- Strong Earnings Growth TD Bank Group reported Q4 2025 earnings of $3.9 billion (EPS $2.18), with ROE rising 110 bps YoY to 13.0%.
- AI-Driven Value Creation AI initiatives generated $170 million in value in Q4, with an additional $200 million expected in 2026 from new use cases.
- Capital Strength CET1 ratio maintained at 14.7%, supported by $6 billion in share repurchases and a $0.03 dividend hike to $1.08/share.
- Wholesale Banking Momentum Recorded $2.2 billion in revenue, driven by broad-based growth in Global Markets and Investment Banking.
- Expense Control and Leverage Expenses grew 5% in Q4 but moderated, with operating leverage positive for two consecutive quarters despite 10% YoY expense increase.
Business Segment Performance
The bank's businesses performed well across various segments. Canadian Personal and Commercial Banking delivered record revenue, deposits, and loan volumes. U.S. Retail saw core loans grow 2% year-over-year, with U.S. bank card balances up 14% year-over-year. Wealth Management delivered record earnings and assets, with direct investing seeing new accounts up 27% and trades per day up 37% year-over-year. Wholesale Banking delivered a record $2.2 billion in revenue.
Credit Quality and Capital Management
The company's credit results are strong, with gross impaired loan formations decreasing 3 basis points or $256 million quarter-over-quarter. Gross impaired loans were stable quarter-over-quarter at 56 basis points. The provision for credit losses was stable quarter-over-quarter at 41 basis points. The bank's CET1 ratio was 14.7%, with a strong capital generation in the quarter. The bank repurchased 65 million shares for a total of over $6 billion and plans to initiate a new share buyback of $6 billion to $7 billion.
Outlook and Valuation
The bank expects to achieve 6% to 8% EPS growth and 13% ROE targets for fiscal 2026. Analysts estimate next year's revenue growth at 4.7%. With a P/TBV ratio of 1.67 and a dividend yield of 3.44%, the stock appears reasonably valued. The bank's strong capital position, robust revenue growth, and improving credit quality support its ability to deliver on its targets. The company's focus on productivity initiatives and investments in its core franchise should drive long-term value creation.
Key Drivers and Risks
The key drivers of TD Bank's performance include its diversified business model, strong capital position, and improving credit quality. Risks include regulatory challenges, market volatility, and the potential impact of economic downturn on credit quality. The bank's U.S. AML remediation program has made significant progress, reducing the risk associated with regulatory compliance.