TD Bank Targets 100 U.S. Branches as AML Remediation Continues

Key Points

• TD plans to open 100 U.S. branches by the end of 2028, focusing on strengthening its presence in major Northeast markets while expanding in Florida and the Carolinas, subject to regulatory approval.
• The bank’s anti-money-laundering remediation remains ongoing: fiscal 2026 costs rose to $550 million, and new controls must still be validated by internal and external reviewers before regulatory relief.
• TD is targeting C$750 million in structural U.S. cost savings to fund growth, while expanding AI use in technology, AML monitoring and customer service; its U.S. business also returned to loan growth and posted a 3.47% third-quarter net interest margin.

Toronto Dominion Bank NYSE: TD plans to open 100 new U.S. branches by the end of calendar 2028, subject to regulatory approval, as the bank resumes an expansion strategy that was paused during its anti-money-laundering remediation efforts.

Leo Salom, TD Bank’s Head of U.S. Banking, said the expansion will build on an existing network of roughly 1,100 stores. The bank opened about 250 stores during the prior decade, he said, and now intends to increase density in markets where it already has a significant presence while extending its reach in the Southeast.

“In the major markets in New England, the New York area and New Jersey, Philadelphia, where we already have a top three deposit position,” Salom said, TD wants to position its network for emerging demographic trends. The second part of the strategy is focused on expanding its footprint in Florida and the Carolinas.

Remediation Work Continues

Salom cautioned that the branch announcement should not be viewed as evidence that TD has completed its remediation plan or met all requirements under its consent order. He said the order provides for the bank to open branches and that TD has confidence, based on regulatory discussions, that it can pursue the planned openings through 2028.

The bank has rebuilt the management team overseeing its Bank Secrecy Act and AML program, appointing 40 experienced officers, according to Salom. TD has also renewed policies and procedures, implemented a customer-risk-rating program and a transaction-monitoring platform, revamped investigative capabilities and training, and strengthened its engagement model with law enforcement.

TD is now entering a validation and sustainability phase, Salom said. Management actions will be tested by the business, internal audit, an independent monitor and, ultimately, the regulator before they can support regulatory relief.

The bank increased its fiscal 2026 U.S. BSA/AML remediation expense guidance to $550 million from $500 million. Salom said most of the $50 million increase relates to a look-back exercise, with the remainder tied to accelerating management actions previously planned for later in 2026 and 2027.

He said TD expects governance and control costs connected to AML remediation to moderate in fiscal 2027, particularly during the second half. More than half of total remediation spending is expected to be permanently reduced over time, while some costs will remain part of the ongoing AML operating structure.

Cost Actions and AI Deployment

TD is targeting a C$750 million reduction in structural costs in its U.S. business over its medium-term outlook period. Salom said the bank has already realized nearly C$200 million in savings this year through store optimization, discontinued businesses tied to balance-sheet restructuring, staffing initiatives, lower general and administrative costs, and early artificial-intelligence projects.

The bank’s absolute U.S. banking expenses have remained at just over C$1.8 billion for the past four quarters, he said. TD aims to use savings to fund branch expansion, additional frontline bankers and financial advisers, and investments in data and technology without increasing its overall cost envelope.

Salom said TD has enabled 1,800 developers with GitHub Copilot and has seen technology-capacity improvements ranging from 30% to 40%, depending on adoption. The bank is using that improvement primarily to accelerate delivery of technology solutions rather than immediately reduce headcount.

TD has also deployed three AI models within its AML program, including tools to scan adverse news and identify unusual transaction patterns. It is developing an investigator desktop intended to help employees evaluate and prioritize investigation items. Separately, the bank is working with a vendor on a voice AI agent that it is targeting to handle about 50% of incoming call-center calls.

Loan Growth, Deposits and Margins

Salom said TD’s U.S. business returned to total loan growth in the third quarter, fully absorbing runoff from its restructuring program. The bank reported approximately C$165 billion in loans, with core loan growth of 3% split evenly between retail and commercial lending.

• Bank card balances increased 20% year over year, while new accounts rose 30% and spending grew 12%.
• Home-equity line balances grew 6% year over year, and related pipeline volumes increased 25%.
• The mid-market portfolio rose 15% year over year, aided by collaboration with TD Securities and TD Cowen.

TD’s deposit base stood at just under C$300 billion, including approximately C$70 billion from the Schwab sweep structure, Salom said. The bank’s loan-to-deposit ratio was 58%, or just under 80% excluding Schwab deposits. Salom characterized TD’s checking and low-yield savings deposits as a lower-cost funding advantage, though he expects deposit competition to intensify as industry loan growth accelerates.

The U.S. banking segment’s net interest margin was 3.47% in the third quarter, up 6 basis points sequentially and 28 basis points year over year. TD expects modest further NIM expansion in the fourth quarter and remains constructive on margin growth in fiscal 2027, although Salom said the benefit from “tractor” on/off rates may be less pronounced during the first half of the year.

Returns, Digital Assets and Strategy

TD reported a 10.2% return on equity in the third quarter, up 130 basis points year over year, while return on tangible common equity exceeded 15%. Salom reaffirmed medium-term targets of 13% ROE and 18% ROTCE, saying there is a path to meet and potentially exceed those figures through earnings momentum, capital optimization and greater accountability for underperforming business areas.

On digital assets, Salom said TD intends to be an early adopter of tokenized deposits and is developing a solution for ledger-to-ledger transactions involving commercial and corporate banking clients. The bank is also participating in an industry effort around tokenized deposit clearing and has joined a consortium of global banks exploring stablecoin technology for cross-border transactions.

However, Salom said TD has concerns about the CLARITY Act in its current form, particularly whether BSA, AML and know-your-customer rules for crypto activities would sufficiently protect the financial system. He also cited concerns that yield-bearing digital assets could disintermediate banks and potentially restrict loan formation.

While TD will evaluate potential inorganic opportunities, Salom said the immediate focus remains organic growth, completion of remediation, branch openings, hiring 450 advisers next year, and expanding digital capabilities.

About Toronto Dominion Bank (NYSE:TD)

Toronto-Dominion Bank, operating under the TD name, is a Canadian financial services company headquartered in Toronto, Ontario. The bank traces its history to the formation of The Toronto-Dominion Bank in 1955 through the merger of The Bank of Toronto, founded in 1855, and The Dominion Bank, founded in 1869.

TD provides a broad range of banking and financial services to individuals, businesses and institutions. Its offerings include personal and commercial deposit accounts, mortgages, consumer and business lending, credit cards, payment services, investment products, insurance and wealth management.

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