TD's High Costs Hurt Q2 Results, Restructuring Plan Revealed, Stock Up

Core Viewpoint - Toronto-Dominion Bank (TD) has initiated a restructuring program aimed at enhancing efficiency, which has positively impacted its stock price, rising 4.5% since the announcement [1]. Financial Performance - For the second quarter of fiscal 2025, TD reported an adjusted net income of C$3.6 billion ($2.63 billion), reflecting a year-over-year decline of 4.3% [1]. - Adjusted revenues increased by 9% year over year to C$15.1 billion ($11.02 billion) [3]. - Net interest income (NII) grew by 8.8% year over year to C$8.13 billion ($5.91 billion) [3]. - Non-interest income surged by 133.1% to C$14.81 billion ($10.78 billion) [3]. - Adjusted non-interest expenses rose by 11.6% to C$7.91 billion ($5.76 billion) [3]. - The adjusted efficiency ratio increased to 57.6 from 56.1 in the prior-year period [3]. Credit Loss Provisions - The bank recorded a provision for credit losses of C$1.34 billion ($0.98 billion), which is a significant increase of 25.2% from the previous year [4]. Balance Sheet Overview - As of April 30, 2025, total assets were C$2.06 trillion ($1.5 trillion), down 1.4% sequentially [5]. - Net loans decreased by 3% to C$936.4 billion ($681.6 billion) and deposits fell by 1.8% to C$1.27 trillion ($0.9 trillion) [5]. - The common equity Tier I capital ratio improved to 14.9 from 13.4 year-over-year, while the total capital ratio rose to 18.5 from 17.1 [5]. Restructuring Plan - TD's restructuring program includes a workforce reduction of approximately 2%, with an estimated pre-tax cost of C$700 million ($505 million) for implementation [6]. - The bank expects pre-tax savings of about C$100 million in fiscal 2025 and annual savings of up to C$650 million thereafter [6]. - A revised strategy and financial targets will be presented on September 29, 2025 [7]. Market Position and Outlook - TD's diverse geographical presence and efforts to improve revenues and market share are viewed positively [8]. - The bank is expected to benefit from relatively high interest rates, restructuring efforts, and decent loan demand [8]. - However, challenges related to regulatory requirements and weakening asset quality due to macroeconomic uncertainties are noted as potential headwinds [8].