TD Bank (NYSE:TD) FY Conference Transcript

Summary of TD Bank Group FY Conference Call - September 09, 2025 Company Overview - Company: TD Bank Group (NYSE: TD) - Key Speaker: Ajai Bambawale, Chief Risk Officer Key Points Industry and Economic Environment - Geopolitical Risks: The current geopolitical landscape is turbulent, characterized by deglobalization, trade protectionism, and ongoing conflicts, which are expected to have macroeconomic implications [3][4] - Macroeconomic Uncertainty: The macro environment is uncertain, driven by policy and trade issues alongside geopolitical risks. The U.S. economy shows resilience, while Canada is forecasted to experience low economic growth of 1.3% in 2025 and 1.4% in 2026 [6][7] - Unemployment Rates: Expected to rise in both Canada (from 7% to 7.3%) and the U.S. (to 4.4%) [6][7] - Interest Rates: Anticipated reductions in policy rates by 50 basis points in the U.S. and 75 basis points this calendar year [7] Credit Performance and Provisions - Impaired PCLs: The bank expects an increase in impaired provisions for credit losses (PCLs) in Q4 due to seasonal spending patterns, with a full-year expectation of 45 to 55 basis points [9][11] - Credit Quality: Overall credit quality remains strong, with no immediate impacts from tariffs at the borrower level. The bank has built reserves of $600 million to prepare for potential economic downturns [10][12] - Tariff Impact: The bank has factored tariff impacts into its macro scenarios, with a focus on industries sensitive to tariffs, which constitute about 9% of gross loans [14][19] Consumer Lending and Real Estate - Real Estate-Secured Lending: TD Bank has a significant real estate-secured lending portfolio of $407 billion in Canada, with a strong customer profile (average bureau score of 792) [22][23] - Condo Market Pressure: There is some pressure in the Canadian condo market due to lower population growth and macroeconomic uncertainties, but the bank's exposure is manageable [25][26] Anti-Money Laundering (AML) and Risk Culture - AML Focus: AML remains the bank's top priority, with a multi-year remediation program expected to be largely completed by the end of 2025. The bank is enhancing its risk culture and accountability across all lines of defense [28][33] - Cultural Changes: The bank is actively working on improving risk culture, leadership behaviors, and collaboration across departments following past AML events [30][31] Strategic Review and Risk Appetite - Risk Appetite: The bank maintains a principles-based risk appetite that has not changed despite current economic uncertainties. Underwriting standards remain consistent [37][38] - Strategic Refresh: A strategy refresh is underway, with excitement internally about upcoming changes and leadership, fully vetted by the risk organization [39] Additional Insights - Reserves and Capitalization: The bank is well-capitalized with reserves at 103 basis points, indicating a strong position to handle potential economic challenges [12][20] - Monitoring and Stress Testing: Continuous monitoring and stress testing of various scenarios, including tariff impacts, are part of the bank's risk management strategy [21][20] This summary encapsulates the key insights from the TD Bank Group FY Conference Call, highlighting the company's focus on risk management, credit quality, and strategic positioning in a challenging economic environment.