Toronto Dominion Bank NYSE: TD, which operates as TD Bank Group, reported what executives described as a strong second quarter for fiscal 2026, driven by revenue growth across several businesses, margin expansion, expense discipline and stable credit performance.
Chief Executive Officer Raymond Chun said adjusted earnings per share rose 21% from a year earlier, while return on equity increased more than 200 basis points to 14.4%. Chun said the bank is “on track to outperform” its fiscal 2026 targets of 6% to 8% EPS growth and 13% ROE, assuming current macroeconomic conditions continue.
The bank also announced a CAD 0.04 increase to its dividend, bringing the quarterly payout to CAD 1.12 per share. Chun said the increase reflected management’s confidence in TD’s “future growth and earnings power.”
Revenue Momentum Across Core Businesses
Chun said Canadian Personal and Commercial Banking delivered record second-quarter revenue, pre-tax pre-provision earnings and earnings. Real estate secured lending volumes rose 5% year over year, while business banking loans increased 7%, supported by distribution expansion and broad-based momentum. He said Canadian clients “continue to demonstrate resilience through macroeconomic uncertainty.”
Chief Financial Officer Kelvin Tran said average deposits in Canadian Personal and Commercial Banking rose 3% year over year, including 1% growth in personal deposits and 5% growth in business deposits. Average loan volumes increased 6%, with 5% growth in personal loans and 7% growth in business loans. Net interest margin in the segment was up two basis points sequentially and is expected to remain relatively stable in the third quarter, based on current rate and competitive dynamics.
In U.S. Banking, Tran said earnings rose 12% year over year and return on tangible common equity expanded by more than 200 basis points to 14.8%. Core loans grew 3% year over year, while new bank card account acquisition rose 32%. TD Auto Finance delivered record second-quarter originations, and middle market lending commitments increased 17% year over year.
U.S. Banking net interest margin was 3.41%, up three basis points from the prior quarter, driven by higher loan and deposit margins. Tran said the bank expects U.S. Banking margin to modestly increase in the third quarter. He also reaffirmed guidance for approximately $2.9 billion in net income for the U.S. Banking segment in fiscal 2026.
AML Remediation Remains a Priority in U.S. Banking
Leo Salom, Group Head of U.S. Banking, said anti-money laundering remediation remains the top priority for the U.S. business. He said a third-party vendor completed its first population of look-back reviews required under the OCC and FinCEN consent orders, though additional work remains.
Salom said TD’s AML program is now operating on a new transaction monitoring system with embedded machine learning and AI enhancements. The bank has also deployed a new know-your-customer strategic platform and embedded an improved customer risk rating model to support more timely and consistent risk assessments.
From a financial standpoint, Salom said AML remediation spending is beginning to shift toward validation and sustainability costs, while implementation expenses have started to moderate. He said overall AML remediation costs are expected to decline in the second half of the year, broadly in line with previous guidance of CAD 500 million for fiscal 2026.
Cost Cuts and AI Investments Ahead of Pace
TD executives emphasized structural cost reductions and artificial intelligence as central elements of the bank’s strategy. Chun said TD is tracking ahead of its Investor Day targets to remove CAD 2 billion to CAD 2.5 billion in structural costs and generate CAD 1 billion in annualized value from AI over the medium term.
Chun said the bank has already achieved its fiscal 2026 goal of CAD 900 million in structural cost reductions. TD has also delivered nearly CAD 145 million in value from predictive, generative and agentic AI use cases so far this year, ahead of its CAD 200 million target for fiscal 2026.
Examples cited by Chun included reducing mortgage pre-adjudication cycle time in real estate secured lending from approximately 15 hours to three minutes using agentic AI. He also said TD became the first home and auto insurer in Canada to launch a client-facing generative AI virtual assistant. Across the bank, more than 40,000 employees are using Copilot, and more than 7,000 engineers are using AI for software development.
Tran said total expenses increased 5% year over year, with about 2% of that increase tied to variable compensation, foreign exchange and the impact of the U.S. Strategic Cards portfolio. TD delivered its fourth consecutive quarter of positive operating leverage. Chun said the bank remains confident in its enterprise expense growth target of 3% to 4% for fiscal 2026, excluding certain effects.
Credit Performance Stable, With Reserves Reflecting Macro Risks
Chief Risk Officer Ajai Bambawale said TD exhibited “continued strong credit performance” in the quarter. Gross impaired loan formations declined five basis points, or CAD 457 million, from the prior quarter to 22 basis points. Gross impaired loans fell four basis points sequentially to 54 basis points.
The bank’s provision for credit losses was 43 basis points, flat quarter over quarter and within TD’s guided range. Impaired provisions for credit losses were CAD 973 million, down CAD 191 million from the prior quarter. The bank recorded a performing provision of CAD 28 million, largely related to an updated macroeconomic outlook.
Bambawale said TD continues to expect fiscal 2026 provisions for credit losses to be in the range of 40 to 50 basis points. He noted that the bank has close to CAD 500 million in reserves related to trade and tariffs, most of which remains unused. He also said TD added some performing reserves to reflect deterioration in the economic outlook and uncertainty related to the Middle East conflict.
On the Canadian consumer, Bambawale said household debt remains high, but consumers have been resilient due to lower rates, improved wealth levels relative to the pre-pandemic period, wage growth and government support. He said TD is seeing some migration in the under-650 credit score segment, including in residential lending, auto and cards, but characterized overall credit as “still in good shape.”
Capital Returns and Segment Records
TD ended the quarter with a Common Equity Tier 1 ratio of 14.3%, down 26 basis points sequentially. Tran said the bank generated strong organic capital during the quarter, partly offset by the repurchase of approximately 19 million common shares, which reduced CET1 by 41 basis points.
Chun said TD remains committed to completing its CAD 7 billion share buyback program. Tran said that, together with a previous buyback, completion of the program would bring total capital returned to shareholders to CAD 15 billion.
Wealth Management and Insurance delivered record earnings and assets, while Wholesale Banking also posted record earnings, supported by strong client activity in global markets and corporate and investment banking. Tran said Wholesale Banking’s return on equity improved 360 basis points year over year to 14.5%.
In closing remarks, Chun said TD continued its momentum in the first half of fiscal 2026 with “strong credit performance, positive operating leverage, and robust earnings growth.”
About Toronto Dominion Bank NYSE: TD
Toronto-Dominion Bank (TD) is a Canadian multinational banking and financial services company headquartered in Toronto, Ontario. Formed through the 1955 merger of the Bank of Toronto (founded 1855) and the Dominion Bank (founded 1869), TD is one of Canada's largest banks and offers a broad range of financial products and services to individual, small business, commercial and institutional clients.
TD's core businesses include Canadian and U.S. personal and commercial banking, wealth management, wholesale banking and insurance.
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