TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 28
On February 12, 2025, the Bank sold its entire
remaining equity investment in Schwab.
Prior to the sale, the Bank accounted
for its investment in Schwab using
the equity method and the share of net income
from investment in Schwab was reported
in the U.S. Retail segment.
Amounts for amortization of acquired
intangibles, the acquisition and integration
charges related to the Schwab transaction,
and the Bank’s share of restructuring
and other charges incurred by Schwab
were recorded in the Corporate segment. Refer
to “Significant Events” for further details.
Effective fiscal 2025, discussions of
the U.S. Retail segment’s
performance exclude Schwab.
REVIEW OF FINANCIAL PERFORMANCE
U.S. Retail reported net income was $1,664 million
(US$1,214 million), an increase of
$2,693 million (US$1,949 million), compared
with last year,
excluding
Schwab earnings of $277 million (US$196
million) in the current year and $709 million
(US$523 million) in the prior year, primarily
reflecting the impact of the
charges for the global resolution of the investigations
into the Bank’s U.S. BSA/AML
program last year, higher revenue, and lower
PCL in the current year, partially
offset by the impact of U.S. balance sheet
restructuring activities, higher governance and
control investments, including costs for U.S.
BSA/AML remediation, and
an adjustment for client deposit rates. U.S.
Retail adjusted net income was $3,691
million (US$2,641 million), a decrease of
$80 million (US$125 million), or 2%
(5% in U.S. dollars), compared with last
year, primarily reflecting higher governance
and control investments, including
costs for U.S. BSA/AML remediation,
and
an adjustment for client deposit rates,
partially offset by the impact of U.S. balance
sheet restructuring activities, higher revenue,
and lower PCL. The reported and
adjusted annualized ROE excluding Schwab
for the year were 3.9% and 8.5%, respectively,
compared with -2.5% and 9.4%, respectively,
last year.
Reported revenue for the year was US$8,815
million, a decrease of US$1,259 million,
or 12%, compared with last year. On an
adjusted basis, revenue for the
year was US$10,717 million, an increase of
US$417 million, or 4%. Reported net interest
income of US$8,833 million, increased
US$313 million, or 4%, and
adjusted net interest income of US$8,858 million,
increased US$338 million, or 4%, largely
reflecting the impact of U.S. balance sheet restructuring
activities and
higher deposit margins, partially offset
by an adjustment for client deposit rates. Reported
net interest margin of 3.08%, increased 13
bps, and adjusted net interest
margin of 3.09% increased 14 bps, due
to U.S. balance sheet restructuring activities
and higher deposit margins.
Reported non-interest loss of US$18 million,
a
decrease of US$1,572 million, compared
with last year, reflecting the impact of
U.S. balance sheet restructuring activities,
partially offset by higher fee income. On
an adjusted basis, non-interest income of US$1,859
million increased US$79 million, or 4%,
compared with last year, reflecting higher
fee income.
Average loan volumes decreased US$9
billion, or 5%, compared with last year. Personal
loans decreased 4% and business loans
decreased 5%, reflecting U.S.
balance sheet restructuring activities. Excluding
the impact of the loan portfolios identified
for sale or run-off under our U.S. balance sheet
restructuring program,
average loan volumes increased US$4 billion,
or 2%
Average deposit volumes decreased US$7
billion, or 2%, reflecting a 7% decrease
in sweep deposits
and a 3% decrease in business deposits,
partially offset by a 2% increase in personal
deposits.
Assets under administration (AUA) were US$46
billion as at October 31, 2025, an increase
of US$3 billion, or 7%, compared with last
year, and assets under
management (AUM) were US$10 billion as
of October 31, 2025, an increase of US$2
billion, or 25%, compared with last
year, both reflecting net asset growth and
market appreciation.
PCL for the year was US$1,080
million, a decrease of US$46 million,
or 4%, compared with last year. PCL
– impaired was US$1,065 million, an increase
of
US$9 million, or 1%, largely reflecting
credit migration in the commercial lending portfolio,
partially offset by lower provisions in the
consumer lending portfolios.
PCL – performing was US$15 million,
a decrease of US$55 million,
or 79%, compared with last year.
The current year performing provisions
largely reflect credit
impacts from policy and trade uncertainty,
partially offset by lower volume and
the adoption impact of a model update in
the credit card portfolio. U.S. Retail PCL
including only the Bank’s share of PCL
in the U.S. strategic cards portfolio, as an
annualized percentage of credit
volume was 0.60%, flat compared with last
year.
Effective fiscal 2025, U.S. Retail segment
non-interest expenses include certain U.S.
governance and control investments, including
costs for U.S. BSA/AML
remediation which were previously reported
in the Corporate segment. Comparative
amounts have been reclassified to conform
with the presentation adopted in
the current period. Reported non-interest
expenses for the period were US$6,852
million, a decrease of US$2,779 million,
or 29%, compared with last year,
reflecting the impact of charges for the global
resolution of the investigations into the
Bank’s U.S. BSA/AML program
last year, partially offset by higher governance
and control investments including costs of US$507
million for U.S. BSA/AML remediation,
and higher employee-related expenses,
in the current year. On an
adjusted basis, non-interest expenses increased
US$632 million, or 10%, reflecting higher
governance and control investments, including
costs for U.S. BSA/AML
remediation, and higher employee-related expenses.
For fiscal 2026, non-interest expenses are expected
to grow in the mid-single digit range
The reported and adjusted efficiency ratios
for the year were 77.7% and 63.9%, respectively,
compared with 95.6% and 60.4%, respectively,
last year.
OPERATING ENVIRONMENT AND OUTLOOK
Fiscal 2026 is expected to be a highly complex
year for the U.S. banking industry, reflecting an uncertain macroeconomic
backdrop, evolving competitive
landscape, and a deregulatory trend. Notwithstanding
geopolitical and economic uncertainty and
indications of declining consumer confidence,
the U.S. economy
has remained resilient, supported by sustained
business investment and consumer spending.
Competitive pressures continue to intensify
as traditional and non-
traditional financial institutions compete for
market share while investment in transformational
technology accelerates.
U.S. Retail’s top priority is the continued execution
against its U.S. BSA/AML remediation program
and the strengthening of its governance
and control
infrastructure. In addition, in order to
continue to meet the evolving needs of its
clients while complying with, and maintaining
an ample buffer to, the asset
limitation set out in the OCC consent order, the Bank
will continue to reduce previously identified
non-core loans that do not align with
U.S. Retail’s focused
strategy or have lower returns.
U.S. Retail will direct the increased capital
capacity created by this non-core loan reduction
to fund growth in more profitable core business
lines where U.S. Retail
has opportunities to deepen relationships,
drive growth in deposits and diversify revenue
streams. In addition, U.S. Retail will continue
to drive disciplined
execution of structural cost reductions.
Net interest margin is expected to moderately
expand in the first quarter of fiscal 2026
T
HE CHARLES SCHWAB
CORPORATION
Refer to Note 12 of the 2025 Consolidated Financial
Statements for further information on
Schwab.
41
Loan portfolios identified for sale or run-off include the Point of Sale finance business which services third
party retailers, correspondent lending, export and import lending, commercial
auto dealer portfolio, and other non-core portfolios. 2025 average loan volumes: US$184 billion (2024: US$192
billion). 2025 average loan volumes of loan portfolios identified for sale or
run-off: US$24 billion (2024: US$36 billion). 2025 average loan volumes excluding loan portfolios identified
for sale or run-off: US$160 billion (2024: US$156 billion).
42
For additional information about the Bank’s use of non-GAAP financial measures, refer to “Non-GAAP
and Other Financial Measures” in the “Financial Results Overview” section of this
document.
43
The Bank’s expectations regarding expense growth are based on the assumptions regarding certain
factors, including the Bank’s ability to successfully execute against its governance
and control initiatives, including U.S. BSA/AML remediation, the timing of business investments, and productivity
and restructuring savings. Refer to the “Risk Factors That May Affect
Future Results” section of this document for additional information about risks and uncertainties that may impact
the Bank’s estimates.
44
The Bank’s Q1 2026 net interest margin expectations for the segment are based on the Bank’s
assumptions regarding interest rates, deposit reinvestment rates, average asset levels,
execution of planned restructuring opportunities, and other variables, and are subject to inherent risks and uncertainties,
including those set out in the “Risk Factors That May Affect
Future Results” section of this document.
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