TD Bank Group Making Progress with US Loan Portfolio and Anti-Money Laundering Efforts
The Toronto-Dominion Bank (TD) has been making significant strides in its U.S. operations, with a particular focus on its loan portfolio and its anti-money laundering (AML) efforts. The bank has reaffirmed its commitment to resume the growth of its U.S. loan portfolio by the end of 2026, around two years after regulators capped the size of its American operations.
TD has been strategically reducing certain U.S. portfolios while simultaneously building up its business in areas it considers its “core” lending areas. These areas include middle market lending, consumer lending, and credit cards. As a result of its concerted efforts, TD reported an increase in U.S. revenue for the quarter ending on January 31st, compared to the same period in the previous year.
Driving Factors Behind TD’s Improving Financial Performance
Several factors have contributed to the improvement in TD’s financial performance. These include better credit quality and a restructuring of the bank’s balance sheet. Leo Salom, who leads TD’s American operations, expressed confidence in the bank’s outlook for the rest of the year. He cited the bank’s current revenue momentum, pricing discipline, and focus on expenses as reasons for his optimistic outlook.
TD’s first quarter, which ended on January 31, displayed a promising look with the bank making significant strides towards its goals. In the U.S., the company’s revenue of $2.9 billion was an 8% increase on an adjusted basis from the prior year. Furthermore, reported net income, excluding the impact of the company’s stake in Charles Schwab, rose to $747 million, up significantly from $105 million in the first quarter of 2025. The increase was primarily due to changes in tax benefit accounting and improved credit quality.
TD’s Ongoing Efforts to Realign its U.S. Operations
TD’s current progress comes in the wake of historic compliance failures, which resulted in the bank paying over $3.1 billion and maintaining its U.S. assets below $434 billion. These events led to a leadership change, with Raymond Chun taking over as president and CEO. Since Chun’s appointment, TD has been realigning its American operations and working on reducing costs across its businesses.
As part of its efforts, TD has reduced its U.S. branch count by 7.5% since January 31, 2025, and has sold or run off portfolios in its “non-core” businesses. Average loans in non-core U.S. businesses fell from $33 billion in the first quarter of 2025 to $11 billion in the same period this year.
Future Outlook
Leo Salom shared that while the effects of the bank’s loan-repositioning work and repricing actions across deposit and loan books were beneficial to TD’s U.S. business during the first quarter, these tailwinds may not be as strong moving forward. However, he noted that the “economic momentum” in the U.S. was contributing to solid loan growth in the areas where TD aims to expand. In fact, while total average loans in the states were down about 9% from the previous year, core average loans were up about 2.5%.
Looking forward, TD aims to return to U.S. net loan growth in the third quarter. The bank also plans to spend $1 billion across 2025 and 2026 on overhauling its U.S. anti-money-laundering controls. The focus of this spending will gradually shift towards validating the progress that the company has made, according to Salom.
In conclusion, TD Bank Group’s efforts to shrink its U.S. balance sheet are nearing the end. The bank expects to beef up its lending in certain areas throughout the year. However, the tailwind that the U.S. unit got from certain balance-sheet repositioning efforts isn’t expected to be as strong going forward as it was in the first quarter.
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