• Earnings: $3.6 billion.
• EPS: $2.02.
• CET1 Ratio: 13.1%, pro forma 14.2% after Schwab stake sale and share buyback.
• Revenue Growth: 9% year over year.
• Expense Growth: 12% year over year.
• Net Interest Margin (Canada): 2.81%, up 1 basis point quarter over quarter.
• Net Interest Margin (US): 2.86%, up 9 basis points quarter over quarter.
• Loan Growth (Canada): 4% year over year.
• Deposit Growth (Canada): 5% year over year.
• Loan Growth (US): 1% year over year, 3% excluding loans for sale or runoff.
• US BSA/AML Remediation Cost: USD 86 million for the quarter, expected USD 500 million for fiscal 2025.
• Allowance for Credit Losses: Increased by $457 million to $9.6 billion.
• Gross Impaired Loans: $5.45 billion, up $504 million quarter over quarter.
• Wholesale Banking Revenue: Over $2 billion for the first time.
• Wealth Management New Institutional Mandates: $3.2 billion.
• Insurance Gross Written Premium Growth: 13% year over year.

• Warning! GuruFocus has detected 2 Warning Sign with TD.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Toronto-Dominion Bank (NYSE:TD) delivered strong earnings of $3.6 billion and EPS of $2.02 in Q1 2025.
• The bank's CET1 ratio was 13.1%, and pro forma for the sale of its Schwab stake and share buyback, it would be approximately 14.2%, indicating a strong capital position.
• TD's Canadian Personal and Commercial Banking saw volume growth and strong trading and fee income in market-driven businesses.
• TD Auto Finance achieved record originations in Q1, adding new dealer floor plan relationships.
• TD's Wealth Management and Insurance segments delivered record revenue, earnings, and assets, with new accounts up 30% year-over-year.

Negative Points

• Tariff and trade risks are clouding the economic outlook, potentially impacting provisions and credit quality.
• Expenses increased 12% year over year, driven by governance and control investments and higher PCLs.
• US AML remediation remains a top priority, with significant costs expected, including $500 million in fiscal 2025.
• The bank's provision for credit losses increased to 50 basis points, reflecting policy and trade uncertainty.
• The strategic review is ongoing, with potential for further restructuring and cost optimization, which may impact future expenses.

Q & A Highlights

Q: Can the sale of lower-yielding assets in the US balance sheet repositioning be NII accretive? A: Leovigildo Salom, CEO of TD Bank, America's Most Convenient Bank, explained that the bank has reduced $25 billion of borrowings and plans to further reduce this amount. The sale of a $9 billion portfolio will help reduce borrowings, potentially making the sale of lower-yielding assets NII accretive over time.

Q: What are the expected costs for US AML remediation, and is there a risk of exceeding the $500 million estimate? A: Leovigildo Salom stated that the total expenses for AML remediation in Q1 were $86 million, slightly lower than Q4. The bank expects costs to become more material in the second half of the year but remains confident in the $500 million guidance. Raymond Chun added that they have a detailed action plan and will update if costs exceed expectations.

Q: How should we interpret the 12% expense growth and its impact on future quarters? A: Kelvin Tran, CFO, explained that the 12% growth includes variable compensation and FX impacts. The year-over-year increase in Q2 will be higher due to last year's lower base, but expense growth is expected to moderate in the second half of the year.

Q: Can you explain the performing provision release and the macroeconomic outlook improvement? A: Ajai Bambawale, Chief Risk Officer, clarified that the release was due to better-than-expected macroeconomic indicators and a model update in the US cards portfolio. An overlay was created to account for potential risks from tariffs, aligning with the bank's cautious approach.

Q: What are the strategic investment plans, and how will they impact expense growth? A: Raymond Chun mentioned that the strategic review is identifying significant organic growth opportunities, with investments funded through cost optimization. Leovigildo Salom added that the US business is focused on AML remediation and strategic investments in areas like cards, wealth, and digital strategy, aiming for ROE improvement and a positive NIM profile by 2026.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.