Dominion Bank(TD) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The bank reported record earnings of CAD 4.2 billion and EPS of CAD 2.44, resulting in an ROE of 14.2%, up 100 basis points year-over-year [5][75] - Total Bank PTPP increased by 19% year-over-year, with revenue growing 11% year-over-year [22] - The CET1 ratio was 14.5%, with strong organic capital accretion during the quarter [6][32] Business Line Data and Key Metrics Changes - Canadian Personal and Commercial Banking achieved record revenue, PTPP, earnings, deposits, and loan volumes, with average deposits rising 3% year-over-year [24] - In U.S. Banking, year-over-year earnings increased by 22%, with core loans growing by 2% [26] - Wealth management and insurance delivered record earnings and assets, with ETF assets surpassing CAD 31 billion [29][30] Market Data and Key Metrics Changes - Impaired PCLs increased, reflecting a small number of borrowers across various industries, with gross impaired loans at CAD 5.59 billion [33][34] - The bank's provision for credit losses was 43 basis points, driven by the Wholesale Banking segment [34] - The efficiency ratio in U.S. Banking is expected to improve, with a target in the mid-fifties by fiscal 2029 [28] Company Strategy and Development Direction - The bank is focused on deepening relationships, simplifying operations, and executing with discipline, with significant opportunities to grow franchise relationships [13][17] - The bank is targeting CAD 2.2 billion to CAD 2.5 billion in annualized cost savings over the medium term, leveraging AI for efficiency [23][68] - The bank aims to achieve a 13% CET1 ratio by the second half of fiscal 2027, positioning itself for future growth [8][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving fiscal 2026 targets, with expectations for PCLs to fall within a range of 40-50 basis points [36] - The bank is optimistic about maintaining momentum across its businesses, with potential upside to EPS growth targets [8][75] - Management highlighted the importance of macroeconomic conditions in sustaining growth and performance [8][40] Other Important Information - The bank completed an $8 billion share buyback and initiated a new $7 billion buyback program, demonstrating commitment to returning excess capital to shareholders [6][32] - The bank's restructuring program concluded with total charges of CAD 886 million, expected to yield annual cost savings of CAD 775 million [22][23] Q&A Session Summary Question: Can you discuss factors that might prevent reaching a 16% ROE by 2027? - Management indicated strong momentum and confidence in achieving targets, with improvements in CET1 ratio and expense takeout contributing to ROE growth [39][40] Question: What areas are focused on growing the U.S. loan book? - Management highlighted strong consumer lending growth, particularly in credit cards, and noted good activity in mid-market lending [41][42] Question: Can you explain the credit performance and the release of performing loans? - Management attributed the release to improved macroeconomic conditions and the migration of loans from performing to impaired status [48][49]