Toronto Dominion Bank NYSE: TD reported record third-quarter earnings, citing revenue growth across its Canadian businesses, Wholesale Banking and improving momentum in U.S. Banking, while management raised confidence that full-year credit losses will land near the low end of its prior guidance range.
Chief Executive Officer Raymond Chun said the bank earned a record CAD 4.7 billion in the fiscal third quarter, with record adjusted earnings per share of CAD 2.77. Revenue increased 8% from a year earlier, supported by markets-driven businesses, margin expansion and loan-volume growth in Canadian Personal and Commercial Banking.
“TD had a very strong quarter with record earnings in our Canadian businesses and Wholesale Banking and growing momentum in U.S. Banking,” Chun said.
The bank reported a 16% return on equity, up 280 basis points year over year, and said it has delivered positive operating leverage for five consecutive quarters. Chun said TD expects to significantly outperform its fiscal 2026 targets of 6% to 8% earnings-per-share growth and a 13% return on equity, assuming current macroeconomic conditions continue.
Capital flexibility and shareholder returns
TD’s common equity tier 1 ratio stood at 14.3% at quarter-end, down three basis points sequentially. The bank repurchased about 14.5 million common shares during the quarter, reducing the CET1 ratio by 37 basis points, Chief Financial Officer Kelvin Tran said. Model updates across Canadian real estate secured lending, Canadian Business Banking and Wholesale Banking portfolios added 10 basis points to the ratio.
Chun reiterated TD’s expectation to reduce its CET1 ratio to 13% by the second half of fiscal 2027. He said that, assuming continued strong organic capital generation and risk-weighted asset growth consistent with fiscal 2026 year-to-date levels, TD could return more than CAD 13 billion of capital in fiscal 2027 to reach a 13% ratio by the end of that year.
In response to an analyst question, Chun clarified that the CAD 13 billion figure referred specifically to potential share buybacks and did not include dividends. He said TD’s primary use of capital remains organic growth, followed by selective opportunities in areas including wealth management, securities, insurance and credit cards, with excess capital to be returned to shareholders.
Chun also pointed to potential investment activity in Canada despite uncertainty in the Canada-U.S. trade relationship. He cited a TD Economics estimate that more than CAD 1 trillion in spending could be deployed across Canada over the next decade.
Canadian and U.S. banking growth
Canadian Personal and Commercial Banking generated record revenue, pre-tax pre-provision earnings and earnings, Tran said. Personal deposits rose 1% year over year and business deposits increased 5%, while personal lending volumes rose 4% and business lending volumes climbed 8%.
Net interest margin in the Canadian personal and business bank rose three basis points sequentially. Based on current rates and competitive conditions, Tran said TD expects the margin to increase modestly again in the fourth quarter.
Chun said real estate secured lending rose 4% year over year, while business loans and non-term deposits each increased 8%. The bank recorded a 17% increase in digital sales in the Canadian personal bank and a 13% increase in small-business banking acquisition.
In U.S. Banking, earnings rose 11% year over year and return on tangible common equity expanded by more than 210 basis points to 15.6%. Bank-card balances increased 20%, mid-market lending commitments rose 9%, and home equity lending increased 6% year over year.
U.S. Banking’s net interest margin reached a record 3.47%, up six basis points sequentially, driven by higher loan margins, revenue from the strategic cards platform conversion and higher deposit margins. TD expects a modest additional NIM increase in the fourth quarter and said it expects approximately CAD 2.9 billion in fiscal 2026 net income from the U.S. Banking segment.
U.S. Banking Group Head Leo Salom said TD plans to open 100 branches across its East Coast footprint by the end of calendar 2028, subject to regulatory approval, with some openings potentially accelerated into 2027. He said most openings are expected in 2028. The plan follows the consolidation of about 91 branches over the past two years and is intended to reposition the network in key metropolitan areas.
Salom said the expansion does not change the bank’s focus on satisfying its U.S. anti-money-laundering consent order. TD expects U.S. AML remediation expenses of about CAD 550 million for fiscal 2026.
Wealth, wholesale and cost initiatives
Wealth Management and Insurance posted record revenue, earnings and assets. New wealth accounts grew 26% year over year, while direct investing referred CAD 1.4 billion to advice channels during the quarter, up 34% from a year earlier. Insurance generated more than CAD 100 million in year-to-date savings tied to claims and severity management, Tran said.
Wholesale Banking also reported record revenue and earnings, aided by equities, commodities, equity underwriting and advisory activity, along with favorable market conditions. The segment delivered a 16.7% return on equity. Chun said TD Securities’ deposits increased 18% year over year and that the business ranked among the top 10 in U.S. equity and equity-related league tables year to date.
The bank said it has already achieved its fiscal 2026 target of CAD 900 million in structural cost reductions and remains on track toward its medium-term CAD 2 billion to CAD 2.5 billion target, with potential upside. Excluding variable compensation, foreign exchange and the U.S. strategic cards portfolio, expenses rose 1% year over year, Chun said.
TD also said it has effectively reached its fiscal 2026 target of CAD 200 million in value from artificial intelligence initiatives. The bank is focusing AI deployment on retail credit processes, software development and contact centers.
Credit outlook improves
Chief Risk Officer Ajai Bambawale said TD’s credit performance improved during the quarter. Gross impaired loan formations fell two basis points sequentially to 20 basis points, while gross impaired loans declined three basis points to 51 basis points.
Total provisions for credit losses were 37 basis points, down six basis points from the prior quarter. Impaired provisions fell CAD 108 million sequentially to CAD 865 million, primarily because of lower provisions in business and government lending portfolios.
TD recorded a CAD 52 million performing provision during the quarter, largely in Wholesale and Canadian commercial lending. Bambawale said the bank now expects total fiscal 2026 provisions for credit losses near the lower end of its previously forecast 40- to 50-basis-point range.
He said TD holds approximately CAD 500 million in reserves for policy and trade risks and cited economic resilience, customer adaptation and TD’s underwriting discipline as factors supporting the quarter’s credit results.
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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