expenses increased 7% year-over-year, reflecting higher variable compensation.
Speaker Change: Wholesale banking delivered record revenue this quarter driven by its global markets business, demonstrating the power of our franchise.
Speaker Change: So a higher PCL this quarter with performing PCL, reflecting policy and trade uncertainty and impaired PCL, reflecting a few new impairment.
Speaker Change: Expenses increased 7% year over year, reflecting higher variable compensation front office and technology costs.
Kelvin Tran: turn to slide. As I mentioned earlier, effective this quarter, certain U.S. governance and control investments, including costs for U.S. BSA AML remediation, previously reported in the corporate segment, are now reported in the U.S. retail segment.
Speaker Change: Please turn to slide 15.
Speaker Change: As I mentioned earlier effective this quarter certain U S governance and control investments, including costs, while you ask BSA AML remediation previously reported in the pulp segment are now reported in the U S. Retail segment. This slide reflects these changes within the corporate segment.
Kelvin Tran: This slide reflects these changes within the corporation. Corporate net loss for the quarter was $266 million, and net corporate expenses were $378 million.
Speaker Change: Corporate net loss for the quarter was $266 million and net corporate expenses were $370 million.
Kelvin Tran: Please turn to slide. The Common Equity Tier 1 Ratio ended the quarter at 13.1%, up two basis points sequentially. Strong internal capital generation was offset by the increase in RWA, excluding the impact of FX and the impact from our U.S.
Speaker Change: Please turn to slide 16.
Speaker Change: The common equity tier one ratio ended the quarter at 13, 1% up two basis points sequentially.
Speaker Change: Strong internal capital generation was offset by the increase in <unk>, excluding the impact of FX.
Speaker Change: And the impact of from our U S balance sheet restructuring activities.
Kelvin Tran: balance sheet restructuring. We expect the impact to CET1 from the Schwab share sale to be approximately 238 basis points This differs modestly from what we disclosed on February 11th, as that was based on Q4 risk-weighted assets and Q1 risk-weighted assets are Our average LCR for the quarter, which does not reflect the impact of the Schwab's share sale post-quarter end, was $141 million. We are comfortable operating at more typical LCR levels and have begun to manage liquidity levels there. However, we expect LCR to remain elevated in the near term, reflecting proceeds from the Schwab's share sale.
Speaker Change: We expect the impact of CET, one from the swap chefs out to be approximately 238 basis points in Q2.
Speaker Change: This is the first modestly from what we disclosed on February 11th.
Speaker Change: Based on Q4 risk weighted asset in Q1 risk weighted assets are higher.
Speaker Change: Our average LCR for the quarter, which does not reflect the impact of the swaps sure Sal post quarter end was 141%.
Speaker Change: We are comfortable operating at more typical LCR levels and have begun to manage liquidity levels down.
Speaker Change: However, we expect LCR to remain elevated in the near term, reflecting proceeds from the swaps share sale.
Ajai Bambawale: With that, Ajai, over to you. Thank you, Kelvin. And good morning, everyone.
RJ: With that RJ over to you.
RJ: Thank you Kelvin and good morning, everyone. Please turn to slide 17.
Ajai Bambawale: Please turn to slide 17. Gross Impaired Loan Formations were 25 basis points, a decrease of three basis points quarter over quarter, reflected in the Canadian and U.S. commercial and wholesale banking lending portfolio.
Gross impaired loan formations with 25 basis points, a decrease of three basis points quarter over quarter.
RJ: Reflected in the Canadian and U S commercial.
RJ: And wholesale banking lending portfolios.
Ajai Bambawale: Please turn to slide 18. Cross-impaired loans increased 504 million quarter over quarter to 5.45 billion of 56 basis points. The increase was recorded across the Canadian and U.S. consumer and business and government lending portfolios and includes a $181 million impact Foreign Exchange.
RJ: Please turn to slide 18.
RJ: Gross impaired loans increased 504 million quarter over quarter to 545 billion or 56 basis points.
RJ: The increase was recorded across the Canadian and U S consumer.
RJ: And business and government lending portfolios.
RJ: And includes a $181 million impact of foreign exchange.
Ajai Bambawale: Please turn to slide 19. Recall that our presentation reports PCL ratios, both gross and net, of the partner's share of the U.S. Strategic Card PCL. We remind you that U.S. card PCLs recorded in the corporate segment are fully absorbed by partners and do not impact the bank's net. Banks provision for credit losses increased three basis points quarter over quarter to 50 basis The increase is largely reflected in Canadian Personal and Commercial Banking and U.S. Commercial, partially offset by lower provisions in Wholesale Banking.
RJ: Please turn to slide 19.
RJ: Recall that our presentation reports PCL ratios, both gross and net of the partner's share of the U S. Strategic card <unk>, we remind you that U S card PCL recorded in the corporate segment are fully absorbed by part.
RJ: News and do not impact the bank's net income.
RJ: The bank's provision for credit losses increased three basis points quarter over quarter to 50 basis points.
RJ: The increase is largely reflected in.
RJ: Canadian personal and commercial banking and U S commercial.
RJ: Partially offset by lower provisions in wholesale banking.
Ajai Bambawale: Please turn to slide 20. The bank's impaired PCL was $1.2 billion, with an increase of $63 million quarter-over-quarter driven by the U.S. Cards portfolio related to the adoption impact of a model update and seasonal trends. partially offset by lower impaired provisions in wholesale. A nominal performing PCL recovery of $4 million this quarter was related to The Adoption Impact of a Model Update in the U.S. Cards Portfolio and Improvement in our Macroeconomic Forecasts Reflecting Recent Positive Economic Data, Though Tempered for Policy and Trade Uncertainty. largely offset by overlays in the business and government lending portfolios, again, for policy and trade uncertainty.
RJ: Please turn to slide 20.
RJ: The bank's impaired PCL was $1 2 billion with an increase of $63 million quarter over quarter, driven by the U S cards portfolio related to the adoption impact of a model update and seasonal trends.
RJ: Partially offset by lower impaired provisions in the wholesale bank.
RJ: In nominal performing PCL recovery of $4 million this quarter was related to.
RJ: The adoption impact operating model update in the U S cards portfolio.
RJ: And improvement in macroeconomic forecasts, reflecting recent positive economic data.
RJ: Tempered for policy and trade uncertainty.
RJ: Largely offset by overlays in the business and government lending portfolios again policy and create uncertainty.
Ajai Bambawale: Please turn to slide 21. The allowance for credit losses increased by $457 million quarter over quarter to $9.6 billion on 99 basis primarily due to a $214 million impact from foreign exchange, overlays in the business and government lending portfolios related to policy and trade uncertainty, and credit migration. partially offset by an update to our macroeconomic forecast.
RJ: Please turn to slide 21.
RJ: The allowance for credit losses increased by $457 million quarter over quarter to $9 6 billion or 99 basis points, primarily due to a.
RJ: $214 million impact from foreign exchange overlays in the business and government lending portfolios related to policy and trade uncertainty.
RJ: And credit migration.
RJ: Partially offset by an update to our macro economic forecasts.
Ajai Bambawale: In summary. The bank exhibited strong credit performance this quarter, in line with expectations as we progress through the credit cycle. While we have taken initial steps to bolster our reserves for policy and trade uncertainty, the situation remains fluid. There are many potential scenarios that could play out that may impact the economic trajectory and credit performance. some of which could drive PCL results beyond the 45 to 55 basis points range I provided last quarter for fiscal 2025. That being said, TD is well-positioned to manage through this period, considering our prudent provisioning, broad diversification across products and geographies, our strong capital position, and our through-the-cycle underwriting standards that have served us well through challenging conditions in the past.
RJ: In summary.
RJ: The bank exhibited strong credit performance this quarter in line with expectations as we progress through the credit cycle.
RJ: While we have taken initial steps to bolster our reserves for policy and create uncertainty.
RJ: Tuition remains fluid.
RJ: There are many potential scenarios that could play out that may impact the economic trajectory in credit performance, some of which could drive PCL results beyond the 45 to 55 basis points range I provided last quarter for fiscal 2025.
RJ: That being said <unk> is well positioned to manage through this period, considering a prudent provisioning broad diversification across products and geographies.
RJ: Our strong capital position and our through the cycle underwriting standards that have served us well through challenging conditions in the past.
Operator: With that operator, we are now ready to begin the Q&A session. Thank you.
Speaker Change: With that operator, we are now ready to begin the Q&A session.
Operator: We will now take questions from the telephone lines. If you have a question, please press star 1. You also can cancel your question at any time by pressing star 2.
RJ: Thank you.
Speaker Change: We will now take questions from the telephone lines is another question. Please press star one.
Speaker Change: You also can cancel your question at any time by pressing star too so.
Operator: So again, please press star one at this time. If you have a question, there will be a brief pause while the participants register. We thank you for your patience.
Speaker Change: So again, please press star one at this time, if you have a question.
Speaker Change: Will be a brief pause while the participants register.
Speaker Change: We thank you for your patience.
Paul Holden: The first question is from Paul Holden from CIBC. Please go ahead. Thank you. Good morning. First question is related to the U.S. balance sheet repositioning. You highlighted that you paid down U.S. $25 billion of borrowings in Q1. I'm assuming there's probably more to do there just in terms of paying down higher cost borrowings. Can that come hand-in-hand with, say, that $9 billion portfolio sale you've agreed to already in Q2? Could the sale of lower-yielding assets actually be NII accretive?
Speaker Change: The first question is from Paul Holden from CIBC.
Speaker Change: Please go ahead.
Paul Holden: Good morning.
Speaker Change: Excuse me our first question is related to the U S.
Paul Holden: I once sheet repositioning.
Speaker Change: You highlighted that you pay down U S 25 billion of borrowings in Q1, Im assuming theres, probably more to do there just in terms of paying down higher cost borrowings.
Speaker Change: Calm hand in hand, with say that $9 billion portfolio sale, you've agreed to already in Q2.
Speaker Change: Good luck.
Speaker Change: It could be the sale of lower yielding assets actually be NII accretive.
Leo Salom: Paul, thanks for the questions, Leo. Yes, the short answer is, at the end of the first quarter, so January 31st, we're sitting on $25 billion of bank borrowings, having already reduced nearly $25 billion previously. So, there will be an opportunity to further reduce that over time. How quickly we can do that will depend on the term structure of some of those bank borrowings. So, we will be able to deploy a good portion of the $9 billion to reduce a portion of those bank borrowings in the second quarter. However, the balance will have to materialize as we reduce our overall loan portfolio.
Paul Holden: Paul Thanks for the question Leo.
Paul Holden: Yes. The short answer is at the end of the first quarter. So January 31, we were sitting on $25 billion of bank borrowings having already reduced.
Paul Holden: Nearly $25 billion.
Paul Holden: Previously so there will be an opportunity to further reduce that over time.
Paul Holden: How quickly we can do that will depend on the term structure of some of those bank borrowings. So we will be able to deploy a good portion of the 9 billion to reduce a portion of those bank borrowings in the second quarter. The balance we will have to materialize as we reduce.
Leo Salom: We'll do that gradually during the course of the year. So, you may not see the same size of decline in the second quarter, but you will see over time an opportunity to further reduce the $25 billion in bank borrowings on the balance sheet at the end of the first quarter. Got it.
Paul Holden: Our overall loan portfolio will do that gradually during the course of the year. So you may not see the same size of decline in the second quarter, but you will see over time, an opportunity to further reduce the 25 billion and bank borrowings on the balance sheet at the end of the first quarter.
Paul Holden: Got it.
Leo Salom: Okay, and then second question, no change in expense guidance or that expected risk and control remediation costs of US $500 million, so that's good.
Paul Holden: Okay, and then second question.
Paul Holden: No change in expense guidance or that.
Paul Holden: Expected.
Paul Holden: Chris can control remediation costs of USD $500 million. That's good two questions related to that I guess first one is can you give us a sense of what the actual costs incurred in Q1 were relative to that $500 million bogie and then two I just want to get confidence that gray and <unk>.
Leo Salom: Two questions related to that, I guess. First one is, can you give us a sense of what the actual costs incurred in Q1 were relative to that $500 million bogey?
Raymond Chun: And then two, I just want to get confidence that Ray in particular, you've really gone through this, checked off all the nuts and bolts to make sure there is no future upside risk that this US $500 million may grow into something larger.
Paul Holden: Particular.
Paul Holden: You've really gone through this checked off all the nuts and bolts to make sure. There is no future upside risks at this U S $500 million may grow into something larger.
Leo Salom: Paul, maybe I'll address the first part of it and then I'll hand it over to Ray. On the total expenses for the first quarter for the AML remediation was $86 million, and I think we disclosed that number, which is slightly lower than what we spent the fourth quarter. That's to be expected. There'll be some ebbing and flowing in terms of expense timing related to some of the remediation activities. I do expect that some of the look-back expenses, expenses related to the monitor costs, et cetera, will become much more material in the second half of the year.
Paul Holden: So Paul maybe I'll I'll address the first part of it and then I'll hand, it over to Ray on the on the total expenses for the first quarter for the AML remediation was $86 million and I think we disclosed that number.
Speaker Change: Which is slightly lower than what we spent the fourth quarter that's to be expected there'll be some ebbing and flowing in terms of expense timing related to some of the remediation activities I do expect that the that some of the look back expenses expenses related to the monitor costs et cetera will will become.
Speaker Change: Much more material in the second half of the year, so there'll be a little bit of staging, but where we feel quite comfortable with the guidance of $500 million.
Raymond Chun: So there'll be a little bit of staging, but we feel quite comfortable with the guidance of $500 million. As I've shared with you in the past, we're pretty far along the remediation program. Some of the more complex elements of the remediation program around technology infrastructure, we've already released a number of releases on our transaction monitoring platform, which are some of the longer pole-type items. So generally speaking, feel quite comfortable with the overall guidance of $500 million.
As I've shared with you in the past, we're pretty far along the remediation program. Some of the more complex elements of the remediation program around technology infrastructure. We've already released a number of releases on our transaction monitoring platform, which are some of the longer pole type items. So <unk>.
Speaker Change: Generally speaking feel quite comfortable with the with the overall guidance of $500 million right.
Raymond Chun: And Paul, I think Leo's covered it well. We have been at this for a little bit, and we have a detailed action plan on what the remediation efforts need to be. I think the piece that he flagged on the look-back is the piece that, as we go through that, Paul will update you if there's anything that comes from the look-back, but that's the one that I would say that'll take a little bit of time as we go through that process. But we have actually, you know, budgeted in the sense of the $500 million. And then if there's more beyond that, we'll update all of you as we go along.
Paul Holden: Paul I think <unk> covered it well.
Paul Holden: Have a been at this for a little bit and we have a detailed action plan on what the remediation effort needs to be I think the piece that you flagged on the look back is the piece that as we go through that Paul will update you. If there's anything that comes from the look back but that's the one that I would say.
Paul Holden: But that will take a little bit of time as we've as we go through that process.
Paul Holden: But we have actually.
Paul Holden: Budgeted in the sense of the $500 million and then if theres more beyond that we'll update all of you as we go along okay I'll leave it there thanks for your time.
Paul Holden: I'll leave it there.
Operator: Thanks for your time.
Paul Holden: Okay.
Operator: Thank you.
Paul Holden: Thank you.
Gabriel Dechaine: The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead. Hey, good morning. I guess I'll start with expenses. So, you know, 12% expense growth, a third of that was variable comp related in FXO. So let's say 8% to, you know, measure up against your guidance. So a little bit about that. You're saying Q2, you'll have another expense uptick. And then I would assume that means in the second half expense growth, you know, maybe doesn't fall off a cliff, but drops well below that, that full year range. Is that how we're expecting it to play out?
Speaker Change: The next question is from Gabriel <unk> from National Bank Financial. Please go ahead.
Speaker Change: Hey, good morning.
Speaker Change: I guess I'll start with expenses, so 12% expense growth a third of that was the variable comp related and FX. So let's say it's 8%.
Speaker Change: Yes.
No.
Speaker Change: Measure up against your guidance, a little bit about that.
Speaker Change: You're saying Q2, you'll have another expense uptick.
Speaker Change: And then I would assume that means in the second half expense growth.
Speaker Change: It doesn't fall off a cliff, but dropped well below the full.
Speaker Change: Full year range is that.
Speaker Change: Sure.
Speaker Change: Expecting it to play out.
Kelvin Tran: Kelvin, that's right, Gabe. So the year over year increase in Q2 is really due to the profile from last year. to you. Okay, and that's despite what Leo was just saying, as far as, you know, there's going to be a seasonal increase in AML remediation costs in the second half? That's right. We're talking about total bank expenses here. Leo's business also in Q2, you would expect a year-over-year higher expense growth as well.
Speaker Change: Thanks, Kevin that's right.
Speaker Change: So the the year over year increase in Q2 is really due to the profile from last year. So.
Speaker Change: Sure.
Speaker Change: Q2 was a little bit lower back in 'twenty, four and because of the ramp up you would see a higher year over year uptick and Youre right that we expect the second half of the year the year over year expense growth would be moderating.
Speaker Change: Okay and Thats, despite what Lee was just saying as far as you know.
Lee: There's going to be a seasonal increase in AML remediation costs in the second half.
Lee: That's right like that we're talking about total bank expenses.
Lee: Okay.
Lee: Business also in Q2.
Lee: Expected year over year, a higher expense growth as well.
Kelvin Tran: And Gabe, maybe I can just jump in on that just to give you some clarity. So you're right. First and second quarter will have elevated expense growth numbers, but to the point that Kelvin raised, and very similar to the shape at the overall group level, the back end, notwithstanding that some of the remediation costs might increase, the year-on-year comparisons will moderate. Yeah. growth quite substantially. So I just wanted to leave you with that clarity.
Lee: Yes, maybe I can just jump in on that just to give you some clarity so.
Youre right first and second quarter, we'll have elevated expense growth numbers, but to the point that Kelvin raised and very similar to the shape at the overall group level. The backend notwithstanding that some of the remediation costs might increase the year on year comparisons will moderate yeah.
Lee: The rate of growth quite substantially so I just wanted to leave you with that clarity fair.
Gabriel Dechaine: Fair enough. Now, other question about the performing provision this quarter, a release, and you gave an explanation there that was helpful, the model refinements for the U.S. carbon portfolio.
Lee: Fair enough no. Other question about the performing provision this quarter. Our release you gave an explanation there.
Lee: It was helpful.
Speaker Change: Refinements for the current portfolio I don't even know what goes in that so.
Ajai Bambawale: I don't even know what goes in that, so you know, that's fine I guess. But then the improvement to the macroeconomic outlook kind of made me, you know, spit out my coffee a bit. What are we talking about here? I think we're all in agreement. There's a lot of uncertainty out there. The Canadian economy, at least, is really decelerating. And, you know, is it a matter of you had really conservative assumptions, and they're just not as bad as you assumed? Or I'm trying to understand why there's a deviation in your messaging versus certainly what we're seeing from other banks.
Speaker Change: That's fine I guess, but then the improvement to the macroeconomic outlook kind of made me.
Speaker Change: But my coffee a bit.
Speaker Change: What's what are we talking about here I think we're all in agreement there is a lot of uncertainty out there Canadian economy at least is really.
Speaker Change: Really decelerating.
Speaker Change: And.
Speaker Change: Is it a matter of you had really conservative.
Speaker Change: Assumptions and they're just not as bad as you assumed or I'm trying to understand why there is a deviation in your messaging gruesome.
Speaker Change: Certainly what we're seeing from other banks.
Ajai Bambawale: I feel our messaging is quite consistent, but let me explain the moving parts. So, performing PCL and analysis. go into a little detail. So the macro, you know, and the Canadian macro, we actually in our scenario in our base case, had Edp slightly better, unemployment lower, better HPI, so that and again keep in mind this is all done in a point in time. Then we had a model update in COST. And that model update, essentially, we used better predictive variables, and there was better segmentation of risk across the PD bank. That drove another release in performing.
Speaker Change: We feel our messaging is quite consistent but let me let me explain the moving parts.
Speaker Change: So.
Speaker Change: Performing PCL.
Speaker Change: <unk>.
Speaker Change: Go into a little detail, so the macro and the Canadian macro we actually in a scenario in a base case had <unk>.
Speaker Change: GDP slightly better unemployment lower better H B I saw that and again keep in mind. This is all done in a point in time.
Speaker Change: And our models drove a release in macro.
Speaker Change: Okay, then we had a model updates in cards.
Speaker Change: And that model update essentially used better predictor variables and there was better segmentation of risk across the PD bats.
Speaker Change: That drove another release in performing.
Ajai Bambawale: What we did is we took a step back and looked at all the industries that may be impacted by tariffs. We looked at potential risk migration. Again, this was based on an initial view. And keep in mind, this is all as at January 31st. And we created an overlay of one hundred and forty nine million dollars. And I do believe that's pretty similar to the approach of others. I think the difference with us is there are certain factors, the model being a material one that drove a release. So we overrode those releases through the overlay.
Speaker Change: We did is we took a step back and looked at all of the industries that may be impacted by tariffs we looked at potential risk migration again. This was based on an initial view and keep in mind. This is all as at January 31st and we created an overlay of 149 million.
Speaker Change: And I do believe Thats pretty similar to the approach of others I think the difference with US is there are certain factors the model being a material one that drove a release so we overrode those releases through the overlay.
Gabriel Dechaine: Okay.
Operator: In the interest of time, I'll just sign off here. Thanks. Thank you.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: Oh no.
Speaker Change: Interest of time I'll just run off here. Thanks.
Speaker Change: Okay.
Speaker Change: Thank you.
Ebrahim Poonawala: The next question is from Ebrahim Poonawala from Bank of America, please go ahead. Hey, good morning. I guess maybe first question, maybe for Ray and Leo both, but I think Ray, in your prepared remarks, you mentioned you identified the need to make strategic investments. And then I think Leo mentioned about looking for other portfolio exits.
Speaker Change: The next question is from Ebrahim <unk> from Bank of America. Please go ahead.
Ebrahim: Hey, good morning.
Ebrahim: I guess, maybe first question maybe for <unk>.
Ebrahim: The <unk>.
Speaker Change: But I think Lee in your prepared remarks, you mentioned you've identified the need to make strategic investments and then I think you mentioned about.
Ebrahim: Looking forward.
Ebrahim: Full year exits as we think about it is not <unk> related but as we think about the outlook for investment spend expense growth does that leave the door open with expense growth.
Raymond Chun: As we think about, so this is not AML related, but as we think about the outlook for investment spend, expense growth, does that leave the door open where expense growth could ramp up as you identify more investment opportunities? Or is that going to be concurrent with savings that you talked about? And same thing on the portfolio exits, is that partly the reason why you're operating with a much higher C81 is to give yourself room to restructure and exit some loans or sort of small business lines? and take charges and move on. I would love color on both doors.
Ebrahim: As you identify more investment opportunities.
Ebrahim: Is that going to be concurrent with savings that you talked about and same thing on the portfolio exits is that partly the reason why you are operating with a much higher CET. One is to give you some.
Ebrahim: Room to restructure and exit some.
Speaker Change: Oh loan loans or sort of small business lines.
Ebrahim: And take charges in one would love color on what those thank you.
Raymond Chun: Thank you.
Leo Salom: Maybe I'll start, Ebrahim, and good morning. On our strategic review, as I outlined on slide three, one of the pillars is on the drive efficiency operational excellence. And so, from a cost optimization, we're going deep to right-size our cost base, Ebrahim, and some of that then will provide us the opportunity to invest in the capabilities in some of the areas of the organization. And so, sort of self-funding, in many cases, some of those opportunities. But we also then have identified, through the strategic review, some significant organic growth opportunities, and we'll be using some of the proceeds from that side of it.
Maybe I'll start Ebrahim and good morning.
Speaker Change: On our strategic review as I outlined.
Speaker Change: On slide three one of the pillars is on the drive efficiency operational excellence and so from a cost optimization, we're going deep too to right size, our cost base Ebrahim and some of that then will provide us the opportunity to invest.
Speaker Change: And the capabilities and some of the areas of the organization and so sort of self funding in many cases some of those opportunities, but we also then have identified.
Speaker Change: <unk> identified through the strategic review some significant organic growth opportunities.
Speaker Change: I'll be using some of the proceeds from that side of it so think of it as in that fact that we will manage our expenses.
Leo Salom: So, think of it as in that fact that we will manage our expenses. So, the guidance for the balance of this year is still 5% to 7%. And as we move forward, we will continue to invest in our business, but then manage our expenses back down to a more normalized.
Speaker Change: So the guidance for the balance of this year is still 5% to 7% and as we move forward. We will continue to invest in our business, but then manage our expenses back down to a more normalized growth.
Speaker Change: Comment on.
Leo Salom: You know, we're following the same logic, maybe if I could just take a step back to give you a sense of how we're thinking about the U.S. First and foremost, I feel like we're making very good progress on both the AML remediation and the investment. Bond Repositioning and the Broader Balance Sheet Restructuring Program. I think on all three fronts, we've essentially executed on the things that we've laid out to do. I think as we think about the outlook for the business, I feel there's a number of factors that point to a very positive outlook. First, we're trading, as a result of the investment bond repositioning, we will be on the upper end of our range, and that's positive.
We're following the same logic, but maybe if I could just take a step back to give you a sense of how we're thinking about the U S.
Speaker Change: First and foremost.
Speaker Change: I feel like we're making very good progress on both the AML remediation and the investment.
Speaker Change: Bond repositioning and the broader balance sheet restructuring program I think on all three fronts.
Speaker Change: We've essentially executed on the things that we've laid out to do I think as we think about the outlook for the business I think I feel there's a number of factors that point to.
A very positive outlook first we're trading as a result of the investment bond repositioning we will be on the upper end of our range and that's positive. So we're ahead of schedule with regards to our overall investment bond repositioning I think we're also seeing medium term rates, a little stronger and as a result tractor on rates are a little bit better and.
Leo Salom: So we're ahead of schedule with regards to our overall investment bond repositioning. I think we're also seeing medium-term rates a little stronger, and as a result, tractor-on rates. are a little bit better, and therefore, that will be constructive from a revenue standpoint. We are seeing in our core areas of growth, we're seeing Good volumes, our cards, our bank cards business was up 12% and our mid-market business up seven. Just to highlight two areas that we've previously expressed a degree to sort of lean into, and our wealth business was up 11%. So some of the businesses that you and I have talked about in terms of the criticality for the franchise perform well.
Speaker Change: Therefore that will be constructive from a revenue standpoint.
Speaker Change: We are seeing in our core areas of growth we're seeing good.
Speaker Change: Good volumes, our cards or bank cards business was up 12% and our mid market business up 7% just to highlight two areas that we've previously expressed the degree to to sort of lean into in our wealth business was up 11%.
Speaker Change: In the quarter. So some of the businesses that you and I have talked about in terms of the criticality for the franchises performed well from an expense standpoint.
Leo Salom: From an expense standpoint, to your question, our challenge is that we've got to absorb the restructuring costs. And so we are being very deliberate and very mindful about generating productivity where we can to be able to create the space to invest in those significant remediation efforts. That is our first priority. We're going to do what we need to do to make sure that we're addressing that fully. But I do think that some of the work that we're doing will allow us to be able to invest selectively in the areas that I think will be critical for our future, whether that be cards, wealth, or digital strategies.
Speaker Change: To your point to your question are challenges that we've got to absorb the restructuring costs and so we are being very deliberate and very mindful about generating productivity, where we can to be able to create the space to invest in those significant remediation efforts and nothing that is our first priority we're going to do what we need to do to make sure.
Speaker Change: Sure that we're addressing that fully but I do think that some of the work that we're doing will allow us to be able to invest selectively in the areas that I think will be critical for our future whether that be cards wealth, our digital strategy. So we.
Leo Salom: We are trying to... As Ray said, create the capacity in order to be able to not only address the foundational investments that we need to make on remediation, but also selectively. And I do emphasize selectively because the strategic review is forcing us to make some significant choices. invest in those areas that I think will be quite positive.
Speaker Change: We are trying to.
Speaker Change: As Ray said create the capacity in order to be able to not only address the foundational investments that we need to make on remediation, but also selectively and I do emphasize selectively because the strategic review is forcing us to make some significant choices.
Speaker Change: Invest in those areas that I think will be will be quite positive you put all that together and I think two big conclusions. One I do think we'll be able to generate return on equity improvement on a quarter on quarter basis through this year and into next year and secondly, I do think we returned to a positive.
Leo Salom: You put all that together and I think I have two big conclusions. One, I do think we'll be able to generate return on equity improvement on a quarter-on-quarter basis through this year and into next year. And secondly, I do think we return to a positive NIAAP profile as we go into 2026.
Speaker Change: <unk> profile as we go into 2026.
Operator: That's helpful. And just one quick follow up, maybe it's quick.
Speaker Change: That's helpful and just one quick follow up maybe it's quick Kevin you mentioned NIM expansion should be substantial would appreciate if you could quantify that and what do you expect you did at segment level consolidated level. Thank you.
Doug Young: Kelvin, you mentioned name expansion should be substantial, would appreciate if you could quantify that in what you expect either at segment level or consolidate level. Thank you.
Kelvin Tran: Maybe I'll follow up, Eben, just on the on the US business, because it's it's where that substantial Tim Wiggan, TD Bank Group, Sona Mehta, Tim Wiggan, Tim Wiggan, Tim Wiggan, Tim Wiggan, will continue to normalize liquidity. And that will have an impact in the quarter. And secondly, we'll get sort of a full quarter's impact of the bond repositioning activity that we did in the first quarter. Both of those items will substantially move the NIM for the US business. Thereafter, coming back to the point I raised before, I do think that the rate structures right now with higher medium-term rates will be constructive for modest NIM expansion thereafter.
Speaker Change: Maybe I'll follow up just on the on the U S business, because its where that substantial.
Speaker Change: Adjective applied I think.
Speaker Change: We are theres going to be two big factors are two big drivers driving that one will further normalize to the question that Paul raised earlier, we will continue to normalized liquidity and that will have an impact in the quarter and secondly, we'll get.
Speaker Change: Sort of a full quarter's impact of the bond reposition activity that we did in the first quarter both of those items will substantially move the NIM for the U S business thereafter.
Speaker Change: Coming back to the point I raised before I do think that the rate structures right now with higher medium term rates will be constructive for modest NIM expansion thereafter.
Kelvin Tran: Thank you.
Speaker Change: Thank you.
Speaker Change: Okay.
Meny Grauman: The next question is from Meny Grauman from Scotiabank. Please go ahead. Hi, good morning. I wanted to follow up on some of the expense questions that Paul asked at the beginning of the call. Specifically, if I'm looking at the U.S., I'm looking at a sequential decline in expenses on an adjusted basis. I think you touched on it, but I want to make sure I understand it. What's driving that sequential decline?
Speaker Change: Thank you. The next question is from many Grumman from Scotiabank. Please go ahead.
Speaker Change: Hi, Good morning, I wanted to follow up on some of the expense question that Paul.
Speaker Change: Paul asked at the beginning of the call specifically, if I'm looking at the U S.
Speaker Change: I'm looking at a sequential decline in expenses on an adjusted basis I think you've touched on it but I want to make sure I understand what's driving that sequential.
Kelvin Tran: I wouldn't have expected that given the incremental remediation costs, but I think you mentioned something about timing, but I just wanted to understand what's going on here and what to expect going forward from a sequential basis. Thanks for the question.
Speaker Change: Decline I wouldn't have expected that given the incremental remediation costs, but I think you mentioned something about timing, but I just wanted to understand what's going on here and what what to expect going forward from a sequential basis.
Speaker Change: Thanks for the question just two.
Kelvin Tran: Just to remind you all, in the fourth quarter we did have two lumpy items. We had the sign-on bonus related to Nordstrom. and we also had the CFPB settlement. that we concluded in the fourth quarter. So when you adjust for those factors, it sort of neutralizes the sort of sequential decline. As we move forward, as I've talked about before, I would expect that towards the second half of the year, the rate of growth would moderate. We were up 11% on a year-on-year basis in the quarter, of which our governance and control costs represented about 7% of that growth.
Speaker Change: To remind you on in the fourth quarter, we did have two.
Speaker Change: Lumpy items, we had the sign on a sign on bonus related to Nordstrom and.
Speaker Change: And we also had the CFPB settlement.
Speaker Change: We concluded in the fourth quarter. So when you when you adjust for those factors, it's sort of neutralizes the sort of sequential sequential decline.
Speaker Change: As we move forward.
Speaker Change: Talked about before I would expect that towards the second half of the year the rate of growth would moderate we were up 11% on a year on year basis in the quarter of which our governance and control costs represented about 7% of that growth. So our base growth rate was 4% and I do think we.
Kelvin Tran: So our base growth rate was 4%. And I do think we continue, as I said before, to look at productivity measures that will give us the space to continue to invest not only in governance and control initiatives, but on some of the critical business priorities that I highlighted previously.
Speaker Change: Continue as I said before to look at productivity measures that will give us the space to continue to invest not only in governance and control initiatives, but on some of the the critical business priorities that I highlighted previously.
Ajai Bambawale: That makes sense. And then just wanted to follow up on, Ajai, you talked about $149 million overlay. Just wanted to understand, on a high level, obviously, how do you calculate that? Like, what is that? How do you derive that $149 million? This is based on a top-down analysis we did on industries that... may be impacted by tariffs and what we really considered is risk rating migration. we use that risk rating migration to extrapolate. You know what the impact could be and our ACL process or allowance process essentially captured that initial view on how risk ratings may migrate.
Speaker Change: That makes sense and then just wanted to follow up on I.
Speaker Change: Joe you talked about $149 million overlay just wanted to understand.
Speaker Change: At a high level obviously.
Speaker Change: How do you calculate that.
Speaker Change: What is that how do you drive that $149 million.
Speaker Change: This is based on a top down analysis, we did on industries that.
Speaker Change: May be impacted by tariffs.
Speaker Change: It would be really considered as risk rating migrations, and we use that risk rating migration to extrapolate.
Speaker Change: You know, what the impact could be and not ACL process or allowance process.
Speaker Change: <unk> captured that initial view on how risk ratings may migrate and migration was a little different for the U S commercial book.
Ajai Bambawale: And the migration was a little different for the U.S. commercial book as opposed to the Canadian commercial. Securities Book. But again, it was a top-down analysis. It's an initial analysis. There is more work going on.
Speaker Change: Opposed to the Canadian commercial TD.
Speaker Change: TD Securities book, but again it was a top down analysis. It's an initial analysis. There is more work going on we're doing a lot more bottom up work.
Ajai Bambawale: We're doing a lot more bottom-up work. for the next quarter and of course we'll have to see how the macro scenario evolves. I think you know that there's so many different scenarios that could play out, so saying anything beyond that at this stage. is a little different. Understood.
Speaker Change: For the next quarter and of course, we'll see have to see how the macro scenario. He wants I think youll know that there's so many different scenarios that could play out so say anything beyond that at this stage, it's a little difficult.
Sona Mehta: Thank you. The next question is from Matthew Lee from Kanakor, Dinudi. Please go ahead. Hey, morning guys, maybe a different type of question on the Canadian mortgage book, flat growth quarter of a quarter and a bit lower than some of the peers. Maybe just talk about what you're seeing in that business and how we should think about growth as you rest of the year. Matt, thanks for that.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you. The next question is from Matthew Li from Canaccord Genuity. Please go ahead.
Matthew Li: Hey, Good morning, guys, maybe didn't have a question on the Canadian mortgage book flat growth quarter over quarter, and a bit lower than some of the peers.
Matthew Li: Maybe just talk about what youre seeing in that business and how we should think about growth as we progress through the year.
Sona Mehta: This is Sona. I'll take that. So let me start by saying we've been very declarative in our Investor Day aspirations. This is a business that we like, that we want to grow, and we're continuing to compete to win profitable business. So, you know, I can just walk you through some of the fundamentals and how we think about this book. You know, first of all, we're a through-the-cycle, multi-channel lender. That's really important. That gives us great reach. And then within that portfolio, especially over the last couple of quarters, we've been leaning in to enhance how we go to market, especially in our proprietary channels.
Matthew Li: Thanks for that and this is Tom I'll take that.
Speaker Change: So let me start by saying, we've been very declarative and our Investor day aspirations are this is a business that we like that we want to grow and we're continuing to compete to win profitable business.
Speaker Change: So I can just walk you through some of the fundamentals and how we think about the this book.
Speaker Change: First of all we're a through the cycle multichannel lender, that's really important that gives us great reach.
Speaker Change: And then within that portfolio, especially over the last couple of quarters, we've been leaning in to enhance how we go to market, especially in our proprietary channels.
Sona Mehta: So a few things that we've done this quarter, as Ray shared, we rolled out RESL specialists, as well as investing specialists in our highest opportunity branches. And so we've thoughtfully enhanced that integration between our branch and our mobile mortgage sales force at the same time. We're seeing really promising results. So referrals from our branch to our MMS have tripled quarter over quarter. You know, and it's translating into real dollars. We've delivered $1 billion in funded volumes through that channel alone. And it's been the best quarter on record, sorry, best Q1 on record for our MMS. So back to your question.
A few things that we've done this quarter as ray shared we've rolled out Russell specialists as well as investing specialists in our highest opportunity branches.
Speaker Change: And so we've thoughtfully enhance that integration between our branch and our mobile mortgage sales force at the same time.
Speaker Change: Staying really promising results so referrals from our branch to our analysts have tripled quarter over quarter.
Speaker Change: And it's translating into real dollars that we've delivered $1 billion in funded volumes through that channel alone and it's been the best quarter on record sorry, best Q1 on record for around enough.
Speaker Change: So back to your question now overall growth will vary from quarter to quarter, but the fundamentals are absolutely pointed in the right direction. I think you typically see some seasonality that slower in Q1.
Sona Mehta: Now, overall growth will vary from quarter to quarter, but the fundamentals are absolutely pointed in the right direction. I think you typically see some seasonality that's lower in Q1. But ultimately, this is a good book. We compete to win profitable business. We're seeing really good results in our proprietary channels. We're also seeing depth of relationship improve up nicely year over year among our Ruzzle customers. So I'd probably sum up by saying, you know, our aspirations are declarative. They're bold. We like the strength that we're seeing in our proprietary ecosystem. And we're going to continue to compete to win profitable business.
Speaker Change: But ultimately this is a good book, we compete to win profitable business and we're seeing really good results in our proprietary channels. We're also seeing depth of relationship improve up nicely year over year, among Garth Russell customers.
Speaker Change: So I'd, probably sum up by saying you know our aspirations are declared of their board, we like the strength that we're seeing in our proprietary ecosystem and we're going to continue to compete to win profitable business.
Sona Mehta: Okay, great. So nothing particular in the quarter that might have affected growth other than maybe seasonality. Thank you.
Speaker Change: Okay, great. So nothing in particular in the corner that might have affected growth other than maybe seasonality.
Speaker Change: Okay.
Speaker Change: Thank you.
Doug Young: The next question is from Doug Young from Desjardins Capital Markets. Please go ahead. Hi, good morning. Just maybe just a few quick ones, hopefully. U.S. NIMS, just to go back to that, when you say normalize, like, should we be thinking going back to around the 3% level, where you kind of were before Q1? Is that, is that, and then, and then expanding out from there, just hoping to get a finer point on, on that. And then, you know, you're gonna have some excess liquidity coming in from the Schwab sale. Is that, is that something, I assume it doesn't impact U.S.
Speaker Change: The next question is from Doug Young from digital Bank capital markets. Please.
Speaker Change: Please go ahead.
Doug Young: Hi, Good morning, just maybe just a few quick ones hopefully U S. Nims just to go back, but when you say normalized I mean should we be thinking going back to around the 3% level.
Speaker Change: Where are you kind of work.
Doug Young: For Q1.
Doug Young: Is that is that and then and then expanding it from there I was just hoping to get a finer point on that and then you're going to have some excess liquidity come in on the Schwab sale and thought.
Doug Young: Is that something I assume it doesn't impact the U S does that kind of fell through up and impact the all bank NIM.
Leo Salom: NIMS? Does that kind of filter up and impact the oil bank NIMS? Doug, just to give you a sense, well, we won't provide a specific guidance on the call. What I can tell you is if you look back to where we were before we put on the liquidity position that we did in late third quarter, fourth quarter, and you look at that NIM level, returning back to that NIM level would not be an unreasonable assumption. then you combine that with the bond repositioning piece, which will be an enhancement to NII. I think if you if you model that, that'll give you a good sense of where we'll probably land from.
Doug Young: So.
Doug Young: Doug just to give you a sense.
Doug Young: We won't provide specific guidance on the call what I can tell you is if you look back to where we were before.
Doug Young: We put on the liquidity position that we did in late third quarter fourth quarter and you look at that NIM level.
Doug Young: Returning back to that NIM level would not be an unreasonable assumption so.
Doug Young: Then you combine that with the bond repositioning piece, which will be an enhancement to NII I think if you. If you model that that'll give you a good sense of where we'll probably land from a NIM standpoint.
Leo Salom: Kelvin here on the earnings on the Schwab proceeds, you would see that. Okay, so that would impact and I guess marginally the old bank. and then. Yeah, total bank level. Yeah. And then, Leo, just just to clarify that three to 500 million. I mean, that's not a new number, you're looking to be at the upper end of that. Is that three to 500 million? Or let's call it 500 million? Is that going to be in for the full? Are you expecting that to be in for the full year fiscal 25? Or be on a run rate exiting 25 at that level?
Doug Young: And it's Kelvin here on the swap earnings on the Schwab come see you would see that in the corporate side.
Doug Young: Okay, so that would impact and I guess marginally in your bank.
Doug Young: And then total bank on the total back yet in the total bank level.
Doug Young: And then Neil just just to clarify that $3 to $500 million.
Doug Young: I mean, that's not a new number you are looking to be at the upper end of that is that $3 to $500 million in let's call. It $500 million does that kind of be in front of us.
Doug Young: Paul.
Doug Young: Are you expecting that to be in kind of full year fiscal 'twenty five or be on a run rate exiting 'twenty five at that level.
Leo Salom: No, no, that's a that's an in year profile. And and just to give you a bit more information that we We reflected about $46 million related to the bond repositioning in the first quarter. So the lion's share of that number will materialize over the subsequent quarter.
Doug Young: That's it that's the in year profile and just to give you a bit more information that we.
Doug Young: We reflected about $46 million related to the bond repositioning in the first quarter. So the lion's share of that number will materialize over the subsequent quarters.
Doug Young: Okay perfect.
Doug Young: And then.
Doug Young: I guess, yes.
Doug Young: Over 4% set one ratio we describe the buybacks.
Doug Young: A lot of discussion around an ability to put capital to work organically I mean, that's a lot of capital.
Doug Young: Can you talk about three to four.
Doug Young: Of the biggest opportunities to really drive what are you going to invest that capital as humans.
Doug Young: <unk>, including capital markets. So just trying to get a sense a better sense, sometimes to think about that.
Doug Young: Sure.
Raymond Chun: Doug, I'll take that. As I said, on the strategic review. We're still going through the process. We're about halfway through the strategic review, just so you get a sense of timeline. But we are looking at it in multiple different buckets, you know, where we are going to allocate our capital. And so, you know, we start with that. We've identified these significant organic opportunities, and we'll start to share some of those potentially along the way. And then certainly at the investor day, but we are also looking to simplify the portfolios. And you've seen some of the actions that we've already taken.
Doug Young: Doug I'll take that.
Doug Young: As I said on the strategic review, we're still going through the process. We're about halfway through the strategic review just just so you get a sense of timelines.
Doug Young: But we are looking at it in multiple different buckets.
Doug Young: Where we're going to allocate our capital and so we start with that we've identified the significant organic opportunities and we'll start to share some of those potentially along the way and then certainly at the Investor day.
Doug Young: But we are also looking to simplify their portfolios and you've seen some of the actions that we've already taken.
Raymond Chun: We'll continue to to look at opportunities to optimize our balance sheet. And that could be in the form of restructuring. That could be in the form of potential, you know, revisiting our investment bond portfolio and see if there's further actions that we want to take there. And then also then looking at our portfolio. see which businesses that we may look at from an optimization perspective and we've done some of those activities but we have some more to look at. And then there's some other efficiency opportunities that we'll be looking at. So certainly, as I said before, I don't want to front-run the strategic review, but what we will do is, as we continue to make some of these decisions, start to share those with you.
Doug Young: <unk> to look at opportunities to optimize our balance sheet.
Doug Young: And that could be in the form of restructuring that could be in the form of potential.
Doug Young: Revisiting our investment bond portfolio and see if there are further actions that we want to take there and then also then looking at our portfolio.
Doug Young: And to see which businesses that we may look at it from an optimization perspective, and we've done some of those activities, but we have some more to look at.
And then there's some other efficiency opportunities that we'll be looking at so certainly as I said before I don't want to front run the strategic review.
What we will do is as we continue to make some of these decisions start to share those with you, but I do look forward to sharing more calm comprehensive review and where we're going to allocate that capital at the Investor day and at the end of that if there is still capital remaining I've said on the previous calls that then we would look at a potential another shoe.
Raymond Chun: But I do look forward to sharing the more comprehensive review and where we're going to allocate that capital at the investor day. And at the end of that, if there is still capital remaining, I've said on the previous calls, that then we will look at a potential another share buy. Appreciate the color. Thank you.
Doug Young: Buyback.
Speaker Change: I appreciate the color. Thank you.
Doug Young: Thank you Lasse.
Darko Mihelic: The last question is now from Darko Mihelic from RBC Capital Markets. Please go ahead. Hi, thank you. Good morning. I have just a couple of detailed questions on the US business as well. I appreciate the Suggestion that your NIM will expand meaningfully or substantially next quarter. But your NIM has your NIM and your NII have a few, well, a lot of moving parts. So I was just wondering if you could provide maybe a range of NII for next quarter for me to work off from for the model.
Speaker Change: The last question is now from Darko <unk> from RBC capital markets. Please go ahead.
Speaker Change: Alright. Thank you. Good morning, just a couple of detailed questions on the U S business as well.
Speaker Change: I appreciate the.
Speaker Change: Suggestion that your NIM will expand meaningfully more substantially.
Speaker Change: Next quarter.
Speaker Change: Your name has your NIM and your NII I have a few well a lot of moving parts. So I was just wondering if you could provide maybe a range of NII for next quarter for me to work off for Tomorrow.
Leo Salom: Darko, well, let me let me just give you a sense of the drivers that that you might want to think about. Clearly I've given you a sense of where the bond repositioning piece is going to land. sort of get a sense of, we take the residual amount and got three quarters left, you can get a sense of what that lift is going to look like. I can tell you that the on rates right now that we're seeing about 50 base points higher than what they were just a few months ago and so obviously that that will be a tailwind that will It's hard to enjoy, maybe less so in the first half of the year, but more so towards the second half of the year.
Speaker Change: Darko, Let me let me just give you a sense of the drivers that you might want to think about.
Speaker Change: Clearly I've given you a sense of where the bond repositioning piece is going to land.
Speaker Change: And you can sort of get a sense, if we take the residual amount in that three quarters left you can get a sense of what what that lift is going to look like.
Speaker Change: I can tell you that the on rates right now that we're seeing it's about 50 basis points higher than what they were just a few months ago and so obviously that will be a tailwind that will.
Speaker Change: Start to enjoy maybe less so in the first half of the year, but more so towards the second half of the year.
Leo Salom: I'd say in terms of the underlying growth, we will be exiting a series of portfolios. So as we communicated to you back on October the 10th, there is an NI drag from exiting some of those lower yielding portfolios. I think at that point in time, we did estimate that would be about a $250 million impact. So if you model that and then assume that in our core lines of businesses, I'm using Cards, Corp Bank Cards business, Home Equity line of business, and our commercial, and those segments of commercial, you know, we're seeing good growth. I will say that I do believe, despite the fact that there is general optimism in the U.S.
Speaker Change: I'd say in terms of the underlying growth, we will be exiting a series of portfolios. So as we communicated to you back on October the 10th there isn't ni drag from exiting some of those lower yielding portfolios I think at that point in time, we we did estimate that'd be about a two to 250.
Speaker Change: Impact. So if you can if you model that and then assume that in our core lines of businesses amusing at cards core bank cards business home equity.
Speaker Change: Line of business.
Speaker Change: In our commercial and those segments in commercial.
Speaker Change: We're seeing.
Speaker Change: Good growth I will say that I do believe despite the fact that there is general optimism in the U S with regards to.
Leo Salom: with regards to Our commercial clients are optimistic about the expansionary sort of deregulatory discussions that the current administration has laid out. I do think that some of the commercial lines might be a little bit more muted. But if you put all those things together, I think it lays out a relatively constructive backdrop for NIM expansion and for NII growth, you know, over the course of the year. And obviously, we'll try to continue, as Ray said, we'll try to continue to maximize those actions as we can.
Speaker Change: Our commercial clients are optimistic about the expansionary sort of Deregulatory discussions that the current administration has laid out I do think that some of the commercial lines might be a little bit more muted, but if you put all those things together I think it lays out a relatively constructive backdrop for NIM expansion and for NII growth.
Speaker Change: Over the course of the year and obviously, we will try to continue as Ray said, we will try to continue to maximize those actions as we can but I want to come back to maybe the that the obvious statement. Our focus here is to leverage 2025 is that transition year.
Leo Salom: But I want to come back to maybe the obvious statement. Our focus here is to leverage 2025 as that transition year, to make the investments we need to in the core franchise to be able to address some of our remediation activities and to be able to exit 2025. Exhibiting the Earnings Power U.S. franchise. And so we're doing those things to be able to enter into 2026 with a more normalized profile. Okay, thank you. I'll get back to the training, the drawing board on that. That is useful, though. I appreciate that, Leo.
Speaker Change: To make the investments we need to in the core franchise to be able to address some of our remediation activities and to be able to exit 2025 <unk>.
Speaker Change: Exhibiting the earnings power of the U S franchise and so.
Speaker Change: We're doing those things to be able to.
Speaker Change: You enter into 2026 with a more normalized profile.
Speaker Change: Okay. Thank you I'll get back to the training.
Speaker Change: The drawing board on that that is useful I appreciate that Calvin just at the all bank level there was some margin compression.
Kelvin Tran: Kelvin, just at the all-bank level, there was some margin compression, and I'm just wondering, given everything that's at play, what would your... What would your view be for the all bank margins going forward? That's a lot. The NIM at the total bank level would have been positive quarter over quarter from the retail businesses, but the decline was really driven by the wholesale banks. Darko essentially what's driving that is higher asset levels in in Prime. So as you know, those are lower interest paying deposits but extremely attractive from an RWE perspective, just given the RWA treatment.
Speaker Change: And I'm, just wondering given everything thats at play what would your.
Speaker Change: Would your view be for the all bank margin going forward.
Speaker Change: So.
Speaker Change: The the NIM at the total bank level would have been positive quarter over quarter.
Speaker Change: From the retail businesses.
Speaker Change: The decline was really driven by the wholesale bank due to.
Speaker Change: Some business volumes and I'm going to ask him to just speak to that that those opportunities, yes, Darko essentially what's driving that is higher asset levels in prime.
So as you know those are lower interest paying deposits, but extremely attractive from an ROE perspective, just given the <unk> treatment.
Kelvin Tran: So what you're really seeing at play there is the continued focus on on growing our Prime franchise. I see, okay, that's helpful. Okay, thank you. So we did guide to that TNC NIM is relatively stable, US substantially expansion, and then you also have Telwin from the Schwab earnings as well. So all of those are headed. Okay, thanks very much, appreciate that. Thank you.
Speaker Change: So what you're really seeing it play there is the continued focus on growing our prime franchise.
Speaker Change: I see okay. That's helpful.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: So we did guide to P&C.
Speaker Change: P&C NIM is relatively stable.
S substantially expansion and then you also have tailwind from the Schwab earnings as well. So all of those are headed towards on the positive side.
Speaker Change: Okay. Thanks, very much I appreciate that.
Operator: There are no further questions registered at this time.
Speaker Change: Thank you there are no further questions registered at this time I will now turn the call back to Raymond James.
Raymond Chun: I will now return the call back to Raymond Chun. Well, thank you everyone for joining us this morning. We look forward to speaking again at our Q2 call in May, and ahead of that is obviously our annual meeting in April, and so hope everyone has a great rest of the day. Thank you.
Speaker Change: Well. Thank you everyone for joining us. This morning, we look forward to speaking again at our Q2 call and me and ahead of that is obviously, our annual meeting in April and so I hope everyone has a great rest of the day. Thank you.
Operator: The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.
Speaker Change: Thank you. The conference has now ended please disconnect your lines at this time.
Speaker Change: And we thank you for your participation.