- Key Insight: The bank’s ambitious strategy overhaul comes about one year after it was hit by U.S. officials with historic fines and an asset cap for compliance failures.
- What’s at Stake: TD has spent billions of dollars to restructure its balance sheet and invest in its risk-management framework.
- Supporting Data: The Canadian company has some 10 million customers and $386 billion of assets in the U.S.
TD Bank laid out its vision Monday for regaining its footing, and pulling ahead, in the United States after historic anti-money laundering blunders. It’s a plan that includes not just major cost-cutting initiatives, but also efforts to target affluent customers and increase artificial intelligence capabilities.
The Toronto-based company has spent more than a year reviewing its strategy and making
In the U.S., TD is aiming to cut costs by $750 million over the next four years by pruning its branch network, automating more processes and reducing its governance spending. Innovation initiatives, like data management and AI development, are expected to deliver about $200 million of those cost savings.
The bank will relocate or close 10% of its roughly 1,100 locations in the U.S., which it expects to take out costs of $100-$150 million. The move comes on top of the 174 branches TD has closed and the 62 it has opened or moved since 2020.
Simultaneously, TD has plans to accelerate revenue growth in U.S. co-branded credit cards and services to affluent Americans. The company expects those two initiatives to lift revenues by $700 million and $300 million, respectively.
All told, TD is projecting a 13% increase in return on equity for its American business by 2029.
Leo Salom, the head of TD’s $386 billion-asset American operation, said that although the bank’s deposit franchise is the “flagship” of its American operations, TD lacks “relationship depth” with many clients. The company’s goal is to drive cross-selling opportunities through the bank’s technology transformation, location optimization plan and product concentration changes, he said.
The bank’s chipper outlook comes almost exactly one year after it was hit by U.S. officials with an asset cap,
Salom said that Oct. 10, 2024 — the day the bank was dealt its orders and punishments — was “one of the most difficult days for anyone who has ever worn the TD shield.”
“As I reflect on the last couple of years, it has certainly been a very challenging period for our U.S. business,” Salom said. “But as we look forward, I believe that our U.S. business has been and will continue to be an important contributor to TD’s growth aspirations and an integral part of the shareholder value story.”
Notwithstanding the compliance scandal, the bank has
Salom added that he thinks the company’s U.S. operation has “an unparalleled opportunity to become a more efficient, more profitable and more formidable competitor in the U.S.”
To stay below its $434 billion cap, the bank has reduced its asset size about 10% by selling or winding down certain loan portfolios and businesses, such as point-of-sale financing, correspondent lending and supply chain financing.
TD’s U.S. balance-sheet restructuring effort resulted in after-tax losses of about $1.4 million in the quarter that ended on July 31, and total losses from the strategy should eventually land around $1.5 billion, the company said during its latest earnings call. But Salom said Monday that an investment portfolio remix has contributed about $500 million in additional net interest income this year.
In 2026, as TD moves past the bulk of the major investments and expenses required by the revamp, the U.S. business is targeting $2.9 billion of net income after taxes, Salom said. That would mark double-digit earnings growth, and a 100 basis-point rise in return on equity.
“Our outlook reflects the benefits of our balance sheet restructuring activities, and is an early indication of the earnings potential of the U.S. franchise,” Salom said.
TD has estimated that it will spend about $1 billion across 2025 and 2026 on its anti-money-laundering remediation efforts, which many executives have maintained is the bank’s top priority.
TD CEO Raymond Chun, who took the reins earlier this year to oversee the bank’s makeover, said Monday that TD is working to build stronger returns in both its U.S. operations and its securities business.
Chun said that there were some aspects of the company’s culture that “must change,” including “accountability at all levels.”
He expressed hope that a “fundamental reset” to TD’s cost base will deliver 2 billion to 2.5 billion of Canadian dollars in run-rate expense reduction across the enterprise by 2029.
“We’re applying rigor and discipline as we make investments to grow the business and achieve our goals,” Chun said about TD’s enterprise-wide goals. “As we drive change, harness AI and extend digital leadership, we’re building a more disciplined, simpler and faster bank to fund our growth and achieve our efficiency ratio target.”
Still, the company is also targeting growth as it navigates through a shifting economic and political environment, Chun said.
“We face new risks, economic changes, disruptive technologies and new innovations,” he said. “Here in Canada, our trading relationship with the United States is center stage.”
“We know we have lots of work to do,” he said.