Q2 2025 Toronto-Dominion Bank Earnings Call

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Operator: This conference is being recorded. Cette conférence est enregistrée.

This conference is being recorded.

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Operator: All participants, please stand by.

All participants please standby your meeting is ready to begin.

Operator: Your meeting is ready.

Speaker Change: Good morning, everyone welcome to the TD Bank Group Q2 2025.

Brooke Hales: Welcome to the TD Bank Group Q2 2025.

Conference call.

Brooke Hales: I would now like to turn the meeting over to Ms. Brooke.

Now I'd like to turn the meeting over to MS broke Alice.

Speaker Change: Investor Relations. Please go ahead.

Speaker Change: Thank you operator, good morning, and welcome to TD Bank group's second quarter 2025 results presentation.

Raymond Chun: Good morning and welcome to TD Bank Group's second quarter 2025 results presentation.

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 second quarter operating results.

Leo So: We'll begin today's presentation with remarks from Raymond Chen The bank CEO, followed by Leo So I'm, President and CEO TD Bank America's most convenient bank after which Calvin Tran the bank's CFO will present, our second quarter operating results.

Brooke Hales: Ajai Bambawale, chief risk officer, will then offer comments on credit quality, after which we will invite questions from pre-qualified analysts and investors on the phone.

Speaker Change: Mamba Walid Chief Risk Officer will then offer comments on credit quality.

Speaker Change: After which we will invite questions from prequalified analysts and investors on the phone.

Brooke Hales: 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 Clark, senior executive vice president, wealth management. Please turn to slide two.

Speaker Change: Also present today to answer your questions are Sonet at group head Canadian personal banking, Barbara Hooper group head Canadian business banking.

Leo So: Wigan group head of wholesale banking, and President and CEO TD Securities and Paul Clark Senior Executive Vice President wealth management.

Speaker Change: Please turn to slide two.

Raymond Chun: Our comments during this call may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. Actual results could differ materially.

Speaker Change: 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.

Raymond Chun: I would also remind listeners that the Bank uses non-GAAP financial measures to arrive at adjusted results.

Raymond Chun: The Bank believes that adjusted results provide readers with a better understanding of how management views the Bank's performance. Ray, Leo, and Kelvin will be referring to adjusted results in their remarks.

Speaker Change: How management views the bank's performance Ray Leo and Calvin will be referring to adjusted results in their remarks.

Raymond Chun: Additional information about non-GAAP measures and material factors and assumptions is available on our Q2 2025 report to shareholders.

Speaker Change: Additional information about non-GAAP measures and material factors and assumptions is available on our Q2 2000 and twenty-five report to shareholders.

Raymond Chun: With that, let me turn the presentation over to Ray.

Speaker Change: That let me turn the presentation over to Ray.

Raymond Chun: Thank you, Brooke, and good morning, everyone. We had a strong quarter and I'm looking forward to walking you through the details in a minute. Before we discuss that and share updates on our strategic review and AML remediation, I'd first like to comment on the current environment. Despite a recent tariff de-escalation between the U.S. and China, that's temporary in nature. There continues to be a high degree of macroeconomic and policy uncertainty. This has made it difficult for businesses to make long-term decisions and created economic distortions, such as inventory stockpiling and purchases being pulled forward to avoid tariffs.

Ray Leo: Thank you Brooks and good morning, everyone. We.

Ray Leo: We had a strong quarter and I'm looking forward to walking you through the details in a minute before we discuss that and share updates on our strategic review in AML remediation I'd first like to comment on the current environment.

Ray Leo: Despite the recent tariff escalation between the U S and China, that's temporary in nature.

Ray Leo: There continues to be a high degree of macroeconomic and policy uncertainty.

Ray Leo: This has made it difficult for businesses to make long term decisions and created economic distortions such as inventory stockpiling.

Ray Leo: Purchases being pulled forward to avoid tariffs.

Raymond Chun: This fluid environment has also driven volatility in capital markets and created angst for some households. In Canada, housing activity has slowed and the job market has continued to soften with notable losses in trade exposed sectors. With the election in Canada now behind us, there's a new opportunity for bilateral discussions with the U.S. And I've been encouraged to see the new federal government working alongside the provinces on opportunities to create economic growth, including those that elimination of interprovincial trade barriers. There are no quick fixes to the challenges our country is confronting. This is going to take time and considerable effort.

Ray Leo: This fluid environment has also driven volatility in capital markets and created the angst for some households.

Speaker Change: Canada how.

Ray Leo: Housing activity has slowed and the job market has continued to soften with notable losses in trade exposed sectors.

Ray Leo: With the election in Canada, now behind Us, there's a new opportunity for bilateral discussions with the U S.

Ray Leo: And I have been encouraged to see the new federal government working alongside the provinces on opportunities to create economic growth, including those that elimination interprovincial trade barriers.

Ray Leo: There are no quick fixes fixes to the challenges our country is complete.

Ray Leo: Confronting.

Ray Leo: This is going to take time and considerable effort.

Raymond Chun: As a major employer and participant in the economic growth in both Canada and the United States, TD has an important role to play. We stand ready to engage and work productively with governments in both countries. Despite an uncertain external environment, our focus remains constant. We're staying close to our nearly 28 million clients, providing advice and supporting them through this period. Within TD, we will continue to prudently manage risk as we drive our businesses forward, ensuring we can be there for our clients as their needs evolve.

Ray Leo: As a major employer and participant in the economic growth in both Canada, and the United States TD has an important role to play.

Ray Leo: We stand ready to engage and work productively with governments in both countries.

Ray Leo: Despite an uncertain external environment, our focus remains constant.

Ray Leo: Staying close to our nearly 28 million clients, providing advice and supporting them through this period.

Ray Leo: Within <unk>, we will continue to prudently manage risk as we drive our business forward, ensuring we can be there for our clients as their needs evolve.

Raymond Chun: With that, let's turn to the next slide.

Ray Leo: With that let's turn to the next slide.

Raymond Chun: I'll start with an update on our strategic review. This quarter, we completed the sale of approximately $9 billion U.S. dollars on correspondent loans. We also communicated plans to wind down our U.S. point-of-sale financing business with services third-party retailers. This business is comprised of a series of bespoke arrangements with each retailer, which impacts its profitability and scalability. Exiting this business is accretive to U.S. retail ROE and free of capacity to invest in a proprietary bank card business.

Ray Leo: I'll start with an update on our strategic review this.

Ray Leo: This quarter, we completed the sale of approximately 9 billion U S dollars on correspondent loans.

Ray Leo: We also communicated plans to wind down our U S point of sale financing business, which services third party retailers.

Ray Leo: This business is comprised of a series of bespoke arrangements with each retailer, which impacts as profitability and scalability.

Ray Leo: Exiting this business is accretive to U S retail Roe and.

Ray Leo: And free up capacity to invest in our proprietary bank card business.

Raymond Chun: In addition, through the strategic review, we are identifying opportunities to innovate to drive efficiencies and operational excellence. We are structurally reducing costs across the bank by taking a disciplined look at our operations and processes to find opportunities to automate and to re-engineer.

Ray Leo: In addition through the strategic review, we are identifying opportunities to innovate to drive efficiencies and operational excellence.

Ray Leo: We are structurally reducing costs across the bank are taking a disciplined look at our operations and processes to find opportunities to automate and to reengineer them.

Raymond Chun: Kelvin will provide more details on our restructuring program in his remarks. These efforts will create capacity to accelerate digital and AI investments to upgrade capabilities and scale relationship banking. We are identifying growth opportunities and making good progress across each of our four pillars of our strategic review.

Ray Leo: Evan will provide more details on our restructuring program in his remarks.

Ray Leo: These efforts will create capacity to accelerate digital.

Ray Leo: Our investments to upgrade capabilities and scale relationship banking.

Ray Leo: We are identifying growth opportunities and making good progress across each of our four pillars of our strategic review.

Raymond Chun: TD will host an Investor Day on September 29th.

Ray Leo: TD will host an investor day on September 29.

Raymond Chun: where we look forward to presenting a clear direction for the bank's future in our refreshed medium-term financial target. Please turn to slide four.

Ray Leo: Well, we will look forward well, we were we look forward to presenting a clear direction.

Ray Leo: The banks future and our refreshed medium term financial targets, please turn to slide four.

Raymond Chun: In Q2, the bank delivered a strong quarter with earnings of $3.6 billion and EPS of $1.97. We saw robust trading and fee income in our markets driven businesses and volume growth year over year in Canadian personal and commercial banking. Impaired PCLs decreased quarter over quarter, reflecting strong credit performance broadly across asset classes.

Ray Leo: In Q2, the bank delivered a strong quarter with earnings of $3 6 billion and EPS of $1 97.

Ray Leo: We saw robust trading and fee income in our markets driven businesses and volume growth year over year in Canadian personal and commercial banking.

Ray Leo: Impaired PCL decreased quarter over quarter, reflecting strong credit performance broadly across asset classes.

Raymond Chun: And we added to our performing reserves for policy and trade uncertainty, taking a prudent approach with more than a half a billion in reserves added over the past two quarters.

Ray Leo: And we added to our performing reserves for policy and trade uncertainty, taking a prudent approach with more than a half a billion in reserves added over the past two quarters.

Raymond Chun: Ajai will share more details shortly in his remarks. As of quarter end, the bank's CET1 ratio was 14.9%. We made good progress on our share buyback this quarter, repurchasing 30 million shares for a total of $2.5 billion. We still intend to deploy $8 billion of the proceeds from the Schwab share sale for our current NCIB. We have the capacity to execute the NCIB as planned, while maintaining very strong capital levels in this uncertain environment.

Ray Leo: Jay will share more details shortly in his remarks.

Ray Leo: As of quarter end the bank CET one ratio was 14, 9% we made good progress on our share buyback this quarter repurchasing 30 million shares.

Ray Leo: Total of $2 5 billion.

Ray Leo: We still intend to deploy $8 billion of the proceeds from the schwab's share sale for our current and CIB.

Ray Leo: We have the capacity to execute the NCI V as planned while maintaining very strong capital levels. In this uncertain environment. Please turn to slide five.

Raymond Chun: Please turn to slide five.

Raymond Chun: This quarter, we saw strong execution across our businesses. The Canadian personal and commercial banking segment delivered growth on both sides of the balance sheet. In Resil, we continue to enhance speed to decision and to provide tailored customer advice by referring more complex deals to our mobile mortgage specialists.

Ray Leo: This quarter, we saw strong execution across our businesses the Canadian personal and commercial banking segment deliver growth on both sides of the balance sheet.

Ray Leo: And Russell, we continued to enhance speed to decision integral and to provide tailored customer customer advice by referring more complex deals to our mobile mortgage specialist.

Raymond Chun: As you know, our single greatest opportunity is to deepen relationships with our more than 15 million customers in Canada. We are executing against that with continued strong referrals. to the Business Bank in Wal-Mart. In addition, the personal bank achieved record credit card penetration rates with new checking account customers. In the business bank, loans are up 6% year over year, reflecting growth across our commercial business. In U.S. retail, we demonstrated resilience and momentum with six consecutive quarters of consumer deposit growth and core loans up 2% year over year. Our U.S. wealth business also has momentum. Total client assets were up 15% year-over-year, with mass affluent client assets up 26% year-over-year.

Ray Leo: As you know.

Ray Leo: Our single greatest opportunity is to deepen relationships with our more than 15 million customers in Canada.

Ray Leo: We are executing against that.

Ray Leo: With continued strong referrals.

Ray Leo: So the business Bank and wealth. In addition, the personal bank achieved a record credit card penetration rates with new checking account customers.

Ray Leo: And the business bank loans were up 6% year over year, reflecting growth across our commercial business.

Ray Leo: In U S retail, we demonstrated resilience and momentum with six consecutive quarters of consumer deposit growth and core core loans up 2% year over year.

Ray Leo: Our U S U S wealth business also has momentum.

Ray Leo: Total client assets were up 15% year over year with math as mass affluent client assets up 26% year over year.

Raymond Chun: We continue to prioritize and execute on our AML remediation and have made significant progress on our U.S. balance sheet restructuring.

Speaker Change: We continue to prioritize and execute on our email remediation and have made significant progress on our U S balance sheet restructuring legal will provide an update in his remarks.

Raymond Chun: Leo will provide an update in his remarks. Wealth Management and Insurance at a strong quarter reflecting our diversified business. TD Asset Management added $5.3 billion in net institutional assets, and our advice business delivered strong net asset growth. We continue to innovate in TD Direct Investments. the only bank-owned brokerage in Canada to offer partial shares trading. We are seeing great momentum with an 83% increase in partial shares adoption by our Gen Z and millennial clients within the last six months.

Ray Leo: Wealth management, and insurance had a strong quarter, reflecting our diversified business mix.

Ray Leo: TD asset management added $5 3 billion in net institutional assets and our advice business delivered strong net asset growth.

Ray Leo: We continue to innovate in TD direct investing the.

Ray Leo: The only bank on brokerage in Canada to offer partial shares trading well.

Ray Leo: We are seeing great momentum with an 83% increase in partial shares adoption by our Gen Z and millennial clients within the last six months.

Raymond Chun: TD insurance continued its digital transformation, with over 46% of new sales this quarter, completed digitally from end to end, as we build on our position as the leading digital direct insurer in In wholesale banking, we continue to demonstrate the power of our broader platform with a record revenue of $2.1 billion. This quarter, the trading business benefited from market volatility. We're navigating challenges in the market while executing against our strategy. Across the bank, we are delivering for our clients.

Ray Leo: TD insurance continued its digital transformation with over 46% of new sales this quarter completed digitally from into and as we build on our position as the leading digital direct insurer in Canada.

Ray Leo: In wholesale banking, we continued to demonstrate the power of our broader platform with record revenue of $2 1 billion.

Ray Leo: This quarter the trading business benefited from market volatility.

Ray Leo: We are navigating challenges in the market, while executing against our strategy.

Ray Leo: Across the bank, we are delivering for our clients this quarter, both TD auto finance in Canada and U S. Retail in Florida were recognized by J D power with the highest ranking in customer satisfaction.

Raymond Chun: This quarter, both TD Auto Finance in Canada and U.S. Retail in Florida were recognized by J.D. Power with the highest ranking in customer satisfaction.

Raymond Chun: Please turn to slide 6.

Ray Leo: Please turn to slide six.

Raymond Chun: We recognize that leadership in digital and mobile is critical. We are investing in these areas and enabling capabilities such as trusted data and AI.

Ray Leo: We recognize that leadership in digital and mobile is critical.

Ray Leo: We are investing in these areas and enabling capabilities such as trusted data and AI.

Raymond Chun: This quarter, we announced plans to open a new office in New York City for Layer 6, TD's AI Research and Development Center. TD has over 800 AI patent filings, and according to Evident AI, our portfolio is in the top 10 amongst banks globally. Last quarter, I mentioned that we have deployed a generative AI virtual assistant in our contact centers to drive efficiency while enhancing the customer experience. We are now beginning to deploy this Gen-AI virtual assistant across our branch network, driving further colleague and customer experience and efficiency benefits.

Ray Leo: This quarter, we announced plans to open a new office in New York City for layer six Td's AI research and development Center.

Ray Leo: TD has over 800, AI patent filings and according to evident AI our portfolio is in the top 10 amongst banks globally.

Ray Leo: Last quarter I mentioned that we have deployed a degenerative AI virtual assistant in our contact centers to drive efficiency, while enhancing the customer experience.

Ray Leo: We are now beginning to deploy this journey I virtual assistant across our branch network, driving further colleague and customer experience and efficiency benefits.

Raymond Chun: This year, we launched the next AI enhancement in our fraud operation and insurance claims to enhance our detection of suspected fraudulent auto and residential claims. This helps improve our response time to customers with genuine claims and continues our development of AI and insurance, which has been heavily engaged in machine learning for over a decade.

Ray Leo: This year, we launched the next AI enhancement in our fraud operation in insurance claims to enhance our detection of suspected fraudulent auto and residential claims.

Ray Leo: This helps improve our response time to customers sort of genuine claims and continues our development of AI and insurance, which has been heavily engaged in machine learning for over a decade.

Raymond Chun: TD continues to innovate for our clients, colleagues, and communities.

Ray Leo: TD continues to innovate for our clients colleagues and communities. Please turn to slide seven.

Raymond Chun: Please turn to slide seven. In March, we published our 2024 Sustainability Report, providing an update on our efforts to protect the bank while adapting business practices to meet changing market conditions and the evolving needs of our stakeholders.

Ray Leo: In March we published our 2020 for sustainability report, providing an update on our efforts to protect the bank, while adapting business practices to meet changing market conditions and the evolving needs of our stakeholders.

Raymond Chun: Before I turn it over to Leo. I want to thank our colleagues across the bank for their tremendous dedication and effort. Together, we are writing the next chapter of this great institution's story. We will continue to invest in our talent and our culture.

Leo So: Before I turn it over to Leo.

Julia: I want to thank our colleagues across the bank for their tremendous dedication and efforts together. We are writing. The next chapter of this great institution story, we will continue to invest in our talent and our culture with that over to Julia Okay. Thank you Ray and good morning, everyone. Please turn to slide eight.

Leo Salom: With that, over to you, Leo. Okay, thank you, Ray.

Leo Salom: And good morning, everyone.

Leo Salom: Please turn to slide 8. I am very pleased with the progress we've made on our USAML remediation, which, as we've said before, is our top priority. We're executing against our remediation plan with focus and purpose, and operationally, we continue to make enhancements to our transaction monitoring coverage and investigative practice. As we said we would do last quarter, we implemented the final round of planned scenarios in our transaction monitoring system. Work is progressing on the use of specialized AI to detect, isolate, and automate our risk mitigation activities. And teams are continuing to work on the implementation of the machine learning tools with these capabilities expected to come online next month.

Julia: I am very pleased with the progress we've made on our USAA Mel remediation, which as we've said before is our top priority, we're executing against our remediation plan with focus and purpose and operationally we continued to make enhancements to our transaction monitoring coverage and investigated practices. As we said we would do last quarter.

Julia: We implemented the final round of planned scenarios and our transaction monitoring system.

Julia: Work is progressing on the use of specialized AI to detect isolate and automate our risk mitigation activities and teams are continuing to work on the implementation of the machine learning tools with these capabilities is expected to come online next month.

Leo Salom: In addition, we rolled out a streamlined workflow of our investigative practices, including the introduction of updated procedures for analyzing customer activity. These changes complement the updated procedures we introduced last quarter.

Julia: In addition, we rolled out a streamlined workflow of our investigative practices, including the introduction of updated procedures for analyzing customer activity. These changes complement the updated procedures, we introduced last quarter.

Leo Salom: It is important to note we're also making progress with data staging in relation to the look-back. Finally, we are continuing to implement risk reduction measures across our program. For example, this quarter we introduced further enhancements to our cash deposit requirements at TD stores. Collectively, these measures will help us manage the bank's financial crimes risk, and coupled with our improved monitoring, enable us to detect, escalate, and report potential activity of interest earlier and more effectively.

Ray Leo: It is important to note, we're also making progress with data staging in relation to the look backs.

Ray Leo: Finally, we are continuing to implement risk reduction measures across our program. For example, this quarter. We introduced further enhancements to our cash deposit requirements at TD stores collectively these measures will help us manage the bank's financial crimes risks and coupled with our improved monitoring enable us to detect escalate.

Ray Leo: And report potential activity or interest earlier and more effectively while we still have more work to do we remain on track with our planned remediation activities and are building the foundational AML program that we need for the years ahead, we will continue to provide updates every quarter.

Leo Salom: While we still have more work to do, we remain on track with our planned remediation activities and are building the foundational AML program that we need for the years ahead.

Leo Salom: We'll continue to provide updates every quarter.

Leo Salom: Please turn to slide nine. I'd also like to provide an update on our balance sheet restructuring. You will recall this effort has two critical objectives. First, to strictly comply with and maintain a buffer to the asset limitation. And second, to ensure that we can continue to serve our clients and communities as their needs evolve. We made meaningful progress against our objectives this quarter. As of March 31st, the first reporting date for the asset limitation, our two-quarter average assets were approximately $405 billion versus the OCC's asset limitation of $434 billion. At the end of the fiscal quarter, total assets were $399 billion, reflecting the closing of the correspondent mortgage sale.

Speaker Change: Please turn to slide nine.

Ray Leo: I'd also like to update provide an update on our balance sheet restructuring activities. You'll recall. This effort has two critical objectives first to strictly comply with and maintain a buffer to the asset limitation.

Ray Leo: And second to ensure that we can continue to serve our clients and communities as their needs evolve.

Ray Leo: We made meaningful progress against our objectives. This quarter as of March 31, the first reporting date for the asset limitation or two quarter average assets were approximately $405 billion versus the occ's asset limitation of $434 billion.

Ray Leo: At the end of the fiscal quarter total assets were 399 billion, reflecting the closing of the correspondent mortgage sale.

Leo Salom: Since the end of the fiscal quarter, we have also paid down an additional $7 billion of bank borrowings. We expect to further reduce our assets in the upcoming quarters, using the proceeds from the loan sales, investment maturities, and normalized cash levels to pay down additional short-term borrowings.

Ray Leo: Since the end of the first of the fiscal quarter. We have also paid down an additional $7 billion of bank borrowings, we expect to further reduce our assets in the upcoming quarters using the proceeds from the loan sales investment maturities and normalized cash levels to pay down additional short term borrowings and.

Leo Salom: And as Ray mentioned, we communicated plans to gradually wind down the approximately $3 billion in our point-of-sale financing business, with services third-party retailers, as part of our efforts to reduce non-scalable and niche portfolios that do not fit our focus strategy. I remain confident that we will largely complete the loan sales we identified last October by the end of the fiscal year. And with the execution of our loan reductions and pay down of short-term borrowing, we expect to comfortably meet the 10% asset reduction we guided to in October.

Ray Leo: As Ray mentioned, we communicated plans to gradually wind down the approximately $3 billion and our point of sale financing business, which services third party retailers as part of our efforts to reduce non scalable and lease portfolios that do not fit our focus strategy.

Ray Leo: I remain confident that we will largely complete the loan sales we identified last October by the end of the fiscal year and with the execution of our loan.

Ray Leo: Reductions and pay down of short term borrowing we expect to comfortably meet the 10% asset reduction we guided to in October.

Leo Salom: Turning to the investment portfolio rotation, we continue to expect to complete the investment portfolio repositioning no later than the first half of calendar 2025. To date, we have sold approximately $23 billion notional for an upfront loss of just under $1.3 billion pre-tax. The investment portfolio repositioning is expected to generate an NII benefit in fiscal 2025 at the end of the $300 million to $500 million pre-tax estimated range we provided in October. Collectively, we expect these actions will enable us to improve return on equity through fiscal 2025 and into fiscal 2026.

Ray Leo: Turning to the investment portfolio rotation, we continue to expect to complete the investment portfolio repositioning no later than the first half of calendar 2025 to date, we have sold approximately $23 billion notional for an upfront loss of just under $1 3 billion pretax the investment portfolio.

Ray Leo: The 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. We provided in October collectively we expect these actions will enable us to improve return on equity through fiscal 2025.

Kelvin: Five and into fiscal 2026 with that I'll turn it over to Kelvin.

Kelvin Tran: With that, I'll turn it over to Kelvin. Thank you, Leo. Please turn to slide 10. TD delivered a strong quarter. Total bank PTPP was up 5% year-over-year after removing the impact of the U.S. strategic card portfolio, FX, and insurance service expenses. Revenue grew 9% year-over-year, driven by higher trading-related and fee income in our market-driven businesses, including fees from TD's sale of its swap shares and volumes in Canadian personal and commercial banks. Expenses increased 12% year-over-year, with approximately one-quarter of the growth driven by variable compensation commensurate with higher revenues, foreign exchange, and the impact of the U.S.

Kelvin: Thank you Leo please turn to slide 10.

Speaker Change: TD delivered a strong quarter.

Kelvin: Total bank P. T. P. P was up 5% year over year after removing the impact of the U S strategic card portfolio effects and insurance service expenses.

Kelvin: Revenue grew 9% year over year, driven by higher trading related and fee income.

Kelvin: Market driven businesses, including fees from TD sale of a swap shares and volumes in Canadian personal and commercial banking.

Kelvin: Expenses increased 12% year over year with approximately one quarter of the growth driven by variable compensation commensurate with higher revenues foreign exchange and the impact of the U S strategic card portfolio.

Kelvin Tran: Strategic Heart portfolio. Impaired PCLs declined quarter over quarter, reflecting strong credit performance. Performing PCLs increase quarter over quarter, reflecting policy and trade uncertainty.

Kelvin: Impaired PCL declined quarter over quarter, reflecting strong credit performance.

Kelvin: Performing PCL increased quarter over quarter, reflecting policy and trade uncertainty.

Kelvin Tran: Please turn to slide 11. As Ray noted, we are undertaking a restructuring program to reduce structural costs and create capacity to invest to build the bank for the future. We incurred restructuring charges of $163 million pre-tax this quarter and expect to incur total restructuring charges of $600 million to $700 million pre-tax over the next several quarters.

Kelvin: Please turn to slide 11.

Speaker Change: As Ray noted we are undertaking a restructuring program to reduce structural costs and create capacity to invest to build the bank for the future.

Kelvin: We incurred restructuring charges of $163 million pre tax this quarter and expect to incur total restructuring charges of $600 million to $700 million pre tax over the next several quarters.

Kelvin Tran: The restructuring program is expected to generate savings of approximately $100 million pre-tax in fiscal 2025 and annual run rate savings of $550 million to $650 million pre-tax. Cost savings will be driven by workforce and real estate optimization, asset write-offs, and business wind-downs and exits as part of the strategic review. We expect this will result in approximately 2% reduction to our workforce. Whenever possible, we will look to achieve this through attrition and we will redeploy talent in areas where we are accelerating our capabilities.

Kelvin: The restructuring program is expected to generate savings of approximately $100 million pre tax in fiscal 2025.

Kelvin: And annual run rate savings of $550 million.

Kelvin: $650 million pre tax.

Kelvin: Cost savings will be driven by workforce and real estate optimization asset write offs and business wind downs and exits as part of the strategic review.

Kelvin: We expect this will result in approximately 2% reduction to our workforce.

Kelvin: Whenever possible, we will look to achieve this through attrition.

Kelvin: And we will redeploy talent in areas, where we are accelerating our capabilities.

Kelvin Tran: Through this restructuring program and the strategic review, more broadly, we are innovating to drive efficiency and structurally reduce the bank's cost base. We expect FISCO 2025 expense growth, assuming FISCO 2024 levels of Variable Compensation, FX, and U.S. Strategic Cards Portfolio, to be at the upper end of the previously communicated 5% to 7% range, reflecting investments in governance and control and investment-supporting business growth, net of expected productivity and restructuring savings.

Kelvin: Through this restructuring program and the strategic review more broadly we are innovating to drive efficiency and structurally reduce the bank cost base.

Kelvin: We expect fiscal 2025 expense growth, assuming fiscal 2024 levels of variable compensation, FX and U S strategic cards portfolio to be at the upper end of the previously communicated 5% to 7% range, reflecting investments in governance and control and <unk>.

Kelvin: Supporting business growth net of expected productivity and restructuring savings.

Kelvin Tran: Please turn to slide 12. Canadian personal and commercial banking deliver continued volume growth on both sides of the balance sheet. Average loan volumes rose 4% year-over-year, with 3% growth in personal volumes and 6% growth in business volumes.

Kelvin: Please turn to slide 12.

Kelvin: Canadian personal and commercial banking deliver continued volume growth on both sides of the balance sheet.

Kelvin: Average loan volumes rose, 4% year over year, with 3% growth in personal volumes and 6% growth in business volume.

Kelvin Tran: This quarter, tariff uncertainty weighed on the Canadian housing market and we saw slower purchase activity. In TDAF, we had record Q2 originations, which may reflect customers pulling forward auto purchases in anticipation of tariffs. Average deposits rose 5% year-over-year, reflecting 4% growth in personal deposits and 8% growth in business deposits. Net interest margin was 2.82% up one basis point quarter per quarter, primarily driven by higher loan margin. As we look forward to Q3, we again expect NIM to be relatively stable.

Kelvin: This quarter tariff uncertainty weighed on the Canadian housing market and we saw slow our purchase activity.

Kelvin: In Canada, we had record Q2 originations, which may reflect customers pulling forward auto purchases and enterprise anticipation of Paris.

Kelvin: Average deposits rose, 5% year over year, reflecting 4% growth in personal deposits and 8% growth in business deposits.

Kelvin: Net interest margin was 282% up one basis point quarter over quarter, primarily driven by higher loan margins.

Kelvin: As we look forward to Q3 Q3, we again expect NIM to be relatively stable.

Kelvin Tran: Expenses increase reflecting high technology spend and other operating expenses.

Kelvin: Expenses increased reflecting higher technology spend and other operating expenses, please turn to slide 13.

Kelvin Tran: U.S. retail demonstrated resilience and business momentum while executing against our balance sheet restrictions. Four loans grew 2% year-over-year. In key areas of focus, bank card, home equity, middle market, and small business, balances grew 11%, 9%, 8%, and 6% year over year, respectively. As you know, we are focused on enhancing ROE in the U.S. region. We are assessing relationship profitability across our loan portfolio. Net interest margin was 3.04%, up 18 basis points quarter over quarter, reflecting the impact of the U.S. balance sheet restructuring activities, normalization of elevated liquidity levels, which positively impacted NIM by 11 basis points, and higher deposit margins.

Kelvin: U S retail demonstrated resilience and business momentum, while executing against our balance sheet we started.

Kelvin: Our loans grew 2% year over year.

Kelvin: In key areas of focus bankcard home equity middle market, and small business balances grew 11%, 9%, 8% and 6% year over year, respectively.

Kelvin: As you know we are focused on enhancing ROE in U S retail.

Kelvin: We are assessing relationship profitability across our loan portfolio.

Kelvin: Net interest margin was three 4% up 18 basis points quarter over quarter, reflecting the impact of U S balance sheet restructuring activities normalization of elevate it.

Kelvin: Liquidity levels, which positively impacted NIM by 11 basis points and higher deposit margins.

Kelvin Tran: As we look forward to Q3, we again expect NIM to deliver substantial expansion, reflecting the benefits from ongoing balance sheet restructuring activities and further normalization of elevated liquidity levels.

Kelvin: As we look forward to Q3, we again expect NIM to deliver a substantial expansion, reflecting the benefits from ongoing balance sheet restructuring activities and further normalization of elevated liquidity levels.

Kelvin Tran: Expenses increased $189 million U.S. or 13% year-over-year, reflecting higher governance and control investments, including costs of $110 million U.S. for U.S. DSA AML remediation this quarter and higher employee-related increases. 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. We expect similar investments in fiscal 2020.

Kelvin: Expenses increased $189 million U S or 13% year over year, reflecting higher governance and control investments, including cost of $110 million of U S. But U S. D. S. A M L remediation this quarter and higher employee related.

Kelvin: We continue to expect U S BSA, AML remediation and related governance and control investments of approximately $500 million pre tax in fiscal 2025.

Kelvin: We expect similar investment in fiscal 2026.

Kelvin Tran: Please turn to slide 14. Across these diversified businesses, the wealth management and insurance segment is firing on all cylinders. Wealth management revenue was up 13% year-over-year, with growth across fee-based revenue from higher markets level, transaction revenue from elevated trading activity in volatile markets, and net interest income from higher deposit volumes in markets.

Kelvin: Please turn to slide 14.

Kelvin: Across its diversified business says the wealth management and insurance segment is firing on all cylinders.

Kelvin: Wealth management revenue was up 13% year over year with growth across fee based revenue from higher market level transaction revenue elevated trading activity in volatile markets and net interest income from higher deposit volumes and margins.

Kelvin Tran: Insurance delivered gross written premium growth of 10% year-over-year. Expenses increased this quarter reflecting high variable compensation technology span supporting business growth initiatives and employee related Statement ROE remains very strong at nearly 47% and Wealth and Management Peer leading ROE is driven by robust returns across all of our business.

Kelvin: Insurance delivered gross written premium growth of 10% year over year.

Kelvin: Expenses increased this quarter, reflecting higher variable compensation and technology spend supporting business growth initiatives and employee related expenses.

Kelvin: Segment, ROE remains very strong and nearly 47% and wealth management.

Kelvin: Peer leading ROE is driven by robust returns across all of our businesses. Please turn to slide 15.

Kelvin Tran: Please turn to slide, please. Wholesale banking has strong performance despite increased market volatility and the decline in capital markets activity. Expenses increase reflecting higher technology and front office expenses, along with investments in our growth platform.

Kelvin: Wholesale banking had strong performance despite increased market volatility and the decline in capital markets activity.

Kelvin: Expenses increased reflecting higher technology and front office expenses, along with investments in our growth platforms.

Kelvin Tran: We continue to execute on our strategy to be a leading integrated North American investment bank with global reach.

Kelvin: We continue to execute on our strategy to be a leading integrated North American investment bank with global reach.

Kelvin Tran: Please turn to slide six. Corporate net loss for the quarter was $161 million, a smaller loss than the same quarter last year, reflecting higher revenue from treasury and balance sheet activities, partially offset by higher net corporate expenses, which were primarily driven by higher governance and control.

Kelvin: Please turn to slide 16.

Kelvin: Corporate net loss for the quarter was $161 million.

Kelvin: <unk> loss in the same quarter last year, reflecting higher revenue from treasury and balance sheet activities, partially offset by higher net corporate expenses, which were primarily driven by higher governance and control costs.

Kelvin Tran: Please turn to slide 7. The common equity tier one ratio ended the quarter at 14.9% up 177 basis points sequentially. strong internal capital generation was offset by the increase in RWA excluding the impact of FX.

Kelvin: Please turn to slide 17.

Kelvin: The common equity tier one ratio ended the quarter at 14, 9% up 177 basis points sequentially.

Kelvin: Strong internal capital generation was offset by the increase in <unk>, excluding the impact of FX.

Kelvin Tran: The Schwab share sale increased CT1 by 238 basis points. We repurchased 30 million common shares under our share buyback program this quarter, which reduced CET1 by 40 basis points. Our average LCR for the quarter was 141%. The bank remains comfortable that it can operate at more typical LCR levels.

Kelvin: The swap sure Sal increased 81% by 238 basis points.

Kelvin: We repurchased 30 million common shares under our share buyback program this quarter, which we do see T. One and by 40 basis points.

Kelvin: Our average LCR for the quarter was 141%.

Kelvin: The bank remains comfortable that it can operate at more typical LCR levels. However, while actions have been taken to manage liquidity buffers down the proceeds from the swaps sure. So we'll continue to keep LCR elevated in the near term with that Jay over to you.

Kelvin Tran: However, while actions have been taken to manage liquidity buffers down, the proceeds from the Schwab share sale will continue to keep LCR elevated in the near term.

Ajai Bambawale: With that, Ajai, over to you. Thank you, Kelvin, and good morning, everyone.

Jay: Thank you Kelvin and good morning, everyone. Please turn to slide 18.

Ajai Bambawale: Please turn to slide 18. Gross Impaired Loan Formations were 21 basis. a decrease of four basis points of 400 million quota over The decrees was recorded broadly across the Canadian and U.S. consumer and business and government lending portfolio.

Ross: Ross impaired loan formations were 21 basis points.

Kris: Kris a four basis points or 400 million quarter over quarter.

Kris: The decrease was recorded broadly across the Canadian and U S consumer.

Kris: And business and government lending portfolios.

Ajai Bambawale: Please turn to slide 19. Gloss-impaired loans decreased $587 million quarter-over-quarter to $4.87 billion of 51 basis. The decrees was reflected in the Canadian personal and commercial, U.S. retail, and wholesale sector. with the largest contribution from the business and government lending portfolios and a $197 million impact. from Foreign Exchange.

Kris: Please turn to slide 19.

Kris: Gross impaired loans decreased 587 million quarter over quarter to 487 billion or 50.

Kelvin: D. One basis points. The decrease was reflected in the Canadian personal and commercial.

Kelvin: U S retail and wholesale segments with the largest contribution from the business and government lending portfolios.

Kelvin: And a 197 million impact from.

Kelvin: Foreign exchange.

Ajai Bambawale: Please turn to slide 20. Recall that our presentation reports PCL ratios both gross and net of the partner 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 our partners and do not impact the bank's net income. The bank's provision for credit losses increased 129 million, or 8 basis points, quarter over quarter to 58 basis The increase is largely reflected in the Canadian personal and commercial banking and wholesale banking segment.

Kelvin: Please turn to slide 20.

Kelvin: Recall that our presentation reports PCL ratios, both gross and net of the partner's share of the U S. Strategic Bcl's, we remind you that U S got Bcl as recorded in the corporate segment are fully absorbed by our partners and do not impact the bank's net.

Kelvin:

Kelvin: The bank's provision for credit losses increased $129 million.

Kelvin: Or eight basis points quarter over quarter to 58 basis points. The increase is largely reflected in the Canadian personal and commercial banking and wholesale banking segments.

Ajai Bambawale: Please turn to slide 21. The bank's impaired PCL was $946 million, a decrease of $270 million quarter-over-quarter reflected across the Canadian and U.S. consumer and commercial lending portfolio. By asset class, the largest quarter-over-quarter decreases were in the U.S. Cards portfolios related to seasonal trends coupled with the impact of a prior quarter model. and the U.S. commercial lending portfolio. Performing PCL was $395 million compared to a recovery of $4 million in the prior quarter. The current quarter performing provisions primarily relate to policy and trade uncertainty and were recorded in the Canadian Personal and Commercial, U.S. Retail, Wholesale Banking and Corporate Segment.

Kelvin: Please turn to slide 21.

Kelvin: The bank's impaired PCL was $946 million.

Kelvin: A decrease of $270 million quarter over quarter.

Kelvin: Collected across the Canadian and U S consumer and commercial lending portfolios.

Kelvin: By asset class the largest quarter over quarter decreases were in the U S cards portfolios related to seasonal trends, coupled with the impact of a prior quarter model update.

Kelvin: And the U S commercial lending portfolio.

Kelvin: Performing PCL was $395 million compared to a recovery of $4 million in the prior quarter.

Kelvin: The current quarter performing provisions primarily related to policy and trade uncertainty and were recorded in the Canadian personal and commercial U S. We do wholesale banking and corporate segments.

Ajai Bambawale: Please turn to slide 22. The allowance for credit losses was $9.6 billion, a decrease of $9 million quarter-over-quarter due to a $231 million impact from foreign exchange and lower impaired allowance, largely offset by performing reserves in the consumer and business and government lending portfolios related to policy and trade uncertainty and applied through overlays and an update to our macroeconomic forecast.

Kelvin: Please turn to slide 22.

Kelvin: The allowance for credit losses was nine 6 billion, a decrease of 9 million quarter over quarter due to a 231 million impact from foreign exchange.

Kelvin: And lower embed allowance.

Kelvin: Largely offset by performing reserves in the consumer and business and government lending portfolios.

Kelvin: Related to policy and creates uncertainty and applied to overlays and an update to our macroeconomic forecasts.

Ajai Bambawale: Please turn to slide 23. In light of recent events, we have provided additional disclosure regarding industries most exposed to elevated policy and trade. These industries represent 9% of the bank's gross loans and acceptance rates. Though the ultimate credit impact will depend on a range of factors, including the magnitude and duration of tariffs and government stimulus. While the industries of focus are broad, exposure to borrowers most sensitive to these risks is small, representing less than 1% of the bank's gross loan. We will continue to work closely with our customers through these challenging conditions.

Kelvin: Please turn to slide 23.

Kelvin: In light of recent events, we have provided additional disclosure regarding industry's most exposed to elevated policy and trade groups.

Kelvin: These industries represent 9% of the bank's gross loans and acceptances, though the ultimate credit impact will depend on a range of factors, including the magnitude and duration of Paris and government stimulus.

Kelvin: While the industries of focus our broad exposure to borrowers most sensitive to these risks as small representing less than 1% of the bank's gross loans.

Kelvin: We will continue to work closely with our customers through these challenging conditions.

Ajai Bambawale: Now in summary. Bank exhibited strong credit performance this quarter. evidenced by lower gross impaired loan formations, gross impaired loans, and impaired PCR.

Kelvin: Now in summary.

Kelvin: Bank exhibited strong credit performance this quarter ever.

Kelvin: Evidenced by lower gross impaired loan formations gross impaired loans and impact D C o's.

Ajai Bambawale: As a result of the ongoing policy and trade risks, we have reviewed our credit portfolios and bolstered our reserves in excess of $500 million over the past two quarters. That being said, there are many potential scenarios that could play out that may impact the economic trajectory and credit performance. some of which could. drive fiscal 2025 PCL results beyond the 45 to 55 basis points range I previously provided.

Kelvin: As a result of the ongoing policy and trade risks, we have reviewed our credit portfolios and bolstered our reserves in excess of $500 million over the past two quarters that being said there are many potential scenario that could play out that may impact the economics.

Kelvin: Smith trajectory and credit performance, some of which could do.

Kelvin: Drive fiscal 2025 Bcf results beyond the 45 to 55 basis points range I previously provided.

Ajai Bambawale: However, TD is well positioned to manage through this period considering a prudent provision For more information, visit www.fema.gov broad diversification across products and geographies, a strong capital position, and through the cycle underwriting standards that have served us well through challenging conditions in the past.

Kelvin: However, <unk> is well positioned to manage through this period, considering a prudent provisioning broad diversification across products and geographies, our strong capital position.

Kelvin: 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.

Kelvin: With that operator, we are now ready to begin the Q&A session.

Operator: We will now take questions from the telephone lines.

Speaker Change: We will now take questions from the telephone lines. If you have a question. Please press star one.

Operator: If you have a question, please press star 1. You may cancel your question at any time by pressing star 1. Please press star 1 at this time if you have.

Kelvin: So your question at any time by pressing Star two please press star one at this time if you other question.

Operator: This will be a brief pause while the participants register for their questions.

Kelvin: A brief pause while the bus.

Kelvin: Well just a follow up question. Thank you for your patience.

Kelvin: Okay.

Matthew Lee: We will take the first question from Matthew Lee.

Speaker Change: The first question from Matthew Lee Canaccord Genuity. Please go ahead.

Matthew Lee: Can I call Janine T. Please go ahead. Oh, good morning, nice to hear my question. I wanted to ask Leo one here. When I think about the reposition of the U.S. portfolio, you've talked a bit about, you know, $500 million in NII benefit in 2025. But the program could continue to the first half of 2026. So does that kind of imply that there's, you know, maybe a further couple hundred million of NII benefit that could be felt from the repositioning?

Matthew Lee: Oh good morning, Thanks, taking my question.

Kelvin: I wanted to ask real one here when I think about that.

Kelvin: Of your position in the U S portfolio, you've talked a bit about $500 million in NII benefit in 2025.

Kelvin: The program could continue into the first time, it's only 26, so does that kind of imply that there is.

Kelvin: Further a couple hundred million dollars of NII benefit that could be felt from the air conditioning in 'twenty six.

Leo Salom: So, Matt, thanks for the question. As you know, the trade effectively takes a loss up front, and then obviously you'll see the NIR recapture associated with the higher rate structures on the investment bond portfolio over the next three years. So you should expect that next year, the number will be slightly higher than what we recorded this year to reflect the calendarization impact. And that will continue through year three. And then thereafter, depending on market conditions, those investment bonds would reprice at market rates at that point in time.

Matthew Lee: So Matt Thanks for the question.

Matthew Lee: As you know the the trade effectively take.

Matthew Lee: It takes a loss upfront and then obviously, you'll you'll see the ni recapture associated with the higher rate structures on the investment bond portfolio over the next three years so.

Matthew Lee: You should expect that next year, the number will be slightly higher than what we recorded this year to reflect the calendar as Asian impact.

Matthew Lee: And then and that will continue through.

Matthew Lee: Through year, three and then and then thereafter, depending on market market conditions that those investment bonds would reprice at market rates at that point in time.

Leo Salom: And then we should be thinking about NIM as expanding in 2026 and beyond 2025 based on the Yeah, so maybe if I could just take a moment on there, because I know that our NIM is moving. We saw an 18 basis point improvement in the quarter. There's a number of factors that are influencing NI right now. First, as Kelvin described, we are running down some of the excess liquidity that we had built up late last year. Second, as you called out, the investment bond repositioning is starting to trickle through the P&L. And then obviously, the tractor-on-off rates right now represent a tailwind for the business.

Matthew Lee: And then we should be thinking about NIM is expanding in 2026 and beyond 2025 based on the new fishing.

Matthew Lee: Yes, so maybe if I could just take a moment on there because I know that our NIM is moving we saw an 18 basis point improvement in the quarter Theres a number of factors that are influencing and I right now first.

Matthew Lee: As Kelvin described we are running down some of the excess liquidity that we have built up late last year second as you as you called out the investment bond repositioning is starting to trickle.

Matthew Lee: Trickle through the P&L and then and then obviously the tractor on off rates right now represents a tailwind for the business. So we do expect that the NII trajectory over the next few quarters to be quite positive and we do expect that NIM expansion for for the core Q3 will be a substantial increase.

Matthew Lee: So we do expect that the NII trajectory over the next few quarters to be quite positive. And we do expect that NIM expansion for Q3 will be a substantial increase, you know, mirroring what we saw in Q2. I should state, because for the second quarter, we did have one extraordinary item, which is we did change the amortization period for some of our deferred product acquisition costs. That was about a $46 million charge we took. We would not expect that to reoccur in Q3. Okay, that's helpful.

Matthew Lee: During what we saw in in Q2, I should state because for the for the second quarter, we did have one.

Matthew Lee: Extraordinary item, which is we did change the amortization period for some of our deferred product acquisition costs that was about a $46 million charge. We took we would not expect that to reoccur in Q3.

Speaker Change: Okay. That's helpful I'll pass the line.

Operator: I'll pass the line.

Matthew Lee: Thank you Matt.

John: The next question is from John.

Speaker Change: The next question is from John <unk> from Jefferies. Please go ahead.

Raymond Chun: Good morning. Ray, I wanted to clarify something that I thought I heard in your prepared commentary. In context of the exit of the correspondent loans at the point of sale in the US, you mentioned that it was going, the proceeds were going to be diverted into proprietary bank card operation. Did I get that correct? And I guess, has that been previously disclosed or is this a new You're talking about the wind down of what we call our RCS business, which is our third-party credit card business. And so that's about a $3 billion US dollar portfolio that we're going to be winding down.

John Jefferies: Good morning Ray.

Matthew Lee: I wanted to clarify something that I thought I heard in your prepared commentary.

Speaker Change: Context of the exited the corresponding loans at the point of sale in the U S. You mentioned that it was growing the proceeds going to be diverted into proprietary bean curd operation did I get that correct and I guess has that been previously disclosed or is this a new initiative.

Speaker Change: Youre talking about the the wind down of our what we call our Rcs business, which is our third party credit card business and so that's about a 3 billion U S. Dollar portfolio that we're gonna be winding down.

Raymond Chun: And then that will provide us a capital that we can then redeploy to our proprietary credit card business that we've been building out organically for the last number of years.

Speaker Change: And then that will provide us.

Speaker Change: Our capital that we can then redeploy to our proprietary credit card business that we've been building out organically for the last number of years. Okay. Fantastic. Thank you sorry, good goodness.

John: Oh, fantastic. Thank you. Sorry, I got the misperception on my part.

Kelvin Tran: And then, Kelvin, in relation to the restructuring charge, again, I apologize if I missed this, but did you give us a breakdown in terms of which of the segments will be more or less impacted by this? So, hi, it's Kelvin. The impact is pretty broad-based across the bank. I can offer that in terms of nature, it's going to be on the workforce, real estate optimization, asset impairment, really about tech decommissioning, and then also a wind-down of some businesses like Ray and Leo talked about earlier.

Speaker Change: On my part and then Calvin.

Speaker Change: Listen to the restructuring charge again I apologize if I missed this but did you give us a breakdown in terms of which segments will be will be more or less impacted by this.

Speaker Change: No.

Kelvin: Hi, it's Kelvin.

Speaker Change: The impact is pretty broad based across the bank.

Speaker Change: I I can offer that in terms of nature.

Speaker Change: It's going to be on the workforce real estate optimization asset impairment really about tech decommissioning.

Ray Leo: And also a wind down of some businesses like Oh, Ray and Neil talked about earlier.

Operator: Thanks, I'll allute you.

Speaker Change: Okay. Thanks, I'll re queue.

Speaker Change: Thank you.

Speaker Change: Next question is from Gabriel This sign from National Bank Financial. Please go ahead hi.

Operator: and National Bank of India.

Gabe: Hi, I just want to ask about your, you know, your excess capital position. So if I, you know, look at where you are today, factor in the amount of buybacks you're still committed to at current prices, and then this restructuring charge leaves me with a pro forma ratio of about just under 14%. So still a good amount that I think most investors and myself anyway, look at as, well, those are the funds that are still remaining from the Schwab sale that you said, you'd be using some of that for internal investment. And if there's anything remaining, you could be, you know, increasing the buyback or buyback more stock than people announced already at some point.

Gabriel: I just wanted to ask about your AR and your excess capital position.

Speaker Change: So if I look at where you are today.

Speaker Change: A factor in the amount of buybacks youre still committed to our current prices and then this restructuring charge.

Speaker Change: It leaves me it leaves me with a pro forma ratio of about just under 14% so still a good amount but the.

Speaker Change: But the.

Speaker Change: I think most investors and myself anyway look out of well that's the those are the funds that are still remaining from the swap sale that you said.

Speaker Change: You'd be using something about for internal investments and if theres anything remainder in you could be you know increasing the buyback or rather.

Speaker Change: Hey back more stock than people announced already at some point in time.

Gabe: Just wondering what the current view is and what the potential is for another large buyback is, you know, the macro climate certainly dicier, maybe there's other investment initiatives you have in mind. So maybe you can provide some clarity.

Speaker Change: Just wondering what the current view is and.

Speaker Change: And what the potential is for another large buyback is you know the macro climate certainly dicier, maybe there's other initiatives investment initiatives you have in mind. So maybe you can provide some clarity.

Gabe: Thanks. Gabe, I appreciate the question. Let me start by saying, as I said in my prepared comments, on the current NCIB, our commitment is still to execute the $8 billion NCIB buyback. And as we get through our strategic review, and as I stated at the investor day, we'll sort of lay out for you where we think we're going to deploy some of that capital, and some of that certainly from, we're seeing significant organic growth opportunities. And we're still looking at rightsizing some of the portfolios from a scale, those businesses that may not be core to our business.

Gabe: Hey, Gabe I appreciate the question.

Gabe: Let me start by saying as I said in my in my prepared comments on the current in CIB. Our commitment is still to execute the $8 billion in CIB buyback.

Gabe: And as we get through our strategic review and as I stated at the Investor Day was sort of lay out for you.

Gabe: Where we think we're going to deploy some of that capital and some of that certainty farm, we're seeing significant organic growth opportunities and we're still looking at.

Gabe: Right sizing some of the portfolios from a scale.

Gabe: Those businesses that may not be core to our business and so we're looking at some of those opportunities.

Gabe: And so we're looking at some of those opportunities. And at the end of all of that, you know, we will assess the current market. I mean, these are uncertain times, and there certainly is value in being well capitalized as we think forward. But as we move through this uncertainty, and as we get through our strategic review, if we still then that we have excess capital, as I've said before, then we then look at as another opportunity to do another buyback. So there could be some more costs associated with like the those funds shouldn't be automatically assumed to be a there's a big buyback coming into there's more more investment required, right?

Gabe: And at the end of all of that we will assess the current market. I mean, these are uncertain times and there's a there's certainly has value and being.

Gabe: Well capitalized as we think forward.

Gabe: We move through this uncertainty and as we get through our strategic review if.

Gabe: If we still then feel that we have excess capital as I've said before then we then looked at as another opportunity to do another buyback.

Gabe: So there could be some.

Gabe: More costs associated with like the votes, one shouldn't be automatically assemblies.

Gabe: There's a big buyback coming into it with more more investment required right.

Gabe: I think as part of our strategic review, we're definitely... Looking at how we deploy some of that capital, and then we'll assess the opportunity for a buyback later in the year and sort of closer to next year.

Gabe: Yeah, I think that's part of our strategic review, where we are definitely.

Gabe: Looking at how we deploy some of that capital and then we'll assess the opportunity for a buyback later later in the year and sort of closer to next year.

Gabe: Okay. And then, thanks for that. On the bond portfolio repositioning, I think I've heard you talk about it in the past, like it was going to be done by the end of this quarter, or maybe I misunderstood, but we're, you know, roughly halfway through, should be done by the midpoint of the calendar year. That's fine. I'm just looking at the guidance on the NII uplift. You're still talking about a $300 to $500 million U.S. NII uplift. That's not an annualized figure. That's an actual impact on this fiscal year, correct?

Gabe: And then on the thanks for that on the bond portfolio repositioning.

Gabe: I think I've heard you talk about in the past like is it going to be done by the end of this quarter.

Gabe: Or maybe I misunderstood, but were you know roughly halfway through should be done by the midpoint of the calendar year.

Gabe: Fine.

Gabe: I'm just looking at the guidance on the NII uplift, you're still talking about a 300 to 500 million U S. NII uplift that's not an annualized figure that's an actual impact on this fiscal year correct.

Gabe: And I guess that's it. more successful reinvestment? Is that basically the story?

Gabe: Like I said.

Matthew Lee: More successful reimbursement was up basically the story that Gabe Gabe good morning, its Lee.

Leo Salom: Gabe, good morning, this is Leo. Yes, the short answer. We are virtually complete the actual investment bond portfolio. We had indicated we'd be done by the end of the calendar. I think we'll be done virtually over the next few days and weeks. So I'm pleased on where we are with regards to the work markets have been constructive. And so we were able to complete it a little bit ahead of schedule. Now, with regards to the impact, what we have indicated, Kelvin mentioned it in his prepared remarks, we had given back in October a range of $300 to $500 million.

Gabe: Yes, the short answer.

Speaker Change: We are.

Speaker Change: We are virtually complete the actual investment bond portfolio, we'd indicated we'd be done by the end of the calendar I think will will be done virtually over the next few days and weeks so okay.

Gabe: I'm pleased on where we are with regards to the work market's been constructive and so we were able to complete it.

Speaker Change: A little bit ahead of schedule now now with regards to the impact what we have indicating Kelvin mentioned it in his prepared remarks.

Speaker Change: We had given back in back in October a range of $3 million to $500 million in and we can confirm to you right now that it'll be on the upper end of that of that range that that is an in year 2025, yeah.

Leo Salom: And we can confirm to you right now that it'll be on the upper end of that range. That is in year 2025.

Gabe: Okay, great.

Speaker Change: Okay, great. So it was.

Kelvin Tran: So, and then just to sneak another one in there, the corporate NII, a big, big jump up there. You mentioned treasury activities. Is there any, you know, unusual drivers there or is that some sort of new run?

Speaker Change: And then just to sneak another one in there the corporate NII like Big Big jump up there you mentioned treasury activities.

Speaker Change: Is there any.

Speaker Change: Unusual drivers there or is that some sort of new run rate.

Kelvin Tran: Hi, it's Kelvin. That's right. The treasury activity that we're mentioning relates to the investment from the proceeds of the Schwab share sale. Okay. We sold those shares, we had cash coming in, and those are invested, generating higher NII in the corporate segment. And then you would expect that NII to come down over time as we redeploy that cash to buy back shares. Got it. Thank you. Thanks, Gabe.

Speaker Change: Hi, Hi, it's Kelvin Oh, that's right.

Speaker Change: Activity that we're mentioning relates to the investment from the proceeds after the swaps are sure Sal.

Speaker Change: We sold those shares we had oh.

Speaker Change: Coming in and those are in bad debt generating higher NII in the corporate segment and then you would expect NII to come down over time as well as we redeploy that cash to buy back shares got it. Thank you.

Speaker Change: Thanks, Craig thank.

Speaker Change: Thank you. The next question is from Doug Young of Deutsche Bank. Please go ahead.

Doug Young: This question is from Doug Young, Desjardins Capital Markets. Hi, good morning.

Speaker Change: Hi, Good morning, just wanted to clarify one thing.

Raymond Chun: Just wanted to clarify one thing, Ray or Leo, just on the business exit, the point of sale, business exit, you're talking about the Target credit card box and the other retailer credit card box, just Do I have that right, or do I have that wrong? No, Doug. Let me just clarify that.

Speaker Change: Just on the the business acts at the point of sale.

Speaker Change: You're talking about the target credit card books and the other.

Speaker Change: Retail and credit card books.

Speaker Change: Do I have that right or do I have that wrong.

Speaker Change: So Doug let me just clarify that there are three three businesses and our overall cards stable. One is our proprietary bank card business, which we've indicated is core and we've done a number of things happy to elaborate a little bit more there second our co branded card offering and we have two critical partners Nordstrom.

Raymond Chun: There are three businesses in our overall cards stable. One is our proprietary bank card business, which we've indicated is core, and we've done a number of things. Happy to elaborate a little bit more there. Second, our co-branded card offering. And we have two critical partners, Nordstrom and Target. Those remain strategic. We're very pleased with the relationship we have with both firms. And then there's this point-of-sale financing business, or what we have historically referred to as our retail card services business. And the challenge with that business, despite the fact we have very strong relationships with some of the top retailers across the country, is that business does not scale quite as well.

Speaker Change: Target those remain strategic we're very pleased with the relationship we have with both firms and then there's this point of sale financing business or what we have historically referred to as our retail card services business and the challenge with that business. Despite the fact, we have very strong relationships with some of the top retailers across the country.

Speaker Change: Is that business does not scale quite as well and when we were looking at what was going to be required to transform that business. It was going to be consumptive of significant investment and resources and at a time, but we're really thinking through where do we want to invest capital for the greatest return as Ray indicated we felt that it was more important to be able to invest in our in our <unk>.

Raymond Chun: And when we were looking at what was going to be required to transform that business, it was going to be consumptive of significant investment resources. And at a time when we're really thinking through where do we want to invest capital for the greatest return, as Ray indicated, we felt that it was more important to be able to invest in our core proprietary cards business. So just to be clear, proprietary cards and our co-branded cards remain very much core and strategic, long-term strategic priority.

Speaker Change: Core proprietary cards business. So just.

Speaker Change: Just to be clear proprietary cards, and our co branded cards remain very much core and strategic.

Speaker Change: Long term strategic priority for us.

Doug Young: Okay, that's, that's clear.

Speaker Change: Okay. That's clear and then one other can you talk about any other businesses that you're that you would be thinking from a wind down perspective, and I would assume it's not just the U S. That's going to be across all of them in different areas, but anything else that you would.

Raymond Chun: And then what other Can you talk about any other businesses that you're that you would be thinking from a wind down perspective, and I would assume it's not just the US, this would be across all But anything else that you would highlight in terms of business exits or one thing?

Speaker Change: Highlight in terms of business exits or wind down.

Raymond Chun: I would say not not on this call, but we certainly are looking at all of our options and going through all of our product services and businesses and some of that we will share as we get to the Q3 call and then certainly we'll have more to share as we get to investor day.

Speaker Change: But I would say not not on this call, but we certainly are looking at all of our options and going through all of our products services and businesses and some of that we will share as we get to the Q3 call and certainly we'll have more to share as we get to Investor day.

Raymond Chun: there. Fair enough.

Speaker Change: No fair enough I figured that.

Doug Young: I figured I'd try and then just, you know, maybe lastly, the Canadian It seemed like there was a sequential decent drop in non-interest income. Maybe I got that wrong. But is there anything in particular that went through in the Canadian banking on the revenue side that was abnormal? Or what, you know, what would have caused the sequential decline in the non interest income?

Speaker Change: And then just.

Speaker Change: Maybe lastly.

Speaker Change: Thank you.

Speaker Change: It seemed like there was a sequential decent drop in noninterest income.

Speaker Change: Maybe I've got that wrong, but is there anything in particular that went through on the Canadian banking on the revenue side that was abnormal or what you know what would have caused a sequential decline in the non interest income line.

Sona Mehta: Hi, Doug. It's Sona. I'll take that. Sequentially, it would have been three less days sequentially and on a year-over-year basis. Also, you might recall we had leap year last year, so there was one fewer day effectively this Q2. That's about a 1% impact to revenue on a Q2 year-over-year basis or $40 million. Overall, the business fundamentals for CADPNC are solid. And beyond the NII piece on the other income, there were a collection of smaller Q2 impacts. I can give you a couple of examples. We would have seen moderated foreign currency spend both on the debit and credit side as consumers had a little more caution, especially with cross-border purchases.

Speaker Change: And then I guess kind of I'll take that sequentially. It would've been three less days sequentially.

Speaker Change: Year over year basis also you might recall, we had leap year last year. So there was one fewer day effectively. This Q2, that's about a 1% impact to revenue on a Q2 year over year basis or $40 million.

Speaker Change: Overall, the business fundamentals African P. M C are solid.

Speaker Change: Beyond the NII piece on the other income never a collection of smaller actually two impacts I can give you a couple of examples we would've seen moderated foreign currency stand both on the debit and credit side is that consumers are a little more caution, especially with cross border purchases.

Sona Mehta: We saw some lower merchant acquiring revenue in the business bank and some small timing items. So, no one big thing on the other income side for Q2, but rather a collection of smaller things. So, really, I'd say a few factors. The biggest is days and leap year. But I would say as we look ahead, we're encouraged by the late Q2 volume momentum. We read that as a positive sign for Q3. And we're expecting quarter-over-quarter NIMS stability as Calvin had noted. So, overall, we're feeling confident heading into Q3.

Speaker Change: We saw some of our merchant acquiring revenue.

Speaker Change: Business banking small timing items I know no one big thing on the other income side for Q2, but rather a collection of smaller things. So really I'd say a few factors that I guess, there's days in leap here.

Speaker Change: But I would say as we look ahead, we are encouraged by the late Q2 volume momentum we read that as a positive sign for Q3, and then we are expecting quarter over quarter NIM stability as Calvin had noted so overall, we're feeling confident heading into Q3.

Speaker Change: I appreciate the color. Thank you.

Paul Holden: Appreciate the color. Thank you.

Speaker Change: Thank you.

Speaker Change: Next question is from Paul <unk> from CIBC. Please go ahead.

Paul Holden: Paul Holden Thank you.

Speaker Change: Thank you good morning, I wanted to get a better understanding of what drove the sequential decline in impaired PCL and Canadian P&C banking like listening to raise opening remarks regarding the macro backdrop, all of which I think makes sense, which suggests sort of higher impaired PCL.

Ajai Bambawale: Good morning. I want to get a better understanding of what drove the sequential decline in impaired PCLs in Canadian PNC banking, like listening to Ray's opening remarks regarding the macro backdrop, all of which I think makes sense, would suggest sort of higher impaired PCLs, but obviously, we saw it lower. So just wondering what drove that and if there's anything we can take away from that trend in terms of forward expectations? Yeah, well, thanks, Paul.

Speaker Change: But obviously, we saw it lower so just wondering what drove that and if there's anything we can take away from that.

Speaker Change: That trend in terms of our.

Speaker Change: Forward expectations.

Speaker Change: Yeah, well, thanks, Paul It's Jim Let me give you an overview.

Ajai Bambawale: It's Ajai. Let me give you an overview of... what's happening on impaired PCLs and I'll go to Canadian PNC as well. So as I said in my prepared remarks, impaired PCLs, they're down substantially, 270 million. We've seen it in Canadian PNC. The numbers in US retail are quite big, corporate segment as well. Numbers went up slightly for wholesale. If I look at Canadian PNC, the numbers are down across asset classes. So, resale numbers are down, auto numbers are down, cards numbers are down, and commercial numbers are down. They're not large dollars, but I'd call them quite symbolic, because it's really telling us that if you keep this tariff issue aside, we were really seeing peak PCL and good quality, and I think the fact that rates have come down have helped borrowers.

Speaker Change: What's happening on impaired PCL.

Speaker Change: Although the Canadian P&C is as well so as I said in my prepared remarks impaired PCL theyre down substantially 270 million.

Speaker Change: <unk> seen it in Canadian P&C the numbers in U S retail up quite big corporate segment as well numbers went up slight teeth for a wholesale.

Speaker Change: If I look at Canadian P&C, yes.

Speaker Change: Number down across asset classes. So Russell numbers are now auto numbers about clogs numbers are down and commercial numbers.

Speaker Change: No, they're not large dollars, but I'd call them quite symbolic because its really telling us that if you keep this tariff issue. Aside we were really seeing big PCL and good quality and I think the fact that rates have come down.

Speaker Change: Have help borrowers and then if I turn to U S. Retail you know again, the numbers down quite a bit.

Ajai Bambawale: And then if I turn to U.S. retail, again, the number's down quite a bit. Cards is a big contributor, but as I said in my prepared remarks, there are two factors there. One is seasonality, and the second is we put a model update in the last quarter, so quarter over quarter, there is a decline. But there are other asset classes that have come down. So, for example, the commercial numbers in the U.S. are down a fair bit. Auto is down, but part of auto is seasonality, but resale and other parts of other consumer are also down.

Speaker Change: Cards is a big contributor, but as I said in my prepared remarks. There are two factors one is seasonality and the second is we put a model update in the last quarter or so quarter over quarter. They is it a decline, but the other asset classes that have come down. So for example, the commercial number.

Speaker Change: In the U S are down a fair bit auto is gone, but part of waters seasonality, but Russell and other parts of other consumer also down. So this is not just a one off yes, there's seasonality and was moderately shoe is certainly a factor and contributed but I think on a broader basis.

Ajai Bambawale: So, this is not just a one-off. Yes, there's seasonality, and this model issue is certainly a factor and a contributor, but I think on a broader basis, we're seeing good credit quality. And then just finally on wholesale, wholesale numbers went up a little bit. It's $28 million, and that's because we took some incremental PCL for three existing borrowers in Telco, CableMedia, Power & Utility, and Creed Office, and we did have two impairments there as well in forestry. So, that's the overall picture on impaired PCL, and I do view it as quite a positive development.

Speaker Change: We're seeing good credit quality and then just finally on wholesale wholesale numbers went up a little bit its $28 million and that's because we took some incremental PCL for three existing borrowers in telco cable media power and utility and create office and we did have two.

Speaker Change: Impairments are there as well in Florida Street. So that's the overall picture on <unk>.

Speaker Change: Third Bcf and I do view it as a quite a positive development.

Speaker Change: Uh huh.

Kelvin Tran: Second question is with respect to the cost restructuring and what I'm really going to try and get at is sort of roughly what proportion could we expect to benefit bottom line, i.e. operating efficiency. One of the reasons I asked, just you know looking through some of the numbers in the sub-pack, I've seen Canadian T&C FTE year-over-year is down roughly 6% so we've had significant headcount reduction but expenses still up 5% so obviously the composition of expenses is changing so again I think it just raises the importance of the question how much of the cost restructuring gets redeployed into you know other initiatives, investments and how much of it has dropped through to improved efficiency.

Speaker Change: Second question is with respect to the cost restructuring and what I'm really going to try and get out is sort of roughly what proportion could we expect to benefit <unk>.

Speaker Change: Line.

Speaker Change: <unk> operating efficiency and one of them one of the reasons I ask just looking through some of the numbers in the sub pack.

Speaker Change: In Canadian P&C FTE year over year is down roughly 6% we've had significant head count production.

Speaker Change: <unk> expenses come up 5%. So obviously the composition of expenses is changing so again I think it just raises the importance of the question how much of the cost restructuring gets redeployed into.

Speaker Change: No other.

Speaker Change: Initiatives investments and how much of it just dropped through to prove deficiency.

Kelvin Tran: Hi, it's Kelvin, I take that. Yeah, so we see significant opportunities to continue to invest in the business to drive future growth. And one area, as you would expect, is on the digital, AI and technology front. And so that spend does not always translate into specific FTEs, but those are investment that are important investment for us. Okay, so if I understand the answer, then most of it gets redeployed into investment. Correct. That's correct.

Speaker Change: It's Kelvin I'll take that.

Speaker Change: Yeah. So we see significant opportunities to continue to invest in their business to drive future growth and and one area as you would expect it on the digital AI.

Speaker Change: Allergy front end, so that that spend does not always translate into specific ftes, but those are investments that are important investment for us.

Speaker Change: Okay. So if I understand the answer there and then most of it gets redeployed into investments into the business right. That's correct. Okay. Okay. That's it for me. Thank you.

Operator: Okay, that's it for me, thank you.

Speaker Change: Paul.

Speaker Change: Thank you. The next question is from us around mobility from BMO capital markets. Please go ahead.

Sohrab Movahedi: Sohrab Movahedi. and Capital Markets, please. Okay, thank you.

Speaker Change: Okay. Thank you and maybe I can if I could just start off with steel.

Sohrab Movahedi: Maybe I can, if I can just start off with Leo, I mean, Leo, obviously lots of good work getting done, lots of moving parts. In the first half of the year in U.S. dollars, U.S. retail has done around $1.2 billion.

Speaker Change: Obviously lots of good work getting done lots of moving parts.

Speaker Change: In the first half of the year in U S dollars U S. Retail has done around one 2 billion.

Speaker Change: Billion.

Sohrab Movahedi: What do you think the second half of the year will be from an earnings contribution?

Speaker Change: What do you think the second half of the year will be from an earnings contribution perspective.

Leo Salom: Sohrab, good to talk to you. We're not going to provide a guidance at this point but maybe if I can give you the moving parts. Sohrab, generally speaking, we're constructive, we're very positive about what the second half will look like and what's driving that is, one, as I indicated before, I do think we will have NII tailwinds based on the factors that I described before, that being excess liquidity, the investment bond repositioning and the tracker on-off rates, all those things will give us a tailwind as we think about the back end of the year. I do think that from a fee line, another income perspective, we saw in the quarter strong growth in our wealth business, continued work with TD Cowen and our commercial banking business on the lending fees line and sustained growth in our retail consumer, retail deposit franchise, which will translate into service fees.

Speaker Change: Sure.

Speaker Change: Good to talk to you.

Speaker Change: We're not going to provide a guidance at this point, but maybe if I can give you the moving parts.

Speaker Change: But generally speaking we're constructive we're very positive about what the second half will look like and what's driving that is one as I indicated before I do think we will have an eye tail winds are based on the factors that I described before that being less excess liquidity investment bond.

Speaker Change: Positioning of the tracker on off rates all of those things will will give us a tailwind as we think about the the back end of the year I do think that from a from a fee line. Another income perspective, and we saw in the quarter strong growth in our wealth business.

Speaker Change: Continued work with TD, Cowen and our and our commercial banking business on the on the lending fees line and sustain growth in our retail consumer retail deposit franchise will which will translate into service fee. So you put those things together and I think from a revenue standpoint, we would expect revenues to be.

Leo Salom: So you put those things together and I think from a revenue standpoint, we would expect revenues to be sustained and strong. From a cost standpoint, just quickly, I would say we would expect a moderation in the rate of growth in expenses in the second half. And that reflects a number of things. One is the year-on-year financial shape, but also some of the work that we're doing from a productivity standpoint to absorb some of the governance and control type activities. So I think, you know, we remain, while expenses related to AML will be slightly higher based on our spend pattern for the first half of the year, I think generally speaking, we'll see a moderation in the rate of growth.

Speaker Change: Sustained and strong from a cost standpoint, just quickly I would say, we would expect a moderation in the in the rate of growth in expenses in the second half.

Speaker Change: And that reflects a number of things one is the year on year financial shape, but also some of the work that we're doing from a productivity standpoint to absorb some of the governance and control type activity. So I think we remain while expenses related to AML will be slightly higher based on our spend pattern for the first half of the year I think generally speaking I will see you.

Speaker Change: A moderation in the rate of growth and you've heard Ajay talk about where we are from a overall health of the credit portfolio itself. So you put those things together and we are feeling optimistic about what the second half of the year is going to be in the one thing that we have been and raised been very clear about this I think ive messaged as well is we're really focused on improving the rich.

Leo Salom: And you heard Ajai talk about where we are from an overall health of the credit portfolio itself. So you put those things together and we are feeling optimistic about what the second half of the year is going to be. And the one thing that we have been, and Ray's been very clear about this, I think I've messaged as well, is we're really focused on improving the return on equity profile quarter-on-quarter through this year and into next year. As we think about the Investor Day discussion, I think we'll provide a little bit more guidance as to firming up what that objective looks like.

Speaker Change: Now on equity profile quarter on quarter through this year and into next year as we think about the Investor day discussion I think will provide a little bit more guidance as to as to firming up with that objective looks like but long.

Sohrab Movahedi: But long-winded way of saying, I think we feel very positive about the back end of the year. Okay, that's really helpful. Thank you.

Speaker Change: Long winded way of saying I think we feel very positive about the back end of the year.

Speaker Change: Okay. That's really helpful. Thank you and if I can just sneak one more in for Rajiv I mean.

Ajai Bambawale: And if I can just sneak one more in for Ajai, I mean, I think, Ajai, you said, you know, tariffs aside, everything's fine, actually. But if you think about the complex environment, the tariffs, all the puts and takes, where do you think you will actually see deterioration? Will it be in the, I'll call it the business and corporate lending stuff, or do you think it will be in the consumers?

Speaker Change: I think you said you know tariffs aside everything's fine actually but if you think about the complex environment to tariffs all the puts and takes.

Speaker Change: Where do you think you will actually see deterioration will it be in the I'll call. It the business in corporate lending stuff, where do you think it will be in the consumer stuff.

Ajai Bambawale: Yeah, well, thanks, Sohrab. I think, I think you could see it actually in both, because if the macro deteriorates, you will see it in consumer and the way we built our reserves, you know, we have built both for consumer and business and government lending. I do think, and we have built the reserves that way, that there could be bigger impact on non-retail. And most of this $500 million that we're talking about has actually been built in business and government. And what we did is we actually went and looked first at the industries that were exposed to tariffs.

Speaker Change: Thanks.

Speaker Change: I think I think you could see it actually booked because.

Speaker Change: If the macro deteriorates, you will see it in consumer and the way we built our reserves you know we have both for consumer and business and government lending I.

Speaker Change: I do think and we have built the reserves that way that there could be a bigger impact on our non retail and most of this 500 million that we're talking about is actually being built in business and in government and what we did is we actually went and looked first at the industries that were exposed to tariffs.

Ajai Bambawale: Okay, that's the 9% number that we had disclosed. After that, we went and looked on a more narrow basis saying, what out of these borrowers are most sensitive to tariffs? But we looked broadly at the financial impact, again, across the 9%, not just the smaller population. We looked at the ratings migration that could occur. And based on that ratings migration, we built our reserves. So again, this $500 million, a big part of it is business and government, but there is some for consumer because if the macro deteriorates, I think you should expect there'll be impact on the consumer as well.

Speaker Change: That's the 9% number that we have disclosed after that we went and looked at on a more narrow basis, saying what out of these borrowers are most sensitive data.

Speaker Change: And but we look broadly at the financial impact again across the 9% not just the smaller smaller population. We look at the ratings migration that could occur based on that ratings migration. We built a result, so again this 500 million a big part of it is business and government.

Speaker Change: There is some for consumer because if the macro deteriorates I think you should expect there'll be impact on the consumer as well.

Tim Wiggan: Okay, and so was this equity markets right down in equity investment portfolio markdowns you talk about? Would you dub that as tariff related as well? It's Tim Wiggan, so I would attribute that to our strategic portfolio, a mark-to-market on our strategic portfolio, which would correlate more to index declines within quarter. And so if you see a normalization quarter over quarter in the S&P, that can reverse. So it was a factor in quarter, but it was a mark-to-market event. I see. Okay. Thank you for that, Clarence.

Speaker Change: Okay, and so was this equity markets right town equity investment portfolio Mark Downs, you talk about was that what would your depth that is tariff related as well.

Speaker Change: Wholesale banking yeah, it's a it's Tim Wiggins, so I would attribute that to our strategic portfolio Mark to market on our strategic portfolio, which would correlate more to index declines within quarter.

Speaker Change: And so if you see a normalization quarter over quarter are in in the S&P that can reverse so it was a factor in the quarter, but it was a mark to market about I see okay. Thank you for that clarity.

Speaker Change: That's it for me.

Speaker Change: Thank you. The next question is from Mike.

Mike Hizanovic: The next question is from Mike Hizanovic. Shabang, please go ahead.

Speaker Change: From Scotiabank. Please go ahead.

Leo Salom: Hi, good morning. Question for Leo. Just wanted to talk a little bit about the AML spend. And it looks like, I think this is new guidance, correct me if I'm wrong, but the $500 million persisting in 2026. And I guess I was under the impression, I think a lot of investors were, that that number could potentially fall off at some point. So I'm not trying to ask for 2027 guidance, but is that still the dynamic where you do expect at some point these expenses will fall off to some extent? Or is it more of a perpetual sort of run rate for AML?

Mike: Hi, Good morning question for Leo just wanted to talk a little bit about AML spend and it looks like I think this is NIE guidance correct me, if I'm wrong, but the 500 million persisting into 2026.

Mike: I guess I was under the impression I think a lot of investors are worried that that number could potentially fall off at some point so.

Speaker Change: Not trying to ask for 2027 guidance, but is that still the dynamic where you do expect at some point. These expenses will fall off to some extent or is it more of a perpetual sort of run rate for AML.

Leo Salom: Mike, let me let me answer that by first saying that we are we are comfortable with the guidance that we've provided for 2025. So in other words, we do believe that we will operate within the $500 million guidance that we've provided. We spent between the first and second quarter about $196 million. We'll see a slight uptick as we as we go into the heat of the meat of our remediation delivery programs. But I feel comfortable with that guidance. What we did is we we wanted to give the street a sense of what 2026 was going to look like.

Speaker Change: Mike Let me, let me answer that by first saying that we are we are comfortable with the guidance that we provided for 2025. So in other words, we do believe that we will operate within the $500 million guidance that we provided we spent.

Speaker Change: Between the first and second quarter about $196 million.

Speaker Change: We will see a slight uptick as we as we go into the the heat the need of our remediation delivery programs, but I feel comfortable with that guidance. What we did is we wanted to give.

Speaker Change: The Street, a sense of what 2026 was going to look like I'd say right now we believe that the spend will be similar the composition of the spend might change a little bit it might be a little less remediation more validation work more look backs.

Leo Salom: I'd say right now we believe that the spend will be similar. The composition of the spend might change a little bit. It might be a little less remediation, more validation work, more look backs, monitor costs, et cetera. So the composition might change, but we think the overall spend level is going to be similar. Then I wouldn't want to speculate on 27, 28, but I feel like the program is moving. We're actually making good progress on the remediation plan. We're hitting the milestones. We're tracking well. So I feel positive about some of the expense guidance that we've already provided.

Speaker Change: Monitor cost et cetera, so the composition might change, but we think the overall spend level is going to be similar and then I wouldn't want to speculate on 27 28, but I feel like that the program is moving we're actually making good progress on the remediation plan, we're hitting the milestones we're tracking well so I I feel positive about.

Speaker Change: Some of the expense guidance that we've already provided.

Leo Salom: It's also no color, you can't really provide any color on potentially drawing that to some extent lower at some point in the future. There's no question as we start thinking about those outer years, I would expect that the raw remediation program management expenses that we're incurring today will fall off. We could have a slight uptick in some of our run costs, but net-net there will be a decline at some point in the future. Okay, that's helpful.

Speaker Change: Okay.

Speaker Change: No color you can't really provide any color on potentially drawing that to some extent lower at some point in the future, but there's no question as we start thinking about those outer years I would expect that the wall remediation program management.

Speaker Change: <unk> expenses that we're incurring today will fall off we could have a slight uptick in some of our run costs, but net net there will be a decline at some point in future.

Speaker Change: Got it Okay. That's helpful. And then maybe a quick one for Sundar just on the mortgage business in Canada.

Sona Mehta: And then maybe a quick one for Sona, just on the mortgage business in Canada, it does look like TD saw a bit of a decline sequentially. And I think there has been quite a bit of underperformance versus most of your peers, just in terms of your your reso balances in the K&P&C segment. Can you help me understand what's driving that? I was sort of under the impression that with the, you know, the big push from the mortgage, the mortgage mobile specialist, sorry, that you probably could see at least market level growth and maybe even some outperformance on on some of those initiatives.

Speaker Change: It does look like TD saw a bit of a decline sequentially and I think there has been quite a bit of underperformance versus most of your peers. Just in terms of your reservoir balances and became P&C segment could you help me understand what's driving that I was sort of under the impression that with the the big push from.

Speaker Change: The mortgage.

Speaker Change: Mortgage mobile stuff specialist sorry.

Speaker Change: That you you probably could see at least market level growth and maybe even some outperformance on some of those initiatives, but I'm just a little bit confused as to why why you would be underperforming just given some of those new.

Sona Mehta: But I'm just a little bit confused as to why why you would be underperforming just given some of those new distribution channels that you sort of introduced the last couple years.

Speaker Change: Distribution channels.

Speaker Change: You sort of introduce the last couple of years.

Sona Mehta: Yeah, Mike, this is Sona. Thanks for the question. So maybe I'll just start just briefly on the macro context. You know, we've clearly seen buyers sitting, waiting a little bit on the sidelines, you know, we're seeing inventory build up, I think we're up to five months of inventory. And I think, you know, each of the last three months of CREA housing sales were in the range of nine to 10% lower on a year over year basis. And so it's certainly a different spot than where we were in early Q1, you know, in early Q1, we were gearing up for a strong spring, just given the natural supportive rate environment, but uncertainty is weighing on buyer sentiment.

John Jefferies: Yeah, Mike This is John Thanks for the question. So maybe I'll just start just briefly on the macro context.

Speaker Change: Clearly seen buyers sitting waiting a little bit on the sidelines now, we're saying inventory buildup I think we're up to five months of inventory and I think you know each of the last three months of Korea housing sales were in the range of 9% to 10% lower on a year over year basis.

Speaker Change: And so it's certainly a different spot than where we were in early Q1, you know in early Q1, we were gearing up for a strong spring just given the natural support airfreight environment.

Speaker Change: Uncertainty is weighing on buyer sentiment. So really you know a lot has changed in the last four months.

Sona Mehta: So really, you know, a lot has changed in the last four months. Now, if I look at our specific competitive position, we're a multi channel through the cycle lender, I would say in this particular market, our broker originations have moderated a little bit, you know, we have really strong relationships, and we continue to compete for profitable business. But you mentioned the MMS, and what I thought might be helpful to share is, despite the macro headwinds, I'm really pleased with the strength that we've seen in our proprietary channels. So, if I look at our branch and MMS proprietary ecosystem, originations – and again, this is despite the macro environment – originations in those two channels are actually up double digits year over year.

Speaker Change: If I look at our specific competitive position, where a multichannel thriller cycle lender I would say in this particular market our broker originations have migrated a little bit you know, we have really strong relationships and we continue to compete for profitable business.

Speaker Change: But you you mentioned, the MMS and what I thought might be helpful to share is despite the macro headwinds I'm really pleased with the strength that we've seen in our proprietary channels.

Speaker Change: And so if I look at our branch in them and us proprietary ecosystem originations and again. This is despite the macro environment originations in those two channels are actually up double digits year over year, and so while you see a flat average sequential growth on a spot basis, we're actually up a billion and a half.

Sona Mehta: And so, while you see a flat average sequential growth, on a spot basis, we're actually up $1.5 billion quarter over quarter. So, the growth is there. The profile was a little different this quarter, where we had higher paydowns in January and February, but then we exited the quarter with momentum. So, overall, I think the fundamentals are very good. What we are highly focused on, Mike, is really building speed in our ecosystem, ensuring we have specialization. Our branch mortgage referral ecosystem, I had shared on the Q1 call, we had tripled referrals in that ecosystem in Q1, and that has continued in Q2.

Speaker Change: Right around the corner. So the growth is there a debt profile is a little different this quarter, where we had higher paydowns in January and February, but then we exited the quarter with momentum.

Speaker Change: So I think the fundamentals are very good what we are highly focused unlike Israeli building speed in our ecosystem.

Speaker Change: Certainly have specialization.

Speaker Change: Our branch mortgage referral system ecosystem I shared on the Q1 call. We had tripled referrals in that ecosystem in Q1 and that has continued into two so on a year to date basis. The branch out unless I ever felt ecosystem is performing incredibly well. So I would say good exit momentum into Q2, and I think you know.

Sona Mehta: So, on a year-to-date basis, the branch MMS referral ecosystem is performing incredibly well. So, I would say good exit momentum to Q2, and I think we're poised, as the market recovers, to deliver on speed and expertise. That's great insight.

Speaker Change: We're poised as the market recovers to deliver on speed and expertise.

Speaker Change: Yeah, that's great insight at just one one quick follow up so would you be expecting to trend in terms of loan volumes with the industry I'm just not sure. If there's a dynamic of protecting margins or maybe focusing on more profitable accounts that would maybe lead to a little bit of underperformance going forward.

Sona Mehta: Just one quick follow up. So would you be expecting to trend in terms of loan volumes with the industry? I'm just not sure if there's a dynamic of protecting margins or maybe focusing on more profitable accounts that would maybe lead to a little bit of underperformance going forward. You know, I think my profitability should always be a factor. And so we will compete to win profitable business, and then leverage our strength and channels where we can differentiate on speed and customer experience. But profitability is important. Do you want to operate a little bit on just the pay down dynamic?

Speaker Change: You know I think Mike profitability should always be a factor and so we will compete to win profitable business and then leverage our strength in channels, where we can differentiate on speed and customer experience, but profitability is important.

Speaker Change: Alright.

Speaker Change: A little bit on just the Paydown dynamics legacy Yeah, Yeah for sure until then I can sure that something like what we saw in Q1 was some seasonality late in the quarter and are really that continued actually interestingly enough. This year.

Sona Mehta: So, Mike, what we saw in Q1 was some seasonality late in the quarter. And really, that continued actually, interestingly enough, this year, this quarter into February. So both January and February were high pay down months for us. You know, I think our book skews slightly more premium. And so as you have customers that have more disposable income by way of year-end bonuses, for example, and more liquidity in the market, we actually saw January and February prepayments were up double digits on a year-over-year basis. So that was some of the dampness in late in Q1, and then also the jump-off point as well as early in Q2 in February.

Speaker Change: Warner into February So both January and February were high pay down months for US you know I think our book skews, a slightly more premium and so as you have customers that have more disposable income by way of a yearend bonuses for example, and more liquidity in the markets. We actually saw January <unk>.

Speaker Change: February our prepayments were up double digits on a year over year basis. So that was some of the the dampness and late in Q1, and then also the jump off point as well as early in Q2 and February so those are perhaps a little bit more symptomatic of our premium book.

Operator: So those are perhaps a little bit more symptomatic of our premium book. Thank you. Thank you very much for the call. That's helpful.

Speaker Change: Okay got it. Thank you. Thank you can you make some color that's helpful.

Speaker Change: Thank you.

Lemar Persaud: The next question is from Lemar Persaud. Yeah, thanks. I want to go to the liquidity coverage ratio that 141% You're saying that, obviously, it should be somewhat elevated in the near term, reflecting these proceeds from the Schwab shares. How should we, like, what's a more normal level, given all the changes that's going on at TD? And, you know, should we be thinking about something in the 130% flat range and kind of how fast do you get there? Any thoughts would be helpful.

Speaker Change: Next question is from Lamar.

Speaker Change: I'm, calling back Securities. Please go ahead.

Speaker Change: Yeah. Thanks, a lot of other the liquidity coverage ratio at 141%.

Speaker Change: You're saying that obviously it should be somewhat elevated in the near term, reflecting these proceeds from the Charlotte shares.

Speaker Change: How should we like what's a more normal level given all the changes that's going on at TD and.

Speaker Change: Should we be thinking about something in the 130% flat range and kind of how fast you get there.

Speaker Change: Any thoughts would be helpful.

Kelvin Tran: Or it's Kelvin, I take that. Yeah, so we would look at LCR in the normal range of $125 to $135. So $130 is kind of smack in the middle. In terms of just adding, providing a little bit more color, last year when we raised liquidity, some of that liquidity were like a kind of a, let's say, one-year basis. So it's going to take some time for those to run off. But we're comfortable at normalizing on a liquidity level, getting back to the $125 to $135 over time. And is that something that we could expect in the next year?

Kelvin Oh: Sure, it's Kelvin I'll take that yeah. So we would look at LCR in the normal range of $1 25 to $1 35. So 130 is kind of smack in the middle.

Kelvin Oh: And then also just adding providing a little bit more color last year, when we raise liquidity and some of that liquidity where.

Kelvin Oh: Like a kind of a let's say one year basis. So it's going to take some time for those to run off but.

Speaker Change: But we're comfortable at a normalized recruiting levels getting back to the 125 to 135 overtime.

Speaker Change: And is that something that we can expect in the next year and I can I'm. Just wondering if you could just provide some timeframe right. So yeah.

Kelvin Tran: Like, I'm just wondering if you could just provide some time frame on how to get that done. So, like, yes, the answer is yes, because the two biggest pieces, as you know, is the proceeds from the Schwab sale, and then a lot of that is going to be redeployed in share buyback. And so that's going to be used. And then some of those liquidity raise about a year or 18 months, and over that time frame, So that would help. Okay, thanks.

Speaker Change: Yeah. The answer is yes, because the two biggest pieces as you know is the proceeds from the Schwab Sal and then a lot of that is going to be redeployed in share buyback and so that's going to be there.

Speaker Change: Some of those liquidity raise about a year or 18 months.

Speaker Change: And over that timeframe that that would also decrease so that was all.

Speaker Change: Okay. Thanks, and then.

Ajai Bambawale: And then a question on credit here. Appreciate the disclosure on these industry of focus from terrorists, but wondering if there's any color you can add as to you know, what industries make up that kind of less than 1% cohort? Is it focused in any of these specific industries like automotive, agriculture, or anything that you've highlighted on your slide 23? Or is it kind of well diversified amongst these kind of industries of I'd say it's diversified across a number of industries that are on that page. Some of the ones I can call out for your benefit would be auto, agriculture, sundry manufacturing, transportation and retail.

Speaker Change: A question on credit here.

Speaker Change: The disclosure on these industry a focus from terrorists, but.

Speaker Change: I'm wondering if there's any color you can add as to what industries make up that kind of less than 1% cohort is it focused in any of these specific industries like automotive agriculture or anything that you've highlighted on your slide 23 or is it.

Speaker Change: Kind of a well diversified amongst these kind of industries of focus.

Speaker Change: I'd say, it's diversified across a number of industries that are on that page some of the ones that I can call out for your benefit would be auto.

Speaker Change: Culture, some remanufacturing transportation and retail that's where the most sensitive would be but the industry is on the page is not confined to one industry. So it's it's fairly diversified.

Ajai Bambawale: Those that's where the most sensitive would be. But the industries on the page is not confined to one industry. So it's it's fairly diverse.

Ajai Bambawale: Okay, and then how's your watch list kind of evolved over the last quarter? Good question. Positively. And the watch list has been coming down and it's actually down across all business segments. Anything you could share in terms of magnitude of changes in that watch? I don't have all those numbers in front of me, but I think if I look at my impaireds, you know, I wouldn't say they're huge movements, but they're positive.

Speaker Change: Okay, and then how does it helps your watch list kind of evolved over the last quarter.

Speaker Change: A good question positively and the watch list has been coming down and it's actually down across all business segments.

Speaker Change: Okay.

Speaker Change: Anything you could share in terms of the magnitude of changes on that watch list.

Speaker Change: No I don't I don't have all those numbers in front of me, but I think if I look at my beds.

Speaker Change: I wouldn't take a huge movement, but there are positive movements.

Darko Mihelic: That takes such a The next question is from Darko Mihelic from RBC Capital Market. Hi, thank you, good morning. My questions are all for Ajai as well. Maybe just the first question is with respect to the the reserve building, I do see the 500 in the business field. But one of the things that I do also see. When I look at the forward-looking indicators and sort of what has changed, I see very significant changes in Canada GDP. U.S. GDP. The house price index is also fairly aggressive and went from an expectation last quarter of 8% to a negative.

Speaker Change: Okay. Thanks, that's it for me.

Speaker Change: Thank you. The next question is from dark pool.

Speaker Change: On the RBC capital markets. Please go ahead.

Speaker Change: Hi, Thank you. Good morning, my questions are all for Andre as well.

Speaker Change: Maybe just the first question is with respect to the the reserve building I do see the $500 million.

Speaker Change: And the business build but one of the things that I do also see.

Speaker Change: When I look at the forward looking indicators and sort of what has changed.

Speaker Change: I see very significant changes in Canada, GDP U S GDP.

Speaker Change: And the House price Index is also fairly aggressive and then you went from an expectation last quarter of 8% to a negative.

Ajai Bambawale: Expectation for House Prize. for the rest of this year. But a very small change overall. the actual. Stage 1 and Stage 2 performing at about 3% quarter-over-quarter. And I believe it's linked to very small changes in your unemployment. where we're seeing like a 40 basis point increase in unemployment expectations. and it's essentially sitting where unemployment is today. So Ajai, what is informing... First of all, am I correct in thinking that if we had a bigger change in the unemployment expectation, we would have seen even more reserve bills and likely consumer and retail? And what is it that's informing this view that unemployment really won't change from like the current level?

Speaker Change: Expectation for house prices.

Speaker Change: For the rest of this year.

Speaker Change: But a very small change overall.

Speaker Change: The actual state Wednesday, performing is about 3% quarter over quarter and I believe it's linked to very small changes in your unemployment expectations.

Speaker Change: Where we're seeing with a 40 basis point increase.

Speaker Change: And unemployment expectation and it's essentially sitting where unemployment is today.

Speaker Change: So argue what is informing them.

Speaker Change: First of all am I correct in thinking that if we had a bigger change in the unemployment expectation, we would have seen even more reserve build unlikely consumer retail and what is it that it's informing this view that unemployment really won't change from like the current level in Canada.

Ajai Bambawale: Yeah, well, let me, let me walk you through what the drivers of our tariff build are, you know, first are the macro changes. And again, the macro changes are determined by our chief economist, you know, they're not determined by me, but we have a strong governance process, and we take it through our governance process. about what changed. So, yes, you called out GDP. Actually, it came down quite a bit for Canada, quite a bit for the United States. Unemployment for Canada, quarter over quarter, at least for the near term, went up 0.4 percent. For the U.S., it went up 0.2 percent.

Speaker Change: Yeah, well, let me let me walk you through what the drivers are.

Speaker Change: Got it.

Speaker Change: First the macro changes and again the macro changes are determined by our chief economist is determined by me, but we have a strong governance process and we take it through our governance process, but.

Speaker Change: What changed I guess, you called out GDP actually came down quite a bit for Canada quite a bit for the United States unemployment for Canada quarter over quarter for Ts for the near term went up one 4% for the U S went up one 2% we did put tariffs into these these scenarios and I'm happy to share the numbers with you forget.

Ajai Bambawale: We did put tariffs into these scenarios, and I'm happy to share the numbers with you. For Canada, we put in tariffs of 10 percent for six months, and then those come down over a period of time. For the U.S., we put in 23 percent for six months, and those come down over a period of time. The second thing I'd like to point out on macro is that our downside case is a recessionary case, you know, and that downside case also reflects the risks of higher tariffs. In addition to the macro, what we've done is we've looked more holistically at the book and said, you know, at higher tariffs rate, what could be the impact on consumers and non-consumers?

Speaker Change: We've put in tandem so 10% for six months and then those come down over a period of time and for the U S. We put in 23% for six months and those come down over a period of time.

Speaker Change: Great.

Speaker Change: The second thing I'd like to point out on macro is that our downside case is a recessionary kits.

Speaker Change: And that downside case also reflects the risk of higher tariffs. In addition to the macro what we've done is we've look more holistically at the book.

Speaker Change: <unk> said.

Speaker Change: At higher tariffs trade, what could be the impact on consumers and non consumers and that's the way we built the overlay. So it's really a combination of these macro plus the judgmental overlays that got us to the 500 million number but 101 beeps.

Ajai Bambawale: And that's the way we built the overlay. So it's really a combination of these macro plus the judgmental overlay that got us to the 500 million number. But at 101 beeps, Darko, I do feel that we are well-reserved. And the one thing I want to caution you, because the situation is fluid, things could change. There's always the possibility we may have to build results, but I feel good as to where we are. Our reserves reflect our forward-looking view as at April 30th. So if that forward-looking view evolves, we may have to build more reserves. For this year, as you know, I'd really ask you to anchor on the fact that we're not changing our guidance.

Speaker Change: Darko I do feel that we are well reserved and I. The one thing I want to caution you because the situation is fluid and things could change there's always the possibility. We may have to build reserves, but I feel good as to where we are our reserves reflect a forward looking view as at April 30, or so.

Speaker Change: What we're looking to do it was we may have to build more reserves, but again.

Speaker Change: For this year as you know.

Speaker Change: I would really ask you to anchor on the fact that we're not changing our guidance were still saying for this year of 45 to 55 basis points, but also calling out that the risk to that range is elevated because of the environment.

Kelvin Tran: We're still saying for this year, 45 to 55 basis points, but we're also calling out that the risk to that range is elevated because of the environment. Okay. Kelvin here, also additional color is that, you know, immigration policy is also constraining population growth, so it is harder to get a rising unemployment rate out of that factor. In addition, the assumption, you can run various scenarios in your projection, but the scenario that we've run there is that, you know, we expect our resolution to be somewhere in Q3. And if that takes longer, and, you know, that would worsen the economic outlook and potentially drive higher PCL.

Speaker Change: Okay.

Speaker Change: Been here also additional color is that immigration policies also constraining population growth. So so it is harder to get the rising unemployment rate out of that factor. In addition, the assumption you can run various scenarios in your projections, but the scenario that we find there is that.

Speaker Change: We expect high resolution to be somewhere in Q3, and if that it takes longer and.

Speaker Change: That was that was worse in the.

Speaker Change: The economic outlook and potentially drive higher PCL.

Darko Mihelic: Okay, thank you for that.

Speaker Change: Okay. Thank you for that and in your one of your answers previously R. J you mentioned that.

Ajai Bambawale: And in your one of your answers previously, Ajai, you mentioned that You know, the industries that are at risk, you sort of suggested that of that 9%, just 1% is most sensitive, I suppose, to tariffs. You mentioned migration risk, can you maybe better define that for me? I just want to understand the better definition and why the exposure is relatively small at less than 1%, rather sensitive to tariffs. So, maybe you can just define that migration issue a bit better for me. Let me outline how we built the reserves and created the overlay. We looked at the industries that were most exposed to tariffs, okay?

Speaker Change: The industries that are at risk.

Speaker Change: You sort of suggested that of that 9% just 1%.

Speaker Change: As is most sensitive I supposed to tariffs you mentioned migration risks, maybe better define that for me I just wanted to understand the better definition and why the exposure is relatively small at less than 1%.

Speaker Change: Rather sensitive to tariffs. So maybe you can just define that migration issue a bit better for me well, let me let me outline how we built the reserve.

Speaker Change: <unk> created the overlay we looked at the industries that were most exposed to capex. Okay. That's abroad. That's the 9% number our reserves were built on that 9% number. What we did is we went actually within those industries borrower by borrower.

Ajai Bambawale: That's a broad set, that's the 9% number, our reserves were built on that 9% number. What we did is, we went actually within those industries, borrow by borrower, and assessed what is the financial impact on the borrower. So, for example, we'd look at revenue, we'd look at cost of goods sold, and we'd look at what impact that would have on the ratings of that individual borrower. If you then aggregate that up, that created the overlay, okay? So, that's the allowance. We then went to each borrower and we used a set of criteria, and one of the main criteria we used was borrower strength, that which of these borrowers would be most vulnerable or most sensitive to tariffs.

Speaker Change: First what is the financial impact on the borrower. So for example, we look at revenue we look at cost of goods sold and we'd look at what impact that would have on the ratings of that individual borrower. If you aggregate that up that Korea did the overlay. Okay. So that's that's the allowance.

Speaker Change: We then went to two.

Speaker Change: Each borrower.

Speaker Change: <unk> used a set of criteria and one of the main criteria. We used was more of a strength.

Speaker Change: Which of these borrowers would be most vulnerable on most sensitive due to tariffs and when we aggregated that number up this is exposure that number was less than 1%.

Ajai Bambawale: And when we aggregated that number up, this is exposure, that number was less than 1% of gross loans. Okay, thank you. And so essentially, if your reserves are based on the 9% But when you whittle it down to less than one, are you suggesting that the overlay actually brought the reserve down? No, the reserves are based on 9%, but you could conclude a lot of those reserves are held against these names that are most central. Okay, thank you.

Speaker Change: Gross loans.

Speaker Change: Okay. Thank you and so essentially if your reserves are based in the 9%.

Speaker Change: But when you whittle it down to less than one is it.

Speaker Change: Are you, suggesting that the overlay oxy brought the reserve down.

Speaker Change: No the reserves up based on 9%, but you could conclude a lot of those reserves held against these names that are most sensitive.

Speaker Change: Oh, that's better okay. Thank you.

Speaker Change: Thank you Yeah. No further question would just thought at this time I would now like to tell the meeting over to Ray Mondschein.

Raymond Chun: There are no further questions at this time. I would now like to turn the meeting over to Raymond. Take a pause for this.

Speaker Change: Okay.

Speaker Change: Mr Cheng.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Let's take a pause for a SEC.

Operator: So let me just thank everyone for joining the call and just again I'll end with thanking our more than 100,000 colleagues across Canada, U.S. and globally for all your support and all the hard work and look forward to chatting with all of you next quarter. Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation. This conference is no longer being recorded. Cette conférence n'est plus enregistrée.

Speaker Change: Listen let me.

Speaker Change: Just thank everyone for joining the call and just again I'll end with thanking our more than 100000 colleagues across Canada U S and globally.

Speaker Change: For all your support and all the hard work and look forward to chatting with all of you next quarter.

Speaker Change: Thank you.

Speaker Change: Thank you. The conference has now ended up his disconnect your lines at this time and we thank you for your participation.

Speaker Change: This conference is no longer being recorded <unk>.

Speaker Change: Uh huh.

Speaker Change: So as you say.