TD Bank Holds $500M Reserves, Achieves Positive Operating Leverage
TD•TD's PCL guidance shows stable provisioning with $500 million reserves, though sub-650 credit segments face migration due to macro and geopolitical headwinds. The bank achieved positive operating leverage for four quarters with expenses up 3% year-over-year ex variable compensation and FX, while ROE rose 200 basis points.
1. Credit Quality and Provisioning
TD expects stable provisions with $500 million in reserves but anticipates PCL pressure from trade tensions, geopolitical conflict and domestic macro trends. Migration is noted in the sub-650 credit segment, although overall consumer credit quality remains resilient.
2. Operating Leverage and Expense Management
The bank reported positive operating leverage for the fourth consecutive quarter, with operating expenses up just 3% year-over-year excluding variable compensation and foreign exchange impacts. Management cites structural cost controls and productivity initiatives.
3. ROE Improvement and AI Initiatives
ROE climbed 200 basis points year-over-year, driven by strong earnings and efficiency gains. TD aims to accelerate ROE through structural cost reductions and AI-driven process automation.
4. U.S. Banking Expenses and Guidance
U.S. expenses were elevated by AML compliance costs, enhanced governance and the Nordstrom conversion, but base expenses remained below 3% growth. The bank maintains mid-single-digit expense guidance for U.S. operations and 3%–4% at the enterprise level.
