P1D P1D P10D
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 1
Management’s Discussion and Analysis
This Management’s Discussion and
Analysis (MD&A) is presented to enable
readers to assess material changes in
the financial condition and
operating results of TD Bank Group (“TD”
or the “Bank”) for the year ended
October 31, 2025,
compared with the corresponding period
in the prior
year. This MD&A should be
read in conjunction with the audited Consolidated
Financial Statements and related Notes
for the year ended
October 31, 2025. This MD&A
is dated December 3, 2025. Unless otherwise
indicated, all amounts are expressed
in Canadian dollars and have been
primarily derived from the Bank’s annual Consolidated
Financial Statements prepared in accordance
with International Financial Reporting Standards
(IFRS) as issued by the International
Accounting Standards Board (IASB). Certain
comparative amounts have been revised
to conform with the
presentation adopted in the current period.
Reported results conform with generally accepted
accounting principles (GAAP), in accordance
with IFRS. Adjusted results
are non-GAAP financial
measures. 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”
sections of this document.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
2
Wholesale Banking
32
Corporate
35
STRATEGIC REVIEW
4
2024 FINANCIAL RESULTS OVERVIEW
SIGNIFICANT EVENTS
5
Summary of 2024 Performance
35
UPDATE ON THE REMEDIATION OF THE
U.S. BANK SECRECY
5
GROUP FINANCIAL CONDITION
ACT/ANTI-MONEY LAUNDERING
PROGRAM AND ENTERPRISE
Balance Sheet Review
37
AML PROGRAM
Credit Portfolio Quality
38
Capital Position
47
FINANCIAL RESULTS OVERVIEW
Securitization and Off-Balance Sheet
Arrangements
54
Corporate Overview
7
Related Party Transactions
55
Economic Summary and Outlook
7
Financial Instruments
56
How the Bank Reports
8
Net Income
11
RISK FACTORS AND MANAGEMENT
Revenue
12
Risk Factors that May Affect
Future Results
56
Provision for Credit Losses
13
Managing Risk
66
Expenses
14
Taxes
16
ACCOUNTING STANDARDS
AND POLICIES
Quarterly Financial Information
16
Critical Accounting Policies
and Estimates
101
Current and Future Changes in
Accounting Policies
105
BUSINESS SEGMENT ANALYSIS
Controls and Procedures
105
Business Focus
19
Canadian Personal and Commercial
Banking
21
ADDITIONAL FINANCIAL INFORMATION
106
U.S. Retail
24
Wealth Management and Insurance
29
GLOSSARY
113
Additional information relating to the Bank, including the Bank’s Annual Information Form, is available on the Bank’s website at
http://www.td.com
, on SEDAR+
at
http://www.sedar.com
, and
on the U.S. Securities and Exchange Commission’s website at
http://www.sec.gov
(EDGAR filers section).
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 2
Caution Regarding Forward-Looking
Statements
From time to time, the Bank (as defined in this document) makes written and/or oral forward-looking statements, including
in this document, in other filings with Canadian regulators or the
United States (U.S.) Securities and Exchange Commission (SEC), and in other communications. In addition, representatives
of the Bank may make forward-looking statements orally to
analysts, investors, the media, and others. All such statements are made pursuant to the “safe harbour” provisions
of, and are intended to be forward-looking statements under,
applicable
Canadian and U.S. securities legislation, including the U.S.
Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, but are not limited to, statements made in
this document, the Management’s Discussion and Analysis (2025 MD&A) in the Bank’s
2025 Annual Report under the heading “Economic Summary and Outlook”, under the headings “Key
Priorities for 2026” and “Operating Environment and Outlook” for the Canadian Personal and Commercial Banking,
U.S. Retail, Wealth Management and Insurance, and Wholesale
Banking segments, and in other statements regarding the Bank’s objectives and priorities for 2026 and
beyond and strategies to achieve them, the regulatory environment in which the
Bank operates, targets and commitments, the Bank’s anticipated financial performance and the outlook
for the Bank’s operations
or the Canadian, U.S. and global economies.
Forward-looking statements are typically identified by words such as “will”, “would”, “should”, “suggest”, “seek”, “believe”,
“expect”, “anticipate”, “intend”, “ambition”, “strive”, “confident”,
“estimate”, “forecast”, “outlook”, “plan”, “goal”, “commit”, “target”, “objective”, “timeline”, possible”, “potential”, “predict”,
“project”, “foresee”, “may”, and “could” and similar expressions or
variations thereof, or the negative thereof, but these terms are not the exclusive means of identifying such statements.
By their very nature, these forward-looking statements require the
Bank to make assumptions and are subject to inherent risks and uncertainties, general and specific. Especially in
light of the uncertainty related to the physical, financial, economic,
political, and regulatory environments, such risks and uncertainties – many of which are beyond the Bank’s
control and the effects of which can be difficult to predict – may cause actual
results to differ materially from the expectations, predictions, forecasts, projections, estimates, targets,
or intentions expressed in the forward-looking statements. Examples of such risk
factors include: general business and economic conditions in the regions in which the Bank operates; geopolitical
risk (including policy, trade and tax-related
risks and the potential impact
of any new or elevated tariffs or any retaliatory tariffs); inflation, interest rates and recession
uncertainty; risks associated with the remediation of the Bank’s U.S.
Bank Secrecy Act
(BSA)/anti-money laundering (AML) program and Enterprise AML program; regulatory oversight and compliance
risk; the ability of the Bank to execute on long-term strategies, shorter-term
key strategic priorities, including the successful completion of acquisitions and dispositions and integration of acquisitions,
the ability of the Bank to achieve its financial or strategic
objectives with respect to its investments, business retention plans, and other strategic plans; risks associated with
the insured deposit account agreement between the Bank and
The Charles Schwab Corporation; technology and cyber security risk (including cyber-attacks, data security breaches
or technology failures) on the Bank’s technologies, systems and
networks, those of the Bank’s customers (including their own devices), and third parties providing services
to the Bank; data risk; model risk; external fraud activity; insider risk; conduct
risk; the failure of third parties to comply with their obligations to the Bank or its affiliates, including relating
to the care and control of information, and other risks arising from the Bank’s use
of third-parties; the impact of new and changes to, or application of, current laws, rules and regulations, including
consumer protection laws and regulations, tax laws, capital guidelines and
liquidity regulatory guidance; environmental and social risk (including climate-related risk); exposure related to litigation
and regulatory matters; increased competition from incumbents and
new entrants (including Fintechs and big technology competitors); shifts in consumer attitudes and disruptive technology;
ability of the Bank to attract, develop, and retain key talent;
changes in foreign exchange rates, interest rates, credit spreads, equity prices and commodity prices; downgrade,
suspension or withdrawal of ratings assigned by any rating agency,
the
value and market price of the Bank’s common shares and other securities may be impacted by market
conditions and other factors; the interconnectivity of financial institutions, including
existing and potential international debt crises; increased funding costs and market volatility due to market illiquidity
and competition for funding; and critical accounting estimates and
changes to accounting standards, policies, and methods used by the Bank; and the occurrence of natural and unnatural catastrophic
events and claims resulting from such events. The
Bank cautions that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely
affect the Bank’s results. For more detailed information, please refer
to the “Risk Factors that May Affect Future Results” section of the 2025 MD&A, and the sections related
to strategic, credit, market (including equity, commodity,
foreign exchange, interest
rate, and credit spreads), operational (including technology, cyber security,
process, systems, data, third-party, fraud, infrastructure,
insider and conduct), model, insurance, liquidity, capital
adequacy, compliance, financial crime, reputational, environmental and
social risk in the “Managing Risk” section of the 2025 MD&A, as may be updated in subsequently
filed quarterly
reports to shareholders and news releases (as applicable) related to any events or transactions discussed under
the headings “Significant Events” or “Update on the Remediation of the
U.S.
Bank Secrecy Act
(BSA)/Anti-Money Laundering (AML) Program and Enterprise AML Program” in the relevant MD&A, which
applicable releases may be found on www.td.com. All
such factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements,
should be considered carefully when making decisions with
respect to the Bank. The Bank cautions readers not to place undue reliance on the Bank’s forward-looking
statements.
Material economic assumptions underlying the forward-looking statements contained in this document are set out
in the 2025 MD&A under the headings “Economic Summary and
Outlook” and “Significant Events”, under the headings “Key Priorities for 2026” and “Operating Environment and
Outlook” for the Canadian Personal and Commercial Banking, U.S. Retail,
Wealth Management and Insurance, and Wholesale Banking segments, each as may be updated in
subsequently filed quarterly reports to shareholders and news releases (as applicable).
Any forward-looking statements contained in this document represent the views of management only as of the
date hereof and are presented for the purpose of assisting the Bank’s
shareholders and analysts in understanding the Bank’s financial position, objectives and priorities and
anticipated financial performance as at and for the periods ended on the dates
presented, and may not be appropriate for other purposes. The Bank does not undertake to update any forward-looking
statements, whether written or oral, that may be made from time to
time by or on its behalf, except as required under applicable securities legislation.
This document was reviewed by the Bank’s Audit Committee and was approved by the Bank’s Board of Directors,
on the Audit Committee’s recommendation, prior to its release.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 3
TABLE 1: FINANCIAL HIGHLIGHTS
(millions of Canadian dollars, except
where noted)
2025
2024
Results of operations
Total revenue – reported
$
67,777
$
57,223
Total revenue – adjusted
1
61,810
56,789
Provision for (recovery of) credit losses
4,506
4,253
Insurance service expenses (ISE)
6,089
6,647
Non-interest expenses – reported
33,539
35,493
Non-interest expenses – adjusted
1
32,555
29,148
Net income – reported
20,538
8,842
Net income – adjusted
1
15,025
14,277
Financial positions
(billions of Canadian dollars)
Total loans net of allowance for loan losses
$
953.0
$
949.5
Total assets
2,094.6
2,061.8
Total deposits
1,267.1
1,268.7
Total equity
127.8
115.2
Total risk-weighted assets (RWA)
2
636.4
630.9
Financial ratios
Return on common equity (ROE) – reported
3
17.8
%
8.2
%
Return on common equity – adjusted
1
12.9
13.6
Return on tangible common equity (ROTCE)
1,3
21.9
11.2
Return on tangible common equity – adjusted
1
15.8
18.0
Efficiency ratio – reported
3
49.5
62.0
Efficiency ratio – adjusted, net of ISE
1,3,4
58.4
58.1
Provision for (recovery of) credit losses
as a % of net average loans
0.47
0.46
Common share information – reported
(Canadian dollars)
Per share earnings
Basic
$
11.57
$
4.73
Diluted
11.56
4.72
Dividends per share
4.20
4.08
Book value per share
3
68.78
59.59
Closing share price (TSX)
5
115.16
76.97
Shares outstanding (millions)
Average basic
1,726.3
1,758.8
Average diluted
1,728.0
1,760.0
End of period
1,689.5
1,750.1
Market capitalization (billions of Canadian dollars)
$
194.6
$
134.7
Dividend yield
3
4.6
%
5.1
%
Dividend payout ratio
3
36.2
86.1
Price-earnings ratio
3
10.0
16.3
Total shareholder return (1 year)
3
56.7
4.5
Common share information – adjusted
(Canadian dollars)
1
Per share earnings
Basic
$
8.38
$
7.82
Diluted
8.37
7.81
Dividend payout ratio
50.0
%
52.1
%
Price-earnings ratio
13.8
9.9
Capital ratios
2
Common Equity Tier 1 (CET1) Capital
ratio
14.7
%
13.1
%
Tier 1 Capital ratio
16.4
14.8
Total Capital ratio
18.4
16.8
Leverage ratio
4.6
4.2
Total Loss Absorbing Capacity
(TLAC) ratio
31.8
28.7
TLAC Leverage ratio
8.9
8.1
1
The Toronto-Dominion Bank (“TD” or the
“Bank”) prepares its Consolidated Financial Statements in accordance with IFRS, the current GAAP,
and refers to results prepared in
accordance with IFRS as the “reported” results. The Bank also utilizes non-GAAP financial measures
such as “adjusted” results and non-GAAP ratios to assess each of its businesses
and to measure overall Bank performance. To
arrive at adjusted results, the Bank adjusts reported results for “items of note”. Refer to the “Financial
Results Overview” section of this
document for further explanation, a list of the items of note, and a reconciliation of adjusted to reported results. Non
-GAAP financial measures and ratios used in this document are not
defined terms under IFRS and, therefore, may not be comparable to similar terms used by other issuers.
2
These measures have been included in this document in accordance with the Office of the Superintendent
of Financial Institutions Canada’s (OSFI’s) Capital Adequacy
Requirements
(CAR), Leverage Requirements, and TLAC guidelines. Refer to the “Capital Position” section of this document for
further details.
3
For additional information about this metric, refer to the Glossary of this document.
4
Efficiency ratio – adjusted, net of ISE is calculated by dividing adjusted non-interest expenses by adjusted
total revenue, net of ISE. Adjusted total revenue, net of ISE –
2025: $55,721 million, 2024: $50,142 million.
5
Toronto Stock Exchange (TSX) closing
market price.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 4
1
2
3
4
5
STRATEGIC REVIEW
In fiscal year 2025, the Bank conducted a comprehensive
review of its
businesses and functions to assess
the Bank’s positioning, performance, and growth
opportunities. This review culminated in a new
enterprise strategy that defines the path
forward for the Bank. The strategy focuses
on deepening client
relationships, driving market leadership, and
scaling profitably within the Bank’s established
risk appetite. Also as part of this review,
the Bank reaffirmed its
commitment to enhancing governance and
control functions including its U.S.
Bank Secrecy Act
(BSA)
and Anti-Money Laundering (AML) compliance
programs
(collectively, the “U.S. BSA/AML program”) compliance remediation
program.
The Bank has, as part of this strategic review,
identified opportunities to accelerate growth,
including deepening relationships, evolving
digital capabilities,
allocating capital to high return businesses,
structurally reducing costs, increasing fee income,
and modernizing infrastructure and processes.
The resulting strategy is intended to deliver
durable earnings growth and premium
ROE, creating long-term value for the Bank’s
shareholders within its existing
risk appetite. The Bank’s ability to achieve these
objectives over the medium-term is
subject to inherent risks and uncertainties,
as discussed in the “Risk Factors
That May Affect Future Results” section of this
document,
and others as noted in the “Caution
Regarding Forward-Looking Statements”
section of this document.
The Bank’s medium-term strategy is anchored in
the three strategic pillars and corresponding objectives
introduced at its
2025 Investor Day.
Deeper Relationships
●
Deeper Share of Wallet
: Become Canada’s leading relationship bank,
increasing client depth across TD’s footprint by
putting clients at the centre, and
seamlessly delivering products and services
across channels
●
Deeper Digital Engagement
: Transform distribution by scaling digital leadership
across businesses and evolving branches
into advice centres, while
adding specialist capabilities and sales capacity
through frontline growth
●
Deeper Fee Income
: Enhance earnings durability by driving
profitable growth across the Wealth Management
and Insurance, and Wholesale Banking
business segments, as well as the Bank’s commercial
banking business in Canada and
the United States
Simpler & Faster
●
Simpler & Faster Client Experiences
: Become a leader in client experience in
Canada and the United States, with a focus
on making processes
simpler and faster
●
Simpler & Faster Operating Model
: Evolve the operating model to reduce
management layers, decrease complexity, and speed up decision
making
while shifting culture towards more leadership
accountability
●
Simpler & Faster Technology, Leveraging Artificial Intelligence (AI)
: Enhance technology and data capabilities
to ensure platforms are scalable,
efficient, and resilient, while capturing revenue
and cost efficiencies through the adoption of AI
Disciplined Execution
●
Disciplined Governance & Controls
: Continue to invest to evolve governance,
risk and control functions in line with the
Bank’s scale, complexity, and
regulatory requirements
●
Disciplined Cost Management
: Sustainably lower the Bank’s expense base by delivering
meaningful cost savings over the medium-term
through
reimagining processes, transforming distribution,
and enabling technology and AI deployment
●
Disciplined Capital Management
: Deploy capital with greater discipline
to drive franchise leadership and scale,
while delivering premium returns,
including uplifting returns across U.S.
Retail and Wholesale Banking
In conjunction with its strategy, the Bank has established Bank-wide
targets
including the following:
Fiscal Year 2026 Targets
1
~13%
Adj.
ROE
6-8%
Y/Y Adj.
2
EPS
Growth
Positive
Adj.
2
Operating
Leverage
13%+
CET1 Ratio
Medium-Term (Fiscal Year 2029) Targets
1
~16%
Adj.
2
ROE
7-10%
Adj.
2
EPS Growth
Positive
Adj.
2
Operating
Leverage
3
Strong
CET1 Ratio
40-50%
Dividend
Payout Ratio
1
The Bankְ’s
fiscal 2026
and
medium-term
financial targets
are
based
on
forward-looking
assumptions
that have
inherent risks and
uncertainties. Results
may
vary
depending
on
actual
economic conditions, including the level of unemployment, interest rates, and economic growth or contraction, the
operating environment, including regulatory requirements, political
environment, and competitive landscape, and the Bank’s assumptions on future business performance,
including credit conditions and performance, inclusive of policy and trade
uncertainty and borrower or industry specific credit factors and conditions, and foreign exchange impact. These
assumptions are subject to inherent uncertainties and may vary based on
factors outside the Bank’s control, including those set out at the beginning of this document in the “Caution
Regarding Forward-Looking Statements” section. 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.
2
The Bank prepares its consolidated financial statements in accordance with IFRS, the current GAAP,
and refers to results prepared in accordance with IFRS as the “reported” results. The
Bank also utilizes non-GAAP financial measures such as “adjusted” results (i.e., reported results excluding “items
of note”) and non-GAAP ratios to assess each of its businesses and
measure overall Bank performance. The Bank believes that non-GAAP financial measures and non-GAAP ratios
provide the reader with a better understanding of how management
views the Bank’s performance. Non-GAAP financial measures and non-GAAP ratios used in this presentation
are not defined terms under IFRS and, therefore, may not be comparable to
similar terms used by other issuers. See “Financial Results Overview” section in this document for further explanation, reported
basis results, a list of the items of note, and a
reconciliation of adjusted to reported results.
3
Operating leverage is a non-GAAP measure. At the total Bank level, TD calculates operating leverage as the
difference between the % change in adjusted revenue (for U.S. Retail in
source currency) net of ISE, and adjusted expenses (for U.S. Retail in US$) grossed up by the retailer program partners
’
share of PCL for the Bank’s U.S. strategic card portfolio.
Collectively, these adjustments provide a measure of operating leverage
that management believes is more reflective of underlying business performance.
4
Calculated in accordance with the OSFI’s Capital Adequacy Requirements guideline.
5
For additional information about this metric, refer to the Glossary of this document.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 5
6
7
SIGNIFICANT EVENTS
a) Sale of Schwab Shares
On February 12, 2025, the Bank sold its entire
remaining equity investment in
The Charles Schwab Corporation (“Schwab”)
through a registered offering and
share repurchase by Schwab. Immediately prior
to the sale, TD held 184.7 million shares
of Schwab’s common stock, representing 10.1% economic
ownership.
The sale of the shares resulted in proceeds
of $21.0 billion (US$14.6 billion) and the
Bank recognized a net gain on sale of $8.6
billion (US$5.8 billion). This gain is
net of the release of related cumulative foreign
currency translation from accumulated other
comprehensive income (AOCI), the release
of AOCI on designated net
investment hedging items, direct transaction
costs, and taxes. The Bank also recognized
$184 million of underwriting fees in its
Wholesale segment as a result of
TD Securities acting as a lead bookrunner
on the transaction.
The transaction increased CET1 capital
by 238 basis points (bps). The Bank discontinued
recording its share of earnings available to
common shareholders
from its investment in Schwab following
the sale. The Bank continues to have a business
relationship with Schwab through the insured
deposit account agreement
(“Schwab IDA Agreement”).
b)
Restructuring Charges
The Bank continued to undertake certain
measures in the fourth quarter of 2025 to reduce
its cost base and achieve greater efficiency. In connection with this
program, the Bank incurred $686 million
pre-tax of restructuring charges during
the year ended October 31, 2025, which primarily
related to employee severance
and other personnel-related costs, asset impairment
and other rationalization, including certain
business wind-downs, and real estate optimization.
Next quarter,
the Bank expects
to incur additional restructuring charges
of approximately $125 million pre-tax, and
to conclude the restructuring program
with total restructuring
charges of approximately $825 million pre-tax.
The restructuring program generated
savings of approximately $100 million pre-tax
in 2025. The Bank expects the
program to generate total pre-tax fully realized
annual program savings of approximately
$750 million, including savings from an
approximate 3% workforce
reduction
.
UPDATE ON THE REMEDIATION OF THE U.S. BANK SECRECY ACT/ANTI-MONEY
LAUNDERING PROGRAM AND ENTERPRISE
AML PROGRAM
As previously disclosed, on October 10, 2024,
the Bank announced that, following active
cooperation and engagement with authorities and
regulators, it reached a
resolution (the “Global Resolution”) of
previously disclosed investigations related
to its U.S. BSA/AML program. The Bank
and certain of its U.S. subsidiaries
consented to orders with the Office of the Comptroller
of the Currency (“OCC”), the Federal
Reserve Board (“FRB”), and the Financial
Crimes Enforcement
Network (“FinCEN”) and entered into plea agreements
with the Department of Justice (“DOJ”), Criminal
Division, Money Laundering and Asset
Recovery Section
and the United States Attorney’s Office for the
District of New Jersey. Details of the Global Resolution include:
(i) a total payment of US$3.088 billion
(C$4.233 billion), all of which was provisioned
during the 2024 fiscal year; (ii) TD Bank,
N.A. (“TDBNA”) pleading guilty to one count
of conspiring to fail to maintain
an adequate AML program, failing to file
accurate currency transaction reports
(“CTRs”) and launder money and TD Bank
US Holding Company (“TDBUSH”)
pleading guilty to two counts of failing to maintain
an adequate AML program and failing
to file accurate CTRs; (iii) requirements to remediate
the Bank’s U.S.
BSA/AML program; (iv) a requirement
to prioritize the funding and staffing of the remediation,
which includes Board certifications for dividend
distributions from
certain of the Bank’s U.S. subsidiaries to
the Bank; (v) formal oversight of the
U.S. BSA/AML remediation through an independent
compliance monitorship; (vi) a
prohibition against the average combined
total assets of TD’s two U.S. banking subsidiaries
(TDBNA and TD Bank USA, N.A.) (collectively, the “U.S.
Bank”)
exceeding US$434 billion (representing the
combined total assets of the U.S. Bank as at
September 30, 2024) (the “Asset Limitation”),
and if the U.S. Bank does
not achieve compliance with all actionable
articles in the OCC consent orders (and
for each successive year that the U.S.
Bank remains non-compliant), the OCC
may require the U.S. Bank to further reduce
total consolidated assets by up to 7%; (vii)
the U.S. Bank being subject to OCC
supervisory approval processes for
any additions of new bank products, services,
markets, and stores prior to the OCC’s acceptance
of the U.S. Bank’s improved AML policies and procedures,
to
ensure the AML risk of new initiatives is appropriately
considered and mitigated; (viii) requirements
for the Bank and TD Group U.S. Holdings,
LLC (“TDGUS”) to
retain a third party to assess the effectiveness of
the corporate governance and U.S. management
structure and composition to adequately oversee
U.S.
operations; (ix) requirements to comply
with the terms of the plea agreements with
the DOJ during a five-year term of probation (which
could be extended as a
result of the Bank failing to complete the compliance
undertakings, failing to cooperate or to
report alleged misconduct as required,
or committing additional
crimes); (x) an ongoing obligation to cooperate
with DOJ investigations; and (xi) an ongoing
obligation to report evidence or allegations
of violations by the Bank,
its affiliates, or their employees that may be a
violation of U.S. federal law. The full terms of the consent orders
and plea agreements are available on the Bank’s
issuer profile on SEDAR+ at www.sedarplus.com.
The Bank is focused on meeting the terms
of the consent orders and plea agreements,
including meeting the requirements to remediate
the Bank’s U.S. BSA/AML
program. In addition, the Bank is also undertaking
remediation of the Bank’s enterprise-wide AML/Anti-Terrorist Financing and Sanctions
Programs (“Enterprise
AML Program”).
For additional information on the risks associated
with the remediation of the Bank’s U.S. BSA/AML
program and the Bank’s Enterprise AML Program,
see the
“Risk Factors That May Affect Future Results –
Remediation of the Bank’s U.S. BSA/AML Program
and Enterprise AML Program” section
of this document.
Update on the Remediation of the U.S.
Bank Secrecy Act/Anti-Money Laundering
Program and Enterprise AML Program
The Bank remains focused on remediating
its U.S. BSA/AML program to meet the requirements
of the Global Resolution. As at December 3,
2025, the Bank has
completed the majority of its management
remediation actions (the term “management
remediation actions” is not a regulatory definition
and is considered by the
Bank to consist of the root cause assessments,
data preparation, design, documentation,
frameworks, policies, standards, training,
processes, systems, testing
and implementation of controls, as well as
the hiring of resources); however, significant work and
important milestones remain for calendar
2026 and calendar
2027 including the Suspicious Activity Report
lookback per the OCC consent order which
management expects to complete in
calendar 2027. For fiscal 2026, the
Bank continues to expect U.S. BSA/AML remediation
and related governance and control
investments of approximately US$500
million pre-tax.
All management
remediation actions will be subject to demonstrated
sustainability and validation by the Bank’s internal
audit function (with such activities currently
planned for
calendar 2026 and calendar 2027), as well
as the review by the appointed monitor, and, ultimately, the review and approval of the
Bank’s U.S. banking regulators
and the DOJ. Following such independent reviews,
testing, and validation, there could be additional
management remediation actions that would
take place after
calendar 2027 in which case the overall remediation
timeline may be extended. In addition, as
the Bank undertakes the lookback reviews,
the Bank may be
6
The Bank’s expectations regarding the restructuring program are subject to inherent uncertainties and
are based on the Bank’s assumptions regarding certain factors, including rate of
natural attrition, talent re-deployment opportunities, years-of-service, execution timing of actions, decisions to expand
on or reduce the restructuring actions (e.g., scope of real estate
optimization, additional rationalizations), and foreign exchange translation impacts. 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.
7
The total amount expected to be spent on remediation and governance and control investments is subject to inherent uncertainties
and may vary based on the scope of work in the U.S.
BSA/AML remediation plan which could change as a result of additional findings that are identified as work progresses
as well as the Bank’s ability to successfully execute against the
U.S. BSA/AML remediation program in accordance with the U.S. Retail segment’s fiscal 2026 and
medium-term plan
.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 6
required to further expand the scope of the review, either in
terms of the subjects being addressed and/or
the time period reviewed. The following
graph illustrates
the Bank’s expected remediation plan and progress
on a calendar year basis, based on its
work to date:
The Bank’s remediation timeline is based on
the Bank’s current plans, as well as assumptions
related to the duration of planning activities,
including the
completion of external benchmarking and
lookback reviews. The Bank’s ability to
meet its planned remediation milestones assumes
that the Bank will be able to
successfully execute against its U.S. BSA/AML
remediation program plan, which is
subject to inherent risks and uncertainties including
the Bank’s ability to attract
and retain key employees, the ability of
third parties to deliver on their contractual obligations,
the successful development and implementation
of required
technology solutions, and data availability
to complete the required lookback reviews.
Furthermore, the execution of the U.S. BSA/AML
remediation plan, including
these planned milestones, will not be entirely
within the Bank’s control because of various factors
such as (i) the requirement to obtain regulatory
approval or non-
objection before proceeding with various
steps, and (ii) the requirement for the various
deliverables to be acceptable to the regulators
and/or the monitor. As of the
date hereof, the Bank believes that it and its applicable
U.S. subsidiaries have taken such actions
as are required of them to date under the
terms of the consent
orders and plea agreements and is not aware
of them being in breach of the same. For
information about the Bank’s AML governance
framework, see the
“Managing Risk” section of this MD&A.
While substantial work remains, the
Bank made progress on remediating and
strengthening its U.S. BSA/AML program
over the first three quarters of fiscal 2025,
including:
1)
the DOJ and FinCEN approved the use
of the same Independent Compliance
Monitor on a go-forward basis;
2)
improvements to transaction monitoring
capabilities with the implementation of
a new transaction monitoring system,
the introduction of all planned
scenarios into that transaction monitoring system
as set out in the Bank’s U.S. BSA/AML program
remediation plan, and the deployment
of the first
phase of machine learning analysis in this
system which will help improve the effectiveness
and efficiency of the Bank’s investigative teams;
3)
enhanced and streamlined investigation practices
including the implementation of technology
which centralizes all new investigative
cases in a single
system to provide unified data sets to help
manage financial crime risk with a single
view of the customer;
4)
implemented enhancements to cash deposit requirements
at stores;
5)
updated and enhanced policies, including those
with respect to Know Your Customer (KYC) activities, and introducing
revised escalation standards
across all of U.S. Financial Crime Risk
Management (FCRM);
6)
introduced new reporting on workloads that has
improved the Bank’s ability to forecast resource
needs;
7)
strengthened controls and assessments relating
to new business initiatives, including the establishment
of a new Financial Crimes Risk Management
subcommittee focused on reviewing and
assessing new business products, services
and geographies; and
8)
the launch of focused training for the first
and second lines of defense relating to suspicious
customer activity for certain commercial
products and
services.
Specifically in the fourth quarter of fiscal 2025,
the Bank made the following progress:
1)
implemented an enhanced,
streamlined system and end-to-end process
for submitting unusual transaction referrals
for frontline colleagues to
improve the accuracy and efficiency by which
the Bank submits unusual transaction reports;
2)
deployed further machine learning enhancements
to the Bank’s transaction monitoring system to improve
the efficacy and accuracy of the Bank’s
U.S. BSA/AML program;
3)
deployed advanced risk detection capability
to help identify and mitigate a high-risk
criminal activity;
and
4)
made good progress against the lookback
reviews
required under the OCC consent order.
Going forward, the Bank’s focus will be on
continuing to remediate and strengthen its
U.S. BSA/AML program, including:
1)
continue enhancing its financial crime risk
assessment methodologies and processes;
2)
the multi-phase deployment of a new KYC strategic
platform that will provide a single view
of the customer to improve risk assessment
capabilities;
3)
further deployments of machine learning
and specialized AI;
4)
continued progress on lookback reviews as required
under the OCC and FinCEN consent orders;
5)
continued data enhancements with the deployment
of dedicated FCRM data environments
which will create a single source of truth
in support of
advanced detection capabilities;
and
6)
continued training and development of colleagues.
To help ensure that the Bank can continue to support its customers’ financial
needs in the U.S. while not exceeding
the limitation on the combined total assets
of
the U.S. Bank, the Bank executed multiple
U.S. balance sheet restructuring actions
in fiscal 2025. Refer to “Update on U.S.
Balance Sheet Restructuring” in the
U.S. Retail segment section for additional
information on these actions. For additional
information about expenses associated
with the Bank’s U.S. BSA/AML
program remediation activities, refer
to the U.S. Retail segment section.
Strengthening of the Bank’s Enterprise AML Program
The Bank continues to undertake remediation
of the Enterprise AML Program, including
a range of management remediation and
enhancement actions (the term
“management remediation and enhancement
actions”
is not a regulatory definition and is considered
by the Bank to consist of root cause
assessments, data
preparation, design, documentation, frameworks,
policies, standards, training, processes,
systems, testing, and execution of controls,
as well as the hiring of
resources). While the Bank has made progress
on this remediation work, it is a multi-year
endeavour and the remediation work remains
ongoing. The timing of
completion of the remediation work will not
be entirely within the Bank’s control, and is subject
to regulatory feedback, internal review, challenge and validation.
As
previously disclosed, following the end of the
first quarter of fiscal 2025, the Financial Transactions
and Reports Analysis Centre of Canada (“FINTRAC”)
commenced a review of certain remediation
steps that the Bank has taken to date
to address the FINTRAC violations.
This review is ongoing, and subject to the
outcome, may result in additional regulatory
actions.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 7
The remediation and enhancement of the Enterprise
AML Program is exposed to similar
risks as noted in respect of the remediation
of the Bank’s U.S. BSA/AML
Program (see also “Remediation of the
U.S. BSA/AML Program”
above). In particular, as the Bank continues its remediation
and improvement activities of the
Enterprise AML Program, it expects an increase
in identification of reportable transactions
and/or events, which will add to the operational
backlog in the Bank’s
Financial Crime Risk Management (FCRM)
investigations processing that the Bank
currently faces, but is working towards
remediating, across the Bank. In
addition, on an ongoing basis, the Bank
will continue to review and assess whether
issues identified in one jurisdiction have an impact
in other jurisdictions.
Furthermore, the Bank’s regulators or law enforcement
agencies may identify other issues with
the Bank’s Enterprise AML Program, which may result
in additional
regulatory actions. These issues identified
through the Bank’s own review or by
the Bank’s regulators or law enforcement agencies
may broaden the scope of the
remediation and improvements required
for the Enterprise AML Program.
While substantial work remains, the
Bank made progress on remediating and strengthening
the Enterprise AML Program over fiscal
2025, including the following
during the first three quarters of fiscal 2025:
1) redesigning the FCRM organizational
structure to better enable stronger collaboration,
clear ownership, and a more agile response
to evolving risk
and regulatory expectations, including the consolidation
of the Enterprise and the U.S. AML mandates
under the leadership of the Global Head of
FCRM;
2) completing a comprehensive transaction
monitoring coverage assessment to identify areas
requiring enhancements;
3) enhancing investigative processes through
improved workflow and data management;
4) continued improvements in the Bank’s process
and procedural guidance, reinforced
with targeted training across FCRM and
individual business
lines;
5) implementing a stronger monitoring and
testing standard to improve control coverage
and depth; and
6) launching technology initiatives to consolidate
electronic document and data availability, to improve quality and
timeliness of monitoring and to
improve oversight of escalated AML issues.
Specifically in the fourth quarter of fiscal 2025,
the Bank made the following progress:
1)
continued improvement of the KYC controls
to strengthen tracking and regulatory compliance,
supporting ongoing customer due diligence
efforts;
2)
strengthened governance structures and
first-line accountability in managing
financial crime risks, driving cross-functional
collaboration and
standardized processes across KYC,
Customer Exits and investigative activities;
3)
enhanced the AML/Anti-Terrorist Finance Enterprise Policy to align
with regulatory amendments;
and
4)
completed the rollout of the enhanced
financial crime risk assessment methodology
and related tools to strengthen identification
and measurement of
FCRM risks across clients, products and
transactions, supported by improved data
capabilities.
Going forward, the Bank’s focus will be on
continuing to remediate and strengthen its Enterprise
AML Program:
1)
continued enhancement and Enterprise-wide
adoption of the new centralized case management
tool, with the goal of strengthening oversight
and
investigations of identified FCRM risks;
2)
ongoing advancement in transaction monitoring
capabilities, including further refinement of
customer risk rating methodologies;
3)
continued investment in supporting advanced
analytics, machine learning, and AI opportunities
within FCRM; and
4)
control enhancements from the execution of
the enhanced financial crime risk assessment
methodology and process.
FINANCIAL RESULTS OVERVIEW
CORPORATE OVERVIEW
The Toronto-Dominion Bank and its subsidiaries are collectively known as
TD Bank Group (“TD” or the “Bank”). TD is
the sixth largest bank in North America by
assets and serves more than 28.1 million
clients in four key businesses operating in
a number of locations in financial centres around
the globe: Canadian
Personal and Commercial Banking, including
TD Canada Trust and TD Auto Finance Canada; U.S.
Retail, including TD Bank, America’s Most Convenient
Bank
®
,
TD Auto Finance U.S., TD Wealth (U.S.), Wealth Management
and Insurance, including TD Wealth (Canada),
TD Direct Investing, and TD Insurance; and
Wholesale Banking,
including TD Securities and TD Cowen.
TD also ranks among North America’s leading digital
banks, with more than 13 million active
mobile
users in Canada and the U.S. TD had $2.1 trillion
in assets on October 31, 2025.
The Toronto-Dominion Bank trades under the symbol “TD” on the Toronto Stock
Exchange and New York Stock Exchange.
ECONOMIC SUMMARY AND OUTLOOK
The global economy remains on track to
slow in calendar 2025 with decelerating cyclical
momentum reinforced by trade barriers. Higher
U.S. tariffs appear likely
to persist under the current administration.
Inflation expectations have increased as
the U.S. tariffs exert upward pressure on prices
and complicate global supply
chains. This puts global central banks in
the challenging position of gauging whether
any resulting inflation is a one-time shock
or will prove persistent.
The U.S. economy has softened overall in
calendar 2025, although growth has been
volatile on a quarter-to-quarter basis, buffeted
by swings in trade policy and
the government shutdown. Smoothing
through the volatility, consumer spending has slowed, and residential
investment continues to contract, held back
by
elevated borrowing costs. Government spending
is also declining, as cutbacks at the federal
level and the U.S. government shutdown have
temporarily restrained
outlays. Business investment has managed
to buck the trend, largely due to increased
technology-related spending. TD Economics
forecasts that a post-
shutdown-related rebound in activity, lower interest rates, tax
cuts, and a more business-friendly regulatory
environment will lift growth back above
2% in calendar
2026.
U.S. economic data releases have been
delayed due to the government shutdown,
increasing uncertainty on recent economic
trends. As of September 2025,
hiring had lost momentum and the unemployment
rate had risen to 4.4% – a new cycle high.
At its latest meeting in October 2025,
the Federal Reserve took
further action to ensure against a slowing labour
market by cutting its overnight rate by a quarter
point to 3.75-4.00%. Inflation has remained somewhat
elevated in
recent months, but it is expected to cool after
the one-time impact of tariffs has passed. TD
Economics expects the Federal Reserve
to lower the policy rate further
over the coming months to 3.00-3.25%, close
to most estimates of a “neutral”
level. But the pace of interest rate
cuts will depend on the evolution of the job and
inflation data.
Canada’s economy is estimated to have turned in a
third straight year of modest economic growth
in calendar 2025 as the impact of U.S. import
tariffs on
Canada’s exports offset the boost from lower borrowing
costs. The effect of elevated uncertainty around
tariff policy has weakened business and consumer
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 8
confidence about the future, and dampened
spending. This soft hiring backdrop is expected
to lift the unemployment rate from 6.9%
in October 2025 to 7.3% by
(calendar) year end. Immigration policy
changes have also resulted in slower population
and labour force growth, which is
expected to limit the rise in the
unemployment rate. New federal defense and
infrastructure spending, an improvement in
the housing market and firmer business investments
are expected to
drive a moderately stronger growth picture
in 2026.
The Canadian central bank lowered its overnight
rate to 2.25% in October 2025. Provided
inflation evolves in line with the Bank’s
current forecast, the overnight
rate is expected to remain unchanged over
the next several quarters. A generally weaker
U.S. dollar and a gradual improvement in Canada’s economy
are
expected to lift the Canadian dollar. TD Economics expects
the Canadian dollar to appreciate to the 73-74
U.S. cent range by mid-2026, although it is likely
to be
influenced by the path of U.S. trade policy.
HOW THE BANK REPORTS
The Bank prepares its Consolidated Financial
Statements in accordance with IFRS, the
current GAAP, and refers to results prepared in accordance with IFRS as
“reported” results.
Non-GAAP and Other Financial Measures
In addition to reported results, the Bank also
presents certain financial measures, including
non-GAAP financial measures that are historical,
non-GAAP ratios,
supplementary financial measures and capital
management measures, to assess its results.
Non-GAAP financial measures, such as “adjusted”
results, are utilized
to assess the Bank’s businesses and to measure
the Bank’s overall performance.
To
arrive at adjusted results, the Bank adjusts
for “items of note”, from reported
results. Items of note are items which management
does not believe are indicative of underlying
business performance and are disclosed
in Table 3. Non-GAAP
ratios include a non-GAAP financial measure
as one or more of its components. Examples
of non-GAAP ratios include adjusted net
interest margin, adjusted basic
and diluted earnings per share (EPS), adjusted
dividend payout ratio, adjusted efficiency ratio,
and adjusted effective income tax rate. The Bank
believes that non-
GAAP financial measures and non-GAAP
ratios provide the reader with a better
understanding of how management views
the Bank’s performance. Non-GAAP
financial measures and non-GAAP ratios used
in this document are not defined terms under
IFRS and, therefore, may not be comparable
to similar terms used by
other issuers. Supplementary financial
measures depict the Bank’s financial performance
and position, and capital management
measures depict the Bank’s
capital position, and both are explained in
this document where they first appear.
U.S. Strategic Cards
The Bank’s U.S. strategic cards portfolio is comprised
of agreements with certain U.S. retailers
pursuant to which TD is the U.S. issuer
of private label and co-
branded consumer credit cards to their U.S.
customers. Under the terms of the individual
agreements, the Bank and the retailers
share in the profits generated by
the relevant portfolios after credit losses.
Under IFRS, TD is required to present the gross
amount of revenue and provision for credit
losses (PCL) related to these
portfolios in the Bank’s Consolidated Statement
of Income. At the segment level, the retailer
program partners’ share of revenues and
credit losses is presented in
the Corporate segment, with an offsetting amount
(representing the partners’ net share)
recorded in Non-interest expenses, resulting
in no impact to Corporate’s
reported Net income (loss). The Net income included
in the U.S. Retail segment includes only
the portion of revenue and credit losses attributable
to TD under the
agreements.
Investment in The Charles Schwab Corporation
and Schwab IDA Agreement
On February 12, 2025, the Bank sold its entire
remaining equity investment in Schwab
through a registered offering and share repurchase
by Schwab. For further
details, refer to the “Significant Events
– Sale of Schwab Shares” section of this
document. The Bank discontinued recording
its share of earnings available to
common shareholders from its investment
in Schwab following the sale.
Prior to the sale, the Bank accounted
for its investment in Schwab using the equity
method. The U.S. Retail segment reflected
the Bank’s share of net income
from its investment in Schwab. The Corporate
segment net income (loss) included
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. The Bank’s share of
Schwab’s earnings
available to common shareholders was reported
with a one-month lag. For further details,
refer to Note 12 of the Bank’s 2025
Annual Consolidated Financial
Statements.
Subsequent to the sale of the Bank’s entire remaining
equity investment in Schwab, the Bank
continues to have a business relationship
with Schwab through the
Schwab IDA Agreement.
On May 4, 2023, the Bank and Schwab entered
into an amended Schwab IDA Agreement,
with an initial expiration of July 1, 2034.
Pursuant to the Schwab IDA
Agreement, the Bank makes sweep deposit
accounts available to clients of Schwab.
Schwab designates a portion of the deposits
with the Bank as fixed-rate
obligation amounts (FROA). Remaining deposits
are designated as floating-rate obligations.
The FROA floor is set at US$60 billion.
Refer to Note 26 of the Bank’s 2025 Annual
Consolidated Financial Statements for further details
on the Schwab IDA Agreement.
The following table provides the operating results
on a reported basis for the Bank.
TABLE 2: OPERATING RESULTS – Reported
(millions of Canadian dollars)
2025
2024
Net interest income
$
33,062
$
30,472
Non-interest income
34,715
26,751
Total revenue
67,777
57,223
Provision for credit losses
4,506
4,253
Insurance service expenses
6,089
6,647
Non-interest expenses
33,539
35,493
Income before income taxes and share
of net income from investment in Schwab
23,643
10,830
Provision for (recovery of) income taxes
3,410
2,691
Share of net income from investment in
Schwab
305
703
Net income – reported
20,538
8,842
Preferred dividends and distributions on other
equity instruments
565
526
Net income available to common shareholders
$
19,973
$
8,316
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 9
The following table provides a reconciliation between
the Bank’s adjusted and reported results. For
further details refer to the “Significant
Events” or “Financial
Results Overview”
sections of this document.
TABLE 3: NON-GAAP FINANCIAL
MEASURES – Reconciliation of
Adjusted to Reported Net Income
(millions of Canadian dollars)
2025
2024
Operating results – adjusted
Net interest income
1,2
$
33,303
$
30,749
Non-interest income
3
28,507
26,040
Total revenue
61,810
56,789
Provision for (recovery of) credit losses
4,506
4,253
Insurance service expenses
6,089
6,647
Non-interest expenses
4
32,555
29,148
Income before income taxes and share of net income from
investment in Schwab
18,660
16,741
Provision for (recovery of) income taxes
3,975
3,355
Share of net income from investment in Schwab
5
340
891
Net income – adjusted
15,025
14,277
Preferred dividends and distributions on other equity instruments
565
526
Net income available to common shareholders –
adjusted
14,460
13,751
Pre-tax adjustments for items of note
Amortization of acquired intangibles
6
(171)
(290)
Acquisition and integration charges related to the Schwab
transaction
4,5
–
(109)
Share of restructuring and other charges from investment
in Schwab
5
–
(49)
Restructuring charges
4
(686)
(566)
Acquisition and integration-related charges
4
(162)
(379)
Impact from the terminated First Horizon (FHN) acquisition-related
capital hedging strategy
1
(205)
(242)
Gain on sale of Schwab shares
3
8,975
1,022
Balance sheet restructuring
2,3
(2,803)
(311)
Indirect tax matters
2,4
–
(226)
Civil matter provision
4
–
(274)
Federal Deposit Insurance Corporation (FDIC) special assessment
4
–
(442)
Global resolution of the investigations into the Bank’s U.S.
BSA/AML program
4
–
(4,233)
Less: Impact of income taxes
Amortization of acquired intangibles
(33)
(41)
Acquisition and integration charges related to the Schwab
transaction
–
(23)
Restructuring charges
(176)
(150)
Acquisition and integration-related charges
(35)
(82)
Impact from the terminated FHN acquisition-related capital hedging
strategy
(52)
(60)
Gain on sale of Schwab shares
407
–
Balance sheet restructuring
(676)
(77)
Indirect tax matters
–
(53)
Civil matter provision
–
(69)
FDIC special assessment
–
(109)
Total adjustments for items of note
5,513
(5,435)
Net income available to common shareholders – reported
$
19,973
$
8,316
1
After the termination of the merger agreement between the Bank and FHN on May 4, 2023, the residual impact
of the strategy is reversed through net interest income (NII) –
2025: ($205) million, 2024: ($242) million,
reported in the Corporate segment.
2
Adjusted net interest income excludes the following items of note:
i.
Balance sheet restructuring – 2025: $36 million in respect of U.S. Retail activities, reported in the U.S. Retail segment;
and
ii.
Indirect tax matters – 2024: $35 million, reported in the Corporate segment.
3
Adjusted non-interest income excludes the following items of note:
i.
The Bank sold common shares of Schwab and recognized a gain on the sale – 2025: $8,975 million, 2024: $1,022 million, reported
in the Corporate segment; and
ii.
Balance sheet restructuring – 2025: $2,665 million, 2024: $311
million in respect of U.S. Retail activities,
reported in the U.S. Retail segment, and 2025: $102 million in respect of
other activities, reported in the Corporate segment.
4
Adjusted non-interest expenses exclude the following items of note:
i.
Amortization of acquired intangibles – 2025: $136 million, 2024: $172 million, reported in the Corporate segment;
ii.
The Bank’s own acquisition and integration charges related to the Schwab transaction – 2024: $88
million, reported in the Corporate segment;
iii.
Restructuring charges – 2025: $686 million, compared with 2024: $566 million under a previous program, reported
in the Corporate segment;
iv.
Acquisition and integration-related charges – 2025: $162 million, 2024: $379 million, reported in the Wholesale
Banking segment;
v.
Indirect tax matters – 2024: $191 million, reported in the Corporate segment;
vi.
Civil matter provision – 2024: $274 million, reported in the Corporate segment;
vii.
FDIC special assessment – 2024: $442 million,
reported in the U.S. Retail segment; and
viii.
Charges for the global resolution of the investigations into the Bank’s U.S. BSA/AML program – 2024:
$4,233 million, reported in the U.S. Retail segment.
5
Adjusted share of net income from investment in Schwab excludes the following items of note on an after-tax basis.
The earnings impact of these items was reported in the Corporate
segment:
i.
Amortization of Schwab-related acquired intangibles – 2025: $35 million, 2024: $118
million;
ii.
The Bank’s share of acquisition and integration charges associated with Schwab’s acquisition
of TD Ameritrade – 2024: $21 million;
iii.
The Bank’s share of restructuring charges incurred by Schwab – 2024: $27 million; and
iv.
The Bank’s share of the FDIC special assessment charge incurred by Schwab – 2024:
$22 million.
6
Amortization of acquired intangibles relates to intangibles acquired as a result of asset acquisitions and business
combinations, including the after-tax amounts for amortization of
acquired intangibles relating to the share of net income from investment in Schwab, reported in the Corporate segment.
Refer to footnotes 4 and 5 for amounts.
TABLE 4: RECONCILIATION OF REPORTED
TO ADJUSTED EARNINGS
PER SHARE
1
(Canadian dollars)
2025
2024
Basic earnings per share – reported
$
11.57
$
4.73
Adjustments for items of note
(3.19)
3.09
Basic earnings per share – adjusted
$
8.38
$
7.82
Diluted earnings per share – reported
$
11.56
$
4.72
Adjustments for items of note
(3.19)
3.09
Diluted earnings per share – adjusted
$
8.37
$
7.81
1
EPS is computed by dividing net income available to common shareholders by the weighted-average number of
shares outstanding during the period. Numbers may not add due to
rounding.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 10
TABLE 5: AMORTIZATION OF
INTANGIBLES, NET OF INCOME TAXES
(millions of Canadian dollars)
2025
2024
Schwab
1
$
35
$
118
Wholesale Banking related intangibles
81
108
Other
22
23
Included as items of note
138
249
Software and asset servicing rights
503
432
Amortization of intangibles, net of income
taxes
$
641
$
681
1
Included in Share of net income from investment in Schwab.
RETURN ON COMMON EQUITY
The consolidated Bank ROE is calculated
as reported net income available to common
shareholders as a percentage of average
common equity. The
consolidated Bank adjusted ROE is calculated
as adjusted net income available to
common shareholders as a percentage of average
common equity. Adjusted
ROE is a non-GAAP financial ratio and
can be utilized in assessing the Bank’s use of equity.
ROE for the business segments is calculated
as the segment net income as a percentage
of average allocated capital. The Bank’s
methodology for allocating
capital to its business segments is largely aligned
with the common equity capital requirements
under Basel III.
Capital allocated to the business segments
was
based on 11.5% of CET1 Capital in both fiscal 2024 and 2025.
TABLE 6: RETURN ON COMMON EQUITY
(millions of Canadian dollars, except
as noted)
2025
2024
Average common equity
$
112,429
$
100,979
Net income available to common shareholders
– reported
19,973
8,316
Items of note, net of income taxes
(5,513)
5,435
Net income available to common shareholders
– adjusted
$
14,460
$
13,751
Return on common equity – reported
17.8
%
8.2
%
Return on common equity – adjusted
12.9
13.6
RETURN ON TANGIBLE COMMON EQUITY
Tangible common equity (TCE) is calculated as common shareholders’ equity
less goodwill, imputed goodwill and intangibles
on the investments in Schwab and
other acquired intangible assets, net of related
deferred tax liabilities. ROTCE is calculated
as reported net income available to common
shareholders after
adjusting for the after-tax amortization of
acquired intangibles, which are treated as an
item of note, as a percentage of average
TCE. Adjusted ROTCE is
calculated using reported net income available
to common shareholders, adjusted for all
items of note, as a percentage of average
TCE. TCE, ROTCE, and
adjusted ROTCE can be utilized in assessing
the Bank’s use of equity. TCE is a non-GAAP financial measure,
and ROTCE and adjusted ROTCE are
non-GAAP
ratios.
TABLE 7: RETURN ON TANGIBLE COMMON
EQUITY
(millions of Canadian dollars, except
as noted)
2025
2024
Average common equity
$
112,429
$
100,979
Average goodwill
18,987
18,431
Average imputed goodwill and intangibles
on investments in Schwab
1,575
5,836
Average other acquired intangibles
1
427
560
Average related deferred tax liabilities
(232)
(230)
Average tangible common equity
91,672
76,382
Net income available to common shareholders
– reported
19,973
8,316
Amortization of acquired intangibles, net of income
taxes
138
249
Net income available to common shareholders
adjusted for
amortization of acquired intangibles, net
of income taxes
20,111
8,565
Other items of note, net of income taxes
(5,651)
5,186
Net income available to common shareholders
– adjusted
$
14,460
$
13,751
Return on tangible common equity
21.9
%
11.2
%
Return on tangible common equity – adjusted
15.8
18.0
1
Excludes intangibles relating to software and asset servicing rights.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 11
8
9
-10%
0%
10%
20%
30%
40%
50%
60%
70%
NET INCOME –REPORTED
8
BY BUSINESS SEGMENT
(as a percentage of total net income)
2024
2025
U.S. Retail
Wholesale
Banking
Canadian Personal
and Commercial
Banking
Wealth
Management
and Insurance
0%
10%
20%
30%
40%
50%
NET INCOME –ADJUSTED
8,9
BY BUSINESS SEGMENT
(as a percentage of total net income)
2024
2025
Canadian Personal
and Commercial
Banking
U.S. Retail
Wholesale
Banking
Wealth
Management
and Insurance
IMPACT OF FOREIGN EXCHANGE RATE ON U.S. RETAIL SEGMENT TRANSLATED EARNINGS
The following table reflects the estimated impact
of foreign currency translation on key
U.S. Retail segment income statement items.
The impact is calculated as
the difference in translated earnings using the average
U.S. to Canadian dollars exchange rates in the
periods noted.
TABLE 8: IMPACT OF FOREIGN EXCHANGE
RATE ON U.S. RETAIL SEGMENT
TRANSLATED EARNINGS
(millions of Canadian dollars, except
as noted)
2025 vs. 2024
2024 vs. 2023
Increase (Decrease)
Increase (Decrease)
U.S. Retail
Total revenue – reported
$
319
$
126
Total revenue – adjusted
1
421
128
Non-interest expenses – reported
268
166
Non-interest expenses – adjusted
1
268
70
Net income excluding Schwab – reported, after-tax
24
(57)
Net income excluding Schwab – adjusted,
after-tax
1
100
39
Share of net income from investment in
Schwab
2
11
6
U.S. Retail net income – reported, after-tax
35
(51)
U.S. Retail net income – adjusted, after-tax
1
111
45
Earnings per share
(Canadian dollars)
Basic – reported
$
0.02
$
(0.03)
Basic – adjusted
1
0.06
0.02
Diluted – reported
0.02
(0.03)
Diluted – adjusted
1
0.06
0.02
Average foreign exchange rate (equivalent
of CAD $1.00)
2025
2024
U.S. dollar
0.714
0.735
1
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.
2
Share of net income from investment in Schwab and the foreign exchange impact were reported with
a one-month lag.
FINANCIAL RESULTS OVERVIEW
Net Income
Reported net income for the year was $20,538
million, an increase of $11,696 million, compared with $8,842
million last year. The increase primarily reflects the
gain on the Schwab sale transaction in the
Corporate segment, the impact of charges
for the global resolution of the investigations
into the Bank’s U.S. BSA/AML
program last year in U.S. Retail, and higher
revenues, partially offset by higher non-interest
expenses including higher governance
and control investments, and
the impact of balance sheet restructuring
activities in U.S. Retail. On an adjusted basis,
net income for the year was $15,025
million, an increase of $748 million, or
5%, compared with last year. The reported ROE for the year
was 17.8%, compared with 8.2% last year. The adjusted
ROE for the year was 12.9%, compared
with
13.6% last year.
By segment, the increase in reported net income
reflects increases in the Corporate segment
of $8,011 million, in U.S. Retail of $2,261 million, in Wealth
Management and Insurance of $834 million, in
Wholesale Banking of $492 million, and in
Canadian Personal and Commercial Banking
of $98 million.
Reported diluted EPS for the year was $11.56, compared with $4.72
last year. Adjusted diluted EPS for the year was $8.37, an
increase of 7%, compared with
$7.81 last year.
8
Amounts exclude Corporate segment.
9
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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 12
10
$0
$4,000
$8,000
$12,000
$16,000
$20,000
$24,000
$28,000
$32,000
$36,000
2024
2025
NET INTEREST INCOME
10
(millions of Canadian dollars)
Reported
Adjusted
FINANCIAL RESULTS OVERVIEW
Revenue
Reported revenue was $67,777 million, an
increase of $10,554 million, or 18%,
compared with last year.
Adjusted revenue was $61,810 million, an
increase of $5,021 million, or 9%, compared
with last year.
NET INTEREST INCOME
Reported net interest income for the year
was $33,062 million, an increase of $2,590
million, or 8%, compared
with last year. The increase primarily reflects higher revenue
from treasury and balance sheet activities,
volume
growth in Canadian Personal and Commercial
Banking, and the impact of balance
sheet restructuring activities
and higher deposit margins in U.S. Retail.
Adjusted net interest income was $33,303
million, an increase of
$2,554 million, or 8%.
By segment, the increase in reported net interest
income reflects increases in the Corporate
segment of
$1,151 million, in Canadian Personal and
Commercial Banking of $1,004 million, in
U.S. Retail of $768 million,
and in Wealth Management and Insurance of $267
million, partially offset by a decrease in
Wholesale Banking
of $600 million.
NET INTEREST MARGIN
Net interest margin is calculated by dividing
net interest income by average interest-earning
assets. This metric
is an indicator of the profitability of the Bank’s earning
assets less the cost of funding. Net interest
margin
increased by 4 basis points (bps) during
the year to 1.76%, compared with 1.72% last
year, primarily reflecting
higher net interest income, partially offset by higher
average interest earning assets from business
growth.
Average interest earning assets used in the calculation
is a non-GAAP financial measure and
net interest
margin is a non-GAAP ratio. They are not
defined terms under IFRS and, therefore,
may not be comparable to
similar terms used by other issuers.
NON-INTEREST INCOME
Reported non-interest income for the year
was $34,715 million, an increase of $7,964
million, or 30%, compared with last year, primarily reflecting
the gain on the
Schwab sale transaction in the Corporate
segment, higher trading-related revenue, underwriting
fees and equity commissions in Wholesale
Banking, and higher
insurance premiums, fee-based revenue,
and transaction revenue in Wealth Management
and Insurance, partially offset by the impact
of balance sheet
restructuring activities in U.S. Retail.
Adjusted non-interest income was $28,507
million, an increase of $2,467 million, or 9%.
By segment, the increase in reported non-interest
income reflects increases in the Corporate
segment of $7,782 million, in Wholesale Banking
of $1,706 million,
and in Wealth Management and Insurance of $760
million, partially offset by decreases in
U.S. Retail of $2,176 million and in Canadian
Personal and Commercial
Banking of $108 million.
TABLE 9: NON-INTEREST INCOME
(millions of Canadian dollars, except
as noted)
2025 vs. 2024
2025
2024
% change
Investment and securities services
Broker dealer fees and commissions
$
1,807
$
1,522
19
Full-service brokerage and other securities
services
2,061
1,668
24
Underwriting and advisory
1,707
1,436
19
Investment management fees
694
669
4
Mutual fund management
2,140
1,994
7
Trust fees
113
111
2
Total investment and securities services
8,522
7,400
15
Credit fees
1,650
1,898
(13)
Trading income (losses)
4,602
3,628
27
Service charges
2,788
2,626
6
Card services
2,905
2,947
(1)
Insurance revenue
7,737
6,952
11
Other income (loss)
6,511
1,300
401
Total
$
34,715
$
26,751
30
10
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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 13
11
$0
$1,000
$2,000
$3,000
$4,000
$5,000
PROVISION FOR CREDIT LOSSES
(millions of Canadian dollars)
2024
2025
TRADING-RELATED REVENUE
Trading-related revenue is the total of trading income (loss),
net interest income on trading positions, and
income (loss) from financial instruments
designated at
fair value through profit or loss (FVTPL).
Trading income (loss) includes realized and unrealized
gains and losses on trading assets and liabilities.
Net interest
income on trading positions arises from interest
and dividends related to trading assets and
liabilities and is reported net of interest
expense associated with
funding these assets and liabilities in the following
table. Trading-related revenue excludes underwriting
fees and commissions on securities transactions.
Trading-
related revenue is a non-GAAP financial
measure, which is not a defined term under
IFRS and, therefore, may not be comparable
to similar terms used by other
issuers. Management believes that the trading-related
revenue is an appropriate measure of
trading performance.
Trading-related revenue by product line depicts trading
income for each major trading category.
TABLE 10: TRADING-RELATED REVENUE
(millions of Canadian dollars)
For the years ended October 31
2025
2024
Trading income (loss)
$
4,602
$
3,628
Net interest income (loss)
1
(1,387)
(732)
Other
2
222
(193)
Total
$
3,437
$
2,703
Trading-related TEB adjustment
61
79
Total trading-related revenue (TEB)
$
3,498
$
2,782
By product
Interest rate and credit
$
1,328
$
1,147
Foreign exchange
996
905
Equity and other
1,174
730
Total trading-related revenue (TEB)
$
3,498
$
2,782
1
Excludes taxable equivalent basis (TEB).
2
Includes income (loss) from securities designated at FVTPL that are managed within a trading portfolio of $76
million (2024 – $(208) million) reported in Other Income (Loss) on the
2025 Consolidated Financial Statements and other adjustments.
FINANCIAL RESULTS OVERVIEW
Provision for Credit
Losses
PCL for the year was $4,506 million,
an increase of $253 million compared
with last year. PCL – impaired
was $4,009 million, an increase of $132 million,
largely reflecting credit migration in the
Canadian
consumer lending portfolios,
partially offset by lower provisions in the
Wholesale and Canadian
commercial lending portfolios.
PCL – performing was $497 million, an increase
of $121 million compared
with last year. The current year performing provisions largely reflect
credit impacts from policy and trade
uncertainty, and volume growth in Canadian Personal and Commercial
Banking, partially offset by lower
volume in U.S. Retail. Total PCL as an annualized percentage of credit volume
was 0.47%.
By segment, PCL was higher by $388
million in Canadian Personal and Commercial
Banking, and
lower by $90 million in the Corporate segment,
by $27 million in Wholesale Banking,
and by $18 million in
U.S. Retail.
While results may vary by quarter, and are subject to changes
to economic trajectory,
the Bank expects
total PCL for fiscal 2026 to be in the range of
40 to 50 basis points
.
11
The Bank’s estimated PCL range is based on forward-looking assumptions that have inherent risks and
uncertainties. Results may vary depending on actual economic or credit
conditions and performance, such as the level of unemployment, interest rates, economic growth or contraction, and
borrower or industry specific credit factors and conditions. The
Bank’s PCL estimate is subject to risks and uncertainties including those set out in the “Risk Factors That
May Affect Future Results”
section of this document.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 14
12
13
14
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
2024
2025
NON-INTEREST EXPENSES
12,13
(millions of Canadian dollars)
Reported
Adjusted
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
2024
2025
EFFICIENCY RATIO
12,13
(percent)
Reported
Adjusted, net of ISE
FINANCIAL RESULTS OVERVIEW
Expenses
NON-INTEREST EXPENSES
Reported non-interest expenses for the year
were
$33,539 million, a decrease of $1,954 million, or
6%, compared
with last year, primarily reflecting the impact of charges for the
global resolution of the investigations into
the Bank’s U.S.
BSA/AML program last year and the FDIC
special assessment
charge last year, partially offset by higher spend supporting
business growth initiatives, including employee-related
expenses, and higher governance and control
investments,
including costs of US$507 million for U.S. BSA/AML
remediation. On an adjusted basis, non-interest
expenses were
$32,555 million, an increase of $3,407 million, or
12%
,
primarily reflecting higher spend supporting
business growth
initiatives, including employee-related expenses,
and higher
governance and control investments. The Bank
is above its
previously disclosed guidance that its adjusted
non-interest
expense growth for fiscal 2025, assuming fiscal
2024 levels of
variable compensation, foreign exchange translation,
and U.S.
strategic cards portfolio impact, would be at
the upper end of
the 5% to 7% range
.
Elevated expense growth was driven by
investments in the business to drive future growth,
including
acceleration of strategic investments, supported
by strong
revenue growth.
By segment, the decrease in reported non-interest
expenses
reflects a decrease in U.S. Retail of $3,542
million, partially
offset by increases in Wholesale Banking of $472
million, in
Wealth Management and Insurance of $413 million, in
Canadian Personal and Commercial
Banking of $372 million,
and in the Corporate segment of $331
million.
INSURANCE SERVICE EXPENSES (ISE)
Insurance service expenses for the year
were $6,089 million. This represents a decrease
of $558 million, or 8%, compared with last
year, driven by $916 million of
estimated losses from catastrophe claims
in the prior year, partially offset by
h
igher claims severity.
EFFICIENCY RATIO
The efficiency ratio measures operating efficiency
and is calculated by dividing non-interest expenses
by total revenue. A lower ratio indicates a
more efficient
business operation. Adjusted efficiency ratio is
calculated in the same manner using
adjusted non-interest expenses and
total revenue.
The reported efficiency ratio was 49.5%, compared
with 62.0% last year. The adjusted efficiency ratio, net of
ISE, was 58.4%, compared with 58.1% last
year.
12
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.
13
In fiscal 2025, variable compensation in Wholesale Banking and Wealth Management,
foreign exchange translation, and gross-up of the retailer program partners’ share of PCL for the
Bank’s U.S. strategic card portfolio (“SCP Impact”), in the aggregate, accounted for approximately one
-third of the year over-year 12% increase in adjusted non-interest expenses.
14
Consistent with previously disclosed methodology,
in estimating the Bank's expense growth expectations, the Bank assumed that the following three factors on the Bank’s
fiscal 2025
adjusted expenses would be the same as the Bank’s fiscal 2024 adjusted expenses: (i) variable compensation
in Wholesale Banking and Wealth Management, (ii) foreign exchange
translation, and (iii) SCP Impact.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 15
TABLE 11: NON-INTEREST EXPENSES
AND EFFICIENCY RATIO
1
(millions of Canadian dollars, except
as noted)
2025 vs. 2024
2025
2024
% change
Salaries and employee benefits
Salaries
$
10,520
$
9,920
6
Incentive compensation
5,106
4,481
14
Pension and other employee benefits
2,601
2,332
12
Total salaries and employee benefits
18,227
16,733
9
Occupancy
Depreciation and impairment losses
1,086
1,048
4
Rent and maintenance
875
910
(4)
Total occupancy
1,961
1,958
–
Technology and equipment
Equipment, data processing and licenses
2,572
2,379
8
Depreciation and impairment losses
300
277
8
Total technology and equipment
2,872
2,656
8
Amortization of other intangibles
780
702
11
Communication and marketing
1,643
1,516
8
Restructuring charges
686
566
21
Brokerage-related and sub-advisory fees
528
498
6
Professional, advisory and outside services
4,288
3,064
40
Other expenses
2,554
7,800
(67)
Total expenses
$
33,539
$
35,493
(6)
Efficiency ratio – reported
49.5
%
62.0
%
(1,250)
bps
Efficiency ratio – adjusted, net of ISE
1
58.4
58.1
30
1
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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 16
FINANCIAL RESULTS OVERVIEW
Taxes
Reported total income and other taxes increased
by $618 million, or 12.1%, compared with
last year, reflecting an increase in income
tax expense of $719 million,
or 26.7%, and a decrease in other taxes
of $101 million, or 4.2%. Adjusted
total income and other taxes increased by
$710 million from last year, or 12.7%,
reflecting an increase in income tax expense
of $620 million, or 18.5%, and an increase
in other taxes of $90 million, or 4.0%.
The Bank’s reported effective income tax rate was
14.4% for 2025, compared with 24.8%
last year. The year-over-year decrease primarily
reflects the tax
impact associated with the sale of Schwab
shares in the current year and the non-deductible
charges for the global resolution of the investigations
into the Bank’s
U.S. BSA/AML program in the prior
year. For a reconciliation of the Bank’s effective
income tax rate with the Canadian
statutory income tax rate, refer to Note 23 of
the 2025 Consolidated Financial Statements.
The Bank reported its investment in Schwab
using the equity method of accounting. Schwab’s
tax expense (2025: $90 million; 2024: $215
million) was not part
of the Bank’s effective tax rate.
To allow for an after-tax calculation of
adjusted income, the adjusted provision
for income taxes is calculated by adjusting
the taxes for each item of note using
the applicable income tax rate of the relevant legal
entity. The adjusted effective income
tax rate is calculated as the adjusted
provision for income taxes before
other taxes as a percentage of adjusted net
income before taxes. The Bank’s
adjusted effective income tax rate for 2025
was 21.3%, compared with 20.0% last
year. The year-over-year increase primarily reflects
the impact of higher adjusted pre-tax income,
Pillar Two taxes, and lower tax-exempt
dividend income.
Adjusted results are not defined terms
under IFRS and, therefore, may not be
comparable to similar terms used by other
issuers.
TABLE 12: INCOME AND OTHER
TAXES – Reconciliation of Reported to
Adjusted Provision for Income and
Other Taxes
(millions of Canadian dollars, except
as noted)
2025
2024
Provision for income taxes – reported
$
3,410
$
2,691
Total adjustments for items of note
565
664
Provision for income taxes – adjusted
3,975
3,355
Other taxes
Payroll
1,000
909
Capital and premium
249
231
GST, HST, and provincial sales
1
800
1,002
Municipal and business
265
273
Total other taxes – reported
2,314
2,415
Total adjustments for items of note related
to indirect tax matters
–
(191)
Total other taxes – adjusted
2,314
2,224
Total taxes – adjusted
$
6,289
$
5,579
Effective income tax rate – reported
14.4
%
24.8
%
Effective income tax rate – adjusted
21.3
20.0
1
Goods and services tax (GST) and Harmonized sales tax (HST).
International Tax Reform – Pillar Two Global Minimum Tax
On December 20, 2021, the Organisation
for Economic Co-operation and Development
(OECD) published Pillar Two model rules as part of its
efforts toward
international tax reform. The Pillar Two model rules provide
for the implementation of a 15% global
minimum tax for large multinational enterprises,
which is to be
applied on a jurisdiction-by-jurisdiction
basis. Pillar Two legislation was enacted in Canada on
June 20, 2024 under Bill C-69, which includes
the
Global Minimum Tax Act
addressing the Pillar Two model rules. Similar legislation
has passed in other jurisdictions in
which the Bank operates and will result in
additional taxes being paid in these countries.
The rules were effective and implemented by
the Bank on November 1, 2024. The IASB
previously issued
amendments to IAS 12
Income Taxes
for a temporary mandatory exception from
the recognition and disclosure of deferred
taxes related to the implementation of
Pillar Two model rules, which the Bank has applied. For
the year ended October 31, 2025, the Bank’s effective
tax rate increased by approximately 0.3%
due to
Pillar Two taxes.
FINANCIAL RESULTS OVERVIEW
Quarterly Financial Information
FOURTH QUARTER 2025
PERFORMANCE SUMMARY
Reported net income for the quarter was $3,280
million, a decrease of $355 million, or 10%,
compared with the fourth quarter last year, primarily reflecting
the prior
year’s gain on sale of Schwab shares in
the Corporate segment, higher non-interest
expenses including higher governance and
control investments, and the
impact of balance sheet restructuring activities
in U.S. Retail and the Corporate segment,
partially offset by higher revenues and lower
insurance service
expenses. On an adjusted basis, net income
for the quarter was $3,905 million, an increase
of $700 million, or 22%. Reported diluted
EPS for the quarter was
$1.82, a decrease of 8%, compared with $1.97
in the fourth quarter of last year. Adjusted diluted EPS for
the quarter was $2.18, an increase of 27%,
compared
with $1.72 in the fourth quarter of last year.
Reported revenue for the quarter was $15,494
million, relatively flat compared with
the fourth quarter last year. Adjusted revenue for the quarter
was
$16,028 million, an increase of $1,131 million, or
8%, compared with the fourth quarter
last year.
Reported net interest income for the quarter
was $8,545 million, an increase of $605
million, or 8%, compared with the fourth quarter
last year, primarily
reflecting higher revenue from treasury
and balance sheet activities in the Corporate
segment, volume growth in Canadian Personal
and Commercial Banking, and
the impact of balance sheet restructuring
activities and higher deposit margins, partially
offset by an adjustment for client deposit rates in
U.S. Retail. Adjusted net
interest income for the quarter was $8,594
million, an increase of $560 million, or 7%.
By segment, the increase in reported
net interest income reflects increases
in the Corporate segment of $337 million, in
Canadian Personal and Commercial Banking
of $246 million, in U.S. Retail of $241
million, and in Wealth
Management and Insurance of $68 million, partially
offset by a decrease in Wholesale Banking of
$287 million.
Reported non-interest income for the quarter
was $6,949 million, a decrease of $625
million, or 8%, compared with the fourth quarter
last year, primarily driven
by the prior year’s gain on sale of Schwab
shares in the Corporate segment and reinsurance
recoveries for prior year catastrophe
claims in Wealth Management
and Insurance, partially offset by higher trading-related
revenue, underwriting fees, advisory
fees and equity commissions in Wholesale
Banking, and higher
insurance premiums, fee-based revenue,
and transaction revenue in Wealth Management
and Insurance. Adjusted non-interest income
was $7,434 million, an
increase of $571 million, or 8%. By segment,
the decrease in reported non-interest income
reflects decreases in the Corporate
segment of $1,120 million, in
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 17
Wealth Management and Insurance of $217 million,
and in Canadian Personal and Commercial
Banking of $5 million, partially offset by
increases in Wholesale
Banking of $716 million and in U.S. Retail
of $1 million.
PCL for the quarter was $982 million, a decrease
of $127 million compared with the fourth
quarter last year. PCL – impaired was $943 million, a
decrease of
$210 million, or 18%, largely reflecting lower
provisions in the business and government
lending portfolios.
PCL – performing was $39 million, compared
with a
recovery of $44 million in the fourth quarter
last year. The performing provisions this quarter were largely
related to the adoption impact of a
model update in the
Canadian credit card portfolio, partially
offset by an improvement to the Canadian and
U.S. macroeconomic forecasts, and lower
volume in U.S. Retail. Total PCL
for the quarter as an annualized percentage
of credit volume was 0.41%.
By segment, PCL was lower by $110 million in Wholesale Banking,
by $85 million in U.S. Retail, by $39 million in
the Corporate segment, and higher by
$107 million in Canadian Personal and Commercial
Banking.
Insurance service expenses for the quarter
were $1,602 million, a decrease of $762
million, or 32%, compared with the fourth
quarter last year, primarily
reflecting lower estimated losses from catastrophe
claims.
Reported non-interest expenses for the quarter
were $8,808 million, an increase of $758
million, or 9%, compared with the fourth quarter
last year, primarily
reflecting higher spend supporting business
growth initiatives, including employee-related
expenses, and higher governance and control
investments, including
costs of US$155 million for U.S. BSA/AML
remediation. Adjusted non-interest expenses
for the quarter were $8,540 million, an
increase of $809 million, or 10%,
compared with the fourth quarter last year. By segment, the
increase in reported non-interest expenses
reflects increases in Wholesale Banking
of $223 million, in
U.S. Retail of $176 million, in the Corporate
segment of $151 million, in Wealth Management
and Insurance of $132 million, and in Canadian
Personal and
Commercial Banking of $76 million.
The Bank’s reported effective tax rate was 20.0% for
the quarter, compared with 13.4% in the same quarter last
year. The year-over-year increase primarily
reflects the tax impact of the items of note
in the prior year.
The Bank’s adjusted effective tax rate was 20.4% for the quarter, compared
with 18.8% in the same quarter last year. The year-over-year increase
primarily
reflects the impact of higher adjusted pre-tax
income and Pillar Two taxes.
QUARTERLY TREND ANALYSIS
Subject to the impact of seasonal trends and
items of note, the Bank’s reported earnings
were up 132% in 2025, compared with last
year, reflecting stabilizing
macroeconomic conditions, the gain on the Schwab
sale transaction, and the impact of charges
for the global resolution of the investigations
into the Bank’s U.S.
BSA/AML program last year. As the year progressed, the
Bank benefited from higher market-related
revenues in the Wholesale Banking and
Wealth Management
and Insurance segments, volume growth in
Canadian Personal and Commercial
Banking, reflecting a declining rate environment,
and higher net interest income
earned from the Schwab sale. Insurance
service expenses were lower, reflecting higher estimated losses
from catastrophe claims in the prior year. Credit impacts
from policy and trade uncertainty contributed
to higher PCLs. Expenses were higher, reflecting governance
and control investments and spend supporting
business growth initiatives, including employee-related
expenses. The Bank’s quarterly earnings were impacted
by, among other things, seasonality, the number
of days in a quarter, the economic environment in Canada and
the U.S., and foreign currency translation.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 18
TABLE 13: QUARTERLY RESULTS
(millions of Canadian dollars, except as noted)
For the three months ended
2025
2024
Oct. 31
Jul. 31
Apr. 30
Jan. 31
Oct. 31
Jul. 31
Apr. 30
Jan. 31
Net interest income
$
8,545
$
8,526
$
8,125
$
7,866
$
7,940
$
7,579
$
7,465
$
7,488
Non-interest income
6,949
6,771
14,812
6,183
7,574
6,597
6,354
6,226
Total revenue
15,494
15,297
22,937
14,049
15,514
14,176
13,819
13,714
Provision for (recovery of) credit losses
982
971
1,341
1,212
1,109
1,072
1,071
1,001
Insurance service expenses
1,602
1,563
1,417
1,507
2,364
1,669
1,248
1,366
Non-interest expenses
8,808
8,522
8,139
8,070
8,050
11,012
8,401
8,030
Provision for (recovery of) income taxes
822
905
985
698
534
794
729
634
Share of net income from investment in Schwab
–
–
74
231
178
190
194
141
Net income (loss) – reported
3,280
3,336
11,129
2,793
3,635
(181)
2,564
2,824
Pre-tax adjustments for items of note
1
Amortization of acquired intangibles
34
33
43
61
60
64
72
94
Acquisition and integration charges related to the
Schwab transaction
–
–
–
–
35
21
21
32
Share of restructuring and other charges from
investment in Schwab
–
–
–
–
–
–
–
49
Restructuring charges
190
333
163
–
–
110
165
291
Acquisition and integration-related charges
44
32
34
52
82
78
102
117
Impact from the terminated FHN acquisition-related
capital hedging strategy
49
55
47
54
59
62
64
57
Gain on sale of Schwab shares
–
–
(8,975)
–
(1,022)
–
–
–
Balance sheet restructuring
485
262
1,129
927
311
–
–
–
Indirect tax matters
–
–
–
–
226
–
–
–
Civil matter provision
–
–
–
–
–
–
274
–
FDIC special assessment
–
–
–
–
(72)
–
103
411
Global resolution of the investigations into the
Bank’s U.S. BSA/AML program
–
–
–
–
52
3,566
615
–
Total pre-tax adjustments for items of note
1
802
715
(7,559)
1,094
(269)
3,901
1,416
1,051
Less: Impact of income taxes
177
180
(56)
264
161
74
191
238
Net income – adjusted
1
3,905
3,871
3,626
3,623
3,205
3,646
3,789
3,637
Preferred dividends and distributions on other
equity instruments
191
88
200
86
193
69
190
74
Net income available to common
shareholders – adjusted
1
$
3,714
$
3,783
$
3,426
$
3,537
$
3,012
$
3,577
$
3,599
$
3,563
(Canadian dollars, except as noted)
Basic earnings (loss) per share
Reported
$
1.82
$
1.89
$
6.28
$
1.55
$
1.97
$
(0.14)
$
1.35
$
1.55
Adjusted
1
2.19
2.20
1.97
2.02
1.72
2.05
2.04
2.01
Diluted earnings (loss) per share
Reported
1.82
1.89
6.27
1.55
1.97
(0.14)
1.35
1.55
Adjusted
1
2.18
2.20
1.97
2.02
1.72
2.05
2.04
2.00
Return on common equity – reported
10.7
%
11.3
%
39.1
%
10.1
%
13.4
%
(1.0)
%
9.5
%
10.9
%
Return on common equity – adjusted
1
12.8
13.2
12.3
13.2
11.7
14.1
14.5
14.1
(billions of Canadian dollars, except as noted)
Average total assets
$
2,102
$
2,112
$
2,156
$
2,063
$
2,035
$
1,968
$
1,938
$
1,934
Average interest-earning assets
2
1,863
1,855
1,894
1,883
1,835
1,778
1,754
1,729
Net interest margin – reported
1.82
%
1.82
%
1.76
%
1.66
%
1.72
%
1.70
%
1.73
%
1.72
%
Net interest margin – adjusted
1
1.83
1.83
1.78
1.67
1.74
1.71
1.75
1.74
1
For explanations of items of note, refer to the “Significant Events” and “Non-GAAP Financial Measures – Reconciliation
of Adjusted to Reported Net Income” table in the
“Financial Results Overview” sections of this document.
2
Average interest-earning assets used in the calculation of net interest margin is a non-GAAP financial
measure. Refer to “Non-GAAP and Other Financial Measures” in the
“Financial Results Overview” section and the Glossary of this document for additional information about this metric
.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 19
BUSINESS SEGMENT ANALYSIS
Business Focus
For management reporting purposes, the Bank’s business
operations and activities are organized around
the following four key business segments:
Canadian
Personal and Commercial Banking, U.S.
Retail, Wealth Management and Insurance, and
Wholesale Banking. The Bank’s other activities are
grouped into the
Corporate segment.
Canadian Personal and Commercial Banking
serves approximately 16 million clients in
Canadian Personal and Business banking.
The Personal Bank is a
premier retail banking franchise delivering
personalized solutions through a full suite of
products and services across deposits, investing,
payments, and lending.
The Bank's clients are supported by a network
of 1,051 branches, 3,370 automated
teller machines (ATM), Mobile Mortgage Specialists,
contact centers, and
digital sales and servicing. Business Banking
is a premier, client-centric franchise that delivers deep
sector expertise, valuable advice, and
a broad range of
products and services to meet the needs of
business owners.
It leverages the Bank's national network of branches,
commercial banking centers, digital channels
and contact centers, and provides retail auto
loans through auto dealerships across
Canada.
U.S. Retail
includes the Bank’s personal, business banking
and wealth management operations in
the U.S. U.S. Retail serves over 10 million
customers in stores
from Maine to Florida, and via auto dealerships
and credit card partner business locations
nationwide. Personal Banking provides a
full range of financial products
and services to customers through a network
of 1,100 stores, 2,401 ATMs, contact centres, and digital sales
and servicing.
Business banking offers a diversified
range of products and services to help businesses
meet their financing, investment, cash management,
international trade, and day-to-day banking
needs. Wealth
Management provides wealth products and
services to retail clients. Prior to the sale of
its entire equity investment in Schwab
on February 12, 2025, the
contribution from the Bank’s investment in Schwab
was reported as equity in net income of an investment
in Schwab.
Wealth Management and Insurance
serves over 6 million customers across the
wealth and insurance businesses in Canada.
Wealth Management
offers wealth
solutions to retail clients in Canada through
the self-directed brokerage, advice-based,
and asset management businesses. Wealth Management
also offers asset
management products to institutional clients in
Canada and globally. Insurance offers property and casualty insurance
through direct channels and to members of
affinity groups, as well as life and health insurance
products to customers across Canada.
Wholesale Banking
actively
serves over 10,000 corporate, government,
and institutional unique clients across North
America, Europe, and Asia-Pacific.
Operating under the brand names TD Securities
and TD Cowen,
Wholesale Banking offers global markets and corporate
and investment banking services to its
corporate, government, and institutional clients.
It also provides market access and wholesale
banking solutions for the Bank’s business banking,
wealth and retail
operations and their clients.
Corporate
segment is comprised of service and control
functions, including Technology Solutions, Shared Services, Treasury and Balance Sheet
Management,
Marketing, Human Resources, Finance,
Risk Management, Compliance, Financial
Crimes Risk Management, Legal, Real
Estate, Internal Audit, and Others.
Certain costs relating to these functions are allocated
to operating business segments. The
basis of allocation and methodologies are reviewed
periodically to align
with management’s evaluation of the Bank’s business
segments.
Results of each business segment reflect revenue,
expenses, assets, and liabilities generated
by the businesses in that segment. Where
applicable, the Bank
measures and evaluates the performance of
each segment based on adjusted results
and ROE, and for those segments the Bank indicates
that the measure is
adjusted. For further details, refer to Note 27
of the 2025
Consolidated Financial Statements.
Effective fiscal 2025, certain U.S. governance
and control
investments, including costs for U.S. BSA/AML
remediation, previously reported
in the Corporate segment are now reported
in the U.S. Retail segment.
Comparative amounts have been reclassified
to conform with the presentation adopted
in the current period.
Net interest income within Wholesale Banking
is calculated on a TEB, which means
that the value of non-taxable or tax-exempt income,
including dividends, is
adjusted to its equivalent before-tax value.
Using TEB allows the Bank to measure income
from all securities and loans consistently
and makes for a more
meaningful comparison of net interest income
with similar institutions. The TEB increase
to net interest income and provision for
income taxes reflected in
Wholesale Banking results is reversed in
the Corporate segment. The TEB adjustment
for the year was $61 million (October 31, 2024
– $79 million).
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 – Sale of Schwab
Shares”
for further details. Effective fiscal 2025, discussions
of the
U.S. Retail segment’s performance exclude
Schwab.
The “Key Priorities for 2026” section for each
business segment, provided on the following
pages, is based on the Bank’s views and
assumptions, including
those set out in the “Economic Summary and Outlook”
section and the actual outcome may be
materially different. For more information regarding
the factors,
assumptions, and risks that may impact
the Bank’s views, refer to the “Caution Regarding
Forward-Looking Statements” and “Risk
Factors That May Affect Future
Results” sections of this document.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 20
TABLE 14: RESULTS BY SEGMENT
1
(millions of Canadian dollars)
Canadian Personal
Wealth
and Commercial
Management
Wholesale
Banking
U.S. Retail
and Insurance
Banking
2
Corporate
2
Total
2025
2024
2025
2024
2025
2024
2025
2024
2025
2024
2025
2024
Net interest income (loss)
$
16,701
$
15,697
$
12,368
$
11,600
$
1,493
$
1,226
$
(18)
$
582
$
2,518
$
1,367
$
33,062
$
30,472
Non-interest income (loss)
3,985
4,093
(63)
2,113
13,069
12,309
8,410
6,704
9,314
1,532
34,715
26,751
Total revenue
20,686
19,790
12,305
13,713
14,562
13,535
8,392
7,286
11,832
2,899
67,777
57,223
Provision for (recovery of) credit
losses – impaired
1,710
1,555
1,499
1,437
–
–
185
247
615
638
4,009
3,877
Provision for (recovery of) credit
losses – performing
433
200
15
95
–
–
105
70
(56)
11
497
376
Total provision for (recovery of)
credit losses
2,143
1,755
1,514
1,532
–
–
290
317
559
649
4,506
4,253
Insurance service expenses
–
–
–
–
6,089
6,647
–
–
–
–
6,089
6,647
Non-interest expenses
8,382
8,010
9,599
13,141
4,698
4,285
6,048
5,576
4,812
4,481
33,539
35,493
Income (loss) before
income taxes
10,161
10,025
1,192
(960)
3,775
2,603
2,054
1,393
6,461
(2,231)
23,643
10,830
Provision for (recovery of)
income taxes
2,844
2,806
(472)
69
986
648
444
275
(392)
(1,107)
3,410
2,691
Share of net income from
investment in Schwab
–
–
277
709
–
–
–
–
28
(6)
305
703
Net income (loss) –
reported
7,317
7,219
1,941
(320)
2,789
1,955
1,610
1,118
6,881
(1,130)
20,538
8,842
Pre-tax adjustments for
items of note
Amortization of acquired
intangibles
–
–
–
–
–
–
–
–
171
290
171
290
Acquisition and integration
charges related to the
Schwab transaction
–
–
–
–
–
–
–
–
–
109
–
109
Share of restructuring and other
charges from investment
in Schwab
–
–
–
–
–
–
–
–
49
–
49
Restructuring charges
–
–
–
–
–
–
–
–
686
566
686
566
Acquisition and integration-
related charges
–
–
–
–
–
–
162
379
–
–
162
379
Impact from the terminated
FHN acquisition-related
capital hedging strategy
–
–
–
–
–
–
–
–
205
242
205
242
Gain on sale of Schwab shares
–
–
–
–
–
–
–
–
(8,975)
(1,022)
(8,975)
(1,022)
Balance sheet restructuring
–
–
2,701
311
–
–
–
–
102
–
2,803
311
Indirect tax matters
–
–
–
–
–
–
–
–
–
226
–
226
Civil matter provision
–
–
–
–
–
–
–
–
–
274
–
274
FDIC special assessment
–
–
–
442
–
–
–
–
–
–
–
442
Global resolution of the
investigations into the Bank’s
U.S. BSA/AML program
–
–
–
4,233
–
–
–
–
–
–
–
4,233
Total pre-tax adjustments
for items of note
–
–
2,701
4,986
–
–
162
379
(7,811)
734
(4,948)
6,099
Less: Impact of income taxes
–
–
674
186
–
–
35
82
(144)
396
565
664
Net income (loss) –
adjusted
3
$
7,317
$
7,219
$
3,968
$
4,480
$
2,789
$
1,955
$
1,737
$
1,415
$
(786)
$
(792)
$
15,025
$
14,277
Average common equity
4
$
23,749
$
21,618
$
44,700
$
44,415
$
6,296
$
6,141
$
16,699
$
15,821
$
20,985
$
12,984
$
112,429
$
100,979
Risk-weighted assets
5
206,667
185,704
240,254
271,959
15,115
14,185
134,203
122,584
40,185
36,468
636,424
630,900
1
The retailer program partners’ share of revenues and credit losses is presented in the Corporate segment, with an
offsetting amount (representing the partners’ net share) recorded in
Non-interest expenses, resulting in no impact to Corporate reported Net income (loss). The Net income (loss) included
in the U.S. Retail segment includes only the portion of revenue and
credit losses attributable to the Bank under the agreements.
2
Net interest income within Wholesale Banking is calculated on a TEB. The TEB adjustment reflected in Wholesale
Banking is reversed in the Corporate segment.
3
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.
4
For additional information about this metric, refer to the Glossary of this document.
5
Effective fiscal 2025, risk-weighted assets associated with investments in insurance are allocated to
the Corporate segment. Comparative period information has been adjusted to reflect
the updated presentation.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 21
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2024
2025
NET INCOME
(millions of Canadian dollars)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
$22,000
2024
2025
TOTAL REVENUE
(millions of Canadian dollars)
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2024
2025
AVERAGE DEPOSITS
(billions of Canadian dollars)
Personal
Business
BUSINESS SEGMENT ANALYSIS
Canadian Personal and
Commercial Banking
Canadian Personal and Commercial Banking offers a full range of financial products and services to approximately 16 million
clients in the Bank’s personal and commercial banking businesses in Canada.
TABLE 15: REVENUE
(millions of Canadian dollars)
2025
2024
Personal banking
$
14,500
$
13,828
Business banking
6,186
5,962
Total
$
20,686
$
19,790
KEY PRODUCT GROUPS
Personal Banking
●
Personal Deposits – chequing, savings, and
investment products for retail clients.
●
Real Estate Secured Lending (RESL) – lending
products secured by residential properties.
●
Credit Cards and Consumer Lending – proprietary
and co-branded credit cards, and unsecured
financing products.
Business Banking
●
Commercial Banking – borrowing, deposit
and cash management solutions for
businesses across a range of industries.
●
Small Business Banking – financial products
and services for small businesses.
●
Auto Finance – financing solutions for prime and
non-prime retail borrowers secured by automobiles,
recreational and leisure vehicles, and
commercial loans
(including floor plan financing) for automotive
dealers.
●
Merchant Solutions – point-of-sale
technology and payment solutions for large
and small businesses.
INDUSTRY PROFILE
The personal and business banking industries
in Canada are mature and highly competitive,
consisting of large chartered banks, regional
banks and credit unions,
as well as non-traditional competitors competing
in specific products and channels. These
industries offer products including borrowing, deposits,
cash
management,
and financing solutions. Products are
distributed through retail branches, commercial
banking centers, contact centers, digital,
and other specialized
distribution channels. Market leaders deliver
comprehensive products and services, proactive
advice that meets clients' needs, differentiated
client experience,
prudent risk management, and disciplined
expense management.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 22
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
STRATEGIC OBJECTIVES, ACCOMPLISHMENTS
AND PRIORITIES
BUSINESS STRATEGY
BUSINESS HIGHLIGHTS IN 2025
Deeper Relationships
●
TD ranked #1 in percentage of total Canadians
who named TD as their primary bank
●
Outgrew Canadian population growth in net
client acquisition
●
Continued to maintain strong market share positions
and gained momentum:
–
Ranked #1 position in personal core deposits
–
Gained year-over-year market share in total
personal deposits
17
–
Gained year-over-year market share in cards
through acquisition and deepening of client relationships
–
Grew the RESL business through specialization
and speed, with year-over-year market
share gains
17
●
Strengthened partnership between Canadian Personal
and Commercial Banking and Wealth
Management, leading to
accelerated growth in funded referrals and
deeper relationships
●
Record digital sales in day-to-day products
(personal chequing, savings,
and cards):
–
Achieved a digital record with 8.6 million
Canadian Personal and Commercial Banking
users active on mobile in
the past 90 days
–
Ranked #1 for average digital reach of any
bank in Canada based on ComScore
●
Continued to advance key credit card partnerships,
with a long-term extension of our exclusive
co-brand credit card
partnership with Amazon in Canada and a unique
6-month complimentary Uber One membership
to eligible credit
cardholders
●
Expanded distribution in Business Banking,
adding over 200 new frontline bankers
●
In Small Business Banking, launched an AI-driven
model that identifies clients' potential product
needs, allowing the
Bank to offer a tailored pre-approved solution
●
Record annual retail auto originations,
with ~90% in Super Prime and Prime
segments
●
TD Auto Finance ranked #1 in two segments of
the J.D. Power 2025 Canada Dealer
Financing Satisfaction Study: #1 for
Dealer Satisfaction among Non-Prime
Non-Captive Automotive Financing Lenders
for an eighth
consecutive year; and
#1 among Non-Captive Prime Lenders with
Retail Credit for the second year in a row
Simpler & Faster
●
Developed and implemented AI-powered
Knowledge Management Solution to accelerate
service delivery in our contact
centers and branches
●
Transitioned all commercial bankers within Business Banking
to new customer relationship management
and credit
underwriting platforms, unlocking efficiencies
●
TD was recognized as a Financial Service Excellence
shared award winner for “Customer Service Excellence”
,
“Branch Service Excellence”
,
“Mobile Banking Excellence”
,
“Live Agent Telephone Banking Excellence”
,
and
“Automated Telephone Banking Excellence”
among the Big 5 Banks
in the 2025
Ipsos Customer Service Index (CSI)
study
Disciplined Execution
●
Continued momentum in new cards acquisition,
while maintaining peer-leading credit quality
●
Entered a strategic relationship with Fiserv
to provide their market leading payment technology
and Clover products to
TD Merchant Solutions clients while
also streamlining operations, reducing
costs, and boosting product penetration
●
Initiated cost-saving measures by upgrading
platforms, simplifying operations, and
enhancing real estate, vendor, and
workforce strategies as discussed in the section
“Significant Events – Restructuring Charges”
15
Ranking based on percentage of Canadian Banking clients surveyed, who indicate TD as their primary financial institution:
Ipsos Canadian Financial Monitor, June 2025.
16
Net client acquisition data as of fiscal 2025.
17
Market share rankings based on the most current data available from OSFI for personal non-term (core)
deposits, total personal deposits, and RESL as of September 2025.
18
Market share based on Peer Quarterly Earnings Disclosure as of Q3 2025. Peers include Bank of Montreal, Canadian
Imperial Bank of Commerce, Royal Bank of Canada, and
Scotiabank (excluding The Toronto-Dominion
Bank).
19
As of October 2025,
including Personal, Direct Investing, and Business Banking. Active mobile users are users who have logged
in via their mobile device at least once in the last 90
days.
20
ComScore MMX® Multi-Platform, Desktop & Mobile, Total
audience, 3-month average ending September 2025.
21
TD Auto Finance received the highest score in the retail Non-Captive segment (2018-2021), and the retail Non-Captive Non-Prime
segment (2022-2025) in the J.D. Power Canada
Dealer Financing Satisfaction Studies, which measure Canadian auto dealers’ satisfaction with their
auto finance providers. TD Auto Finance also received the highest score in the retail
Non-Captive Prime segment in the J.D. Power 2024-2025 Canada Dealer Financing Satisfaction Studies, which
measure Canadian auto dealers’ satisfaction with their auto finance
providers. Visit jdpower.com/awards for more details.
22
TD Canada Trust shared in the Customer Service Excellence award in the 2025
Ipsos Study.
23
TD Canada Trust shared in the Branch Banking Excellence award in the 2025 Ipsos
Study.
24
TD Canada Trust shared in the Mobile Banking Excellence award in the 2025 Ipsos
Study.
25
TD Canada Trust shared in the Live Agent Telephone
Banking Excellence award in the 2025 Ipsos Study.
26
TD Canada Trust shared in the Automated Telephone
Banking Excellence award in the 2025 Ipsos Study.
27
Big 5 Banks consist of Bank of Montreal, Canadian Imperial Bank of Commerce, Royal Bank of Canada,
Scotiabank, and The Toronto
-Dominion Bank.
28
Ipsos 2025 Financial Service Excellence Awards are based on ongoing quarterly Customer Service Index
(CSI) survey results. Ipsos announces annual winners across 11
categories in
October after fielding for the final quarter-ends in September.
29
Peer leading 90 day+ Delinquency Rates per Peer Quarterly Financial Disclosures Q3 2025. Peers include Bank of Montreal,
Canadian Imperial Bank of Commerce, Royal Bank of
Canada, and Scotiabank.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 23
30
KEY PRIORITIES FOR
2026
●
Deeper Relationships:
–
In Personal Banking,
continue outgrowing the Canadian population
in net client acquisition and be the
leader in core banking and primacy
–
Maintain leadership in retail core deposit market
share
–
Further deepen client relationships across
Personal Banking, Business Banking,
and Wealth Management
–
Transform RESL homebuying and retention through specialization
and speed while delivering strong returns
–
Expand distribution within Business Banking
through accelerating investments in
frontline bankers and increasing focus
on relationship banking
●
Simpler & Faster:
–
Deliver client-focused outcomes by modernizing
and automating processes and platforms,
and leveraging AI (predictive, generative,
and agentic) to deliver
efficient, seamless, and personalized experiences
for clients and colleagues
–
Deliver simpler and faster client experiences
which include faster onboarding and mobile
first experiences
–
Apply AI to boost automatic-adjudication rates
in TD Auto Finance and Small Business
Banking, improving client response times,
and reducing manual
workload
–
Integrate automation and AI into Commercial
credit processes to shorten underwriting
cycles and improve time to market
–
Invest in talent for specialized advice across
RESL, trade finance, and several industry
verticals in Commercial Banking
●
Disciplined Execution:
–
Leverage automation, digital tools and AI-at-scale
to drive cost savings and improve efficiency
–
Redesign key business processes and
streamline operations to realize cost reduction,
and deliver disciplined expense management
through resource
optimization and third-party spend reduction
TABLE 16: CANADIAN PERSONAL AND COMMERCIAL BANKING
(millions of Canadian dollars, except as noted)
2025
2024
Net interest income
$
16,701
$
15,697
Non-interest income
3,985
4,093
Total revenue
20,686
19,790
Provision for (recovery of) credit losses – impaired
1,710
1,555
Provision for (recovery of) credit losses – performing
433
200
Total provision for (recovery of) credit losses
2,143
1,755
Non-interest expenses
8,382
8,010
Provision for (recovery of) income taxes
2,844
2,806
Net income
$
7,317
$
7,219
Selected volumes and ratios
Return on common equity
1
30.8
%
33.4
%
Net interest margin (including on securitized assets)
2
2.82
2.82
Efficiency ratio
40.5
40.5
Number of Canadian Retail branches at period end
1,051
1,060
Average number of full-time equivalent staff
3
32,611
33,660
1
Capital allocated to the business segment was based on 11.5% CET1
Capital in fiscal 2025 and 2024.
2
Net interest margin is calculated by dividing net interest income by average interest-earning assets.
Average interest-earning assets used in the calculation of net interest margin is a non-
GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” in the “Financial Results
Overview” section and the Glossary of this document for additional information
about this metric.
3
Effective the third quarter of 2025, call center operations have been realigned from the Corporate segment
to the businesses, providing end-to-end ownership of customer experience.
The change mainly impacts the Canadian Personal and Commercial Banking segment. Average number
of full-time equivalent staff has been restated for comparative periods.
REVIEW OF FINANCIAL PERFORMANCE
Canadian Personal and Commercial
Banking net income for the year was $7,317
million, an increase of $98 million, or 1%,
compared with last year, reflecting
higher revenue, partially offset by higher PCL and non-interest
expenses. ROE for the year was 30.8%,
compared with 33.4% last year.
Revenue for the year was $20,686 million, an increase
of $896
million, or 5%, compared with last year. Net interest income
was $16,701 million, an increase of
$1,004 million, or 6%, primarily reflecting volume
growth. Average loan volumes increased $24 billion,
or 4%, reflecting 4% growth in personal loans
and 6%
growth in business loans. Average deposit
volumes increased $22 billion, or 5%, reflecting
4% growth in personal deposits and
6% growth in business deposits.
Net interest margin was 2.82%, flat to the
prior year. Non-interest income was $3,985 million, a decrease
of $108 million, or 3%, reflecting lower
fees due to the
transition of Bankers’ Acceptances (BAs)
to Canadian Overnight Repo Rate Average (CORRA)-based
loans in the prior year, the impact of which is offset in net
interest income, partially offset by higher fee revenue.
PCL for the year was $2,143
million, an increase of $388
million compared with last year. PCL – impaired was $1,710
million, an increase of $155 million, or
10%, largely reflecting credit migration in
the consumer lending portfolios,
partially offset by lower provisions in the commercial
lending portfolio. PCL – performing
was $433 million, an increase of $233
million compared with last year. The current year performing
provisions largely reflect credit impacts
from policy and trade
uncertainty, the adoption impact of a model update in the credit
card portfolio, and volume growth. Total PCL as an annualized percentage
of credit volume was
0.36%, an increase of 5 basis points (bps)
compared with last year.
Non-interest expenses for the year were
$8,382 million, an increase of $372
million, or 5%, compared with last year. The increase reflects
higher technology
costs, employee-related expenses, and other
operating expenses.
The efficiency ratio for the year was 40.5%, flat
compared with last year.
OPERATING ENVIRONMENT AND OUTLOOK
For the second straight year, Canada’s economy is expected
to record subdued but positive expansion in
fiscal 2026. Conditions in trade-exposed industries
are
likely to remain challenging as adjustment
continues in the face of ongoing U.S.
trade uncertainty. More broadly, consumer and business spending are expected to
benefit from a relatively stable near-term outlook
for both inflation and interest rates. While
hiring is expected to remain soft in
the coming year, more pronounced
weakness in the labour force due to tighter immigration
policies is expected to gradually pressure
the unemployment rate down beginning
in the second fiscal
quarter of 2026. Within the national resale housing
market, sales and average prices are expected
to record further modest gains, helped
in part by pent-up
demand from first-time and move-up buyers.
As we look forward to the first quarter of
fiscal 2026, we expect net interest margin to remain
relatively stable
.
30
The Bank’s Q1 2026 net interest margin expectations for the segment are based on the Bank’s
assumptions regarding factors such as Bank of Canada rate cuts, competitive market
dynamics, and deposit reinvestment rates and maturity profiles, 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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 24
31
-$1,000
-$500
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2024
2025
NET INCOME
31
(millions of U.S. dollars)
Reported
Adjusted
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2024
2025
TOTAL REVENUE
31
(millions of U.S. dollars)
Reported
Adjusted
$0
$50
$100
$150
$200
$250
$300
$350
$400
2024
2025
AVERAGE DEPOSITS
(billions of U.S. dollars)
Personal
Business
Sweep
Canadian Personal and Commercial
Banking is focused on continuing to manage
expenses with discipline to drive cost efficiency and
to create the capacity to
invest for the future. TD’s client-centric and digitally-enabled
Canadian Personal and Commercial Banking
franchise is well-positioned to execute on
its growth
opportunities.
BUSINESS SEGMENT ANALYSIS
U.S. Retail
U.S. Retail offers a full range of financial products and services to over 10 million customers in the Bank’s U.S. personal,
business banking and wealth management operations. Prior to the sale of its entire equity investment in Schwab on
February 12, 2025, U.S. Retail included an investment in Schwab.
TABLE 17: REVENUE – Reported
1
(millions of dollars)
Canadian dollars
U.S. dollars
2025
2024
2025
2024
Personal Banking
$
8,908
$
8,466
$
6,381
$
6,219
Business Banking
4,742
4,331
3,397
3,181
Wealth
508
483
364
355
Other
2
(1,853)
433
(1,327)
319
Total
$
12,305
$
13,713
$
8,815
$
10,074
1
Excludes equity in net income of an investment in Schwab.
2
Other revenue consists primarily of revenue items of note, revenue from the Schwab IDA Agreement and from investing
activities.
KEY PRODUCT GROUPS
Personal Banking
●
Personal Deposits – chequing, savings, and
certificates of deposit products and payment
solutions for retail customers offered through
multiple delivery
channels.
●
Consumer Lending – financing products,
including residential mortgages, home
equity and unsecured lending solutions
for retail customers.
●
Credit Cards Services – TD-branded credit
cards for retail customers, private label and
co-brand credit cards alongside strategic
relationships with leading
national retailers.
●
Retail Auto Finance – indirect retail financing
through a network of auto dealers.
Business Banking
●
Commercial Banking – borrowing, deposit
and cash management solutions for
U.S. businesses and governments across a
wide range of industries and
specialty banking segments.
●
Small Business Banking – borrowing, deposit
and cash management solutions for small businesses
including merchant services and TD-branded
credit cards.
Wealth
●
Wealth Advice – wealth management advice, financial
planning solutions, estate and trust planning,
and insurance and annuity products for
mass affluent, high
net worth and institutional clients, delivered
by store-based financial advisors, a robo-advisory
platform, and a multi-custodial securities-based
collateral lending
platform.
31
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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 25
32
33
34
35
36
37
INDUSTRY PROFILE
The U.S. personal and business banking industry
is highly competitive and includes
several very large financial institutions, as
well as regional banks, small
community and savings banks, finance companies,
credit unions, and other providers of
financial services. The wealth management
industry includes national and
regional banks, insurance companies, independent
mutual fund companies, brokers, and independent
asset management companies. The personal
and business
banking and wealth management industries
also include non-traditional competitors, including
non-financial companies expanding into financial
services. These
industries serve individuals, businesses, and
governments and offer products and financial technology
solutions to support customer needs in deposits,
lending,
payments, cash management, financial advice,
and asset management. Products may
be distributed through a single distribution
channel or across multiple
channels, including physical locations, ATMs, and telephone and digital
and mobile channels. Certain businesses
also serve customers through indirect channels.
Traditional competitors are embracing new technologies,
including AI, and strengthening their
focus on providing enhanced customer
experiences, insights and
security. Non-traditional competitors including direct banks, financial
technology companies and private credit
institutions have gained momentum and are
increasingly collaborating with banks or leveraging
data through open banking to develop
new products and services. The keys to profitability
continue to be
attracting and retaining client relationships
with differentiated service, offering comprehensive products,
advice and service quickly and seamlessly
across
distribution channels, optimizing funding
sources and costs, investing strategically
while maintaining expense discipline, and
managing risk prudently.
STRATEGIC OBJECTIVES, ACCOMPLISHMENTS
AND PRIORITIES
BUSINESS STRATEGY
BUSINESS HIGHLIGHTS IN
2025
Deeper Relationships
●
Increased Bankcard balances 12% YoY, and acquired the most new accounts since fiscal 2018, powered by
the
introduction of the Gen2 deposit-based underwriting
machine-learning model that allows better targeting
of
opportunities and extension of credit to more clients
than traditional underwriting methods
●
Increased Assets under Management (AUM)
23% YoY,
with mass affluent balances up 21% YoY, reflecting a focus on
delivering an enhanced relationship banking
service and advice
●
Delivered digital sales and service capabilities
which drove all-time highs in Digital Sales
share (36%), Digital
Adoption
(58%) and Self-Serve Transactions
(85%),
by providing clients a more holistic self-servicing
experience to
expand store colleagues’
capacity to provide advice
●
Re-imagined retail distribution model by
transforming stores into advice centers,
completing renovation on the 178th
Next Generation store (16% of total stores),
with ~90% having dedicated Wealth space
●
Increased Middle Market loan balances
8% YoY,
expanding partnerships with TD Securities
to deliver approximately
US$77 million of OneTD fees in U.S. Retail
Commercial Banking
●
TD’s Florida market ranked #1 overall in 2025 J.D.
Power Retail Banking Satisfaction
●
TD ranked #1 in total number of approved
U.S. Small Business Administration (SBA) loans
in the Bank’s Maine to
Florida footprint for the 9th consecutive year
●
TD Auto Finance ranked #1 in Dealer Satisfaction
among National Prime Credit Non-Captive
Automotive Finance
Lenders for 6th consecutive year in J.D. Power
2025 U.S. Dealer Financing Satisfaction
Study
Simpler & Faster
●
Executed balance sheet restructuring activities
and achieved the 10% asset reduction target,
creating ~US$52
billion
of headroom to the asset limitation to meet
the evolving needs of clients, while simplifying
the franchise and driving
profitable growth. Exited ~US$22 billion of
non-core loans since inception of the program:
-
Completed the sale of the US$9 billion Correspondent
Mortgage portfolio
-
Initiated the wind down of the US$3 billion
Retail Card Services, Point of Sale financing
business
-
Exiting commercial auto, supply chain
financing and select export import and commercial
bank relationships
that are not profitable or aligned with the
Bank’s core franchise
-
Deployed excess cash and proceeds from loan
sales to pay down bank borrowings
●
Completed the planned investment portfolio
repositioning program, as outlined in the “Update
on U.S. Balance Sheet
Restructuring Activities”
section in this MD&A,
generating a net interest income benefit
of US$500 million pre-tax in
fiscal 2025
●
Opened Layer 6 GenAI research and development
center in New York, focused on leveraging AI leadership
advantage to automate operational processes,
improve cost to serve and support
front-line colleagues with real-time
insights to provide more personalized advice
and increase productivity
●
Delivered enhanced digital capabilities to
streamline customer interactions including
the credit card application
process for existing retail customers and
Small Business Banking clients, and
real-time debit card disputes
Disciplined Execution
●
Made progress against U.S. BSA/AML Program
remediation as outlined in the “Update on the
Remediation of the U.S.
Bank Secrecy Act/Anti-Money Laundering
Program and Enterprise AML Program”
section in this MD&A
●
Delivered ~$200 million of incremental productivity
expense savings in fiscal 2025, through
optimization of the Bank’s
stores, balance sheet, corporate real estate,
workforce and vendor efficiencies as outlined
in the “Significant Events –
Restructuring Charges”
section in this MD&A
●
Reduced risk-weighted assets as part of
U.S. balance sheet restructuring activities
supporting total U.S. Retail
adjusted ROE growth of 180 bps in fiscal
2025
32
Digital sales based on U.S. consumer banking and small business banking.
33
Active digital users as a percentage of total customer base. Active digital users are users who have logged in
online or via their mobile device at least once in the last 90 days.
34
Self-serve share of transactions represents all financial transactions that are processed through unassisted channels
(Online, Phone, Mobile, ATM and Phone IVR).
35
TD Bank received the highest score in a tie in Florida in the J.D. Power 2025 U.S. Retail Banking Satisfaction Study,
which measure customers’ satisfaction with their primary bank. Visit
jdpower.com/awards for more details
36
For 2025, TD Bank ranked #1 in Small Business Administration (SBA) lending in the Maine to Florida footprint for
ninth consecutive year. Lenders ranked by the U.S. SBA
based on the
SBA’s data for the units of loans approved
during the period October 1, 2024 to September 30, 2025.
37
TDAF is ranked #1 in Dealer Satisfaction among National Prime Credit Non-Captive Automotive Finance Lenders
for 6th consecutive year in the J.D. Power 2025 U.S. Dealer Financing
Satisfaction Study. Visit jdpower.com/awards
for more details
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 26
38
39
40
KEY PRIORITIES FOR
2026
●
U.S. Retail’s top priority remains remediating the
U.S. BSA/AML program and strengthening
the governance and control environment.
Refer to the “Update on
the Remediation of the U.S. Bank Secrecy
Act/Anti-Money Laundering Program and Enterprise
AML Program”
section in this MD&A for additional information.
●
Deeper Relationships:
-
Continue the reimagination of retail distribution
model by bolstering digital sales and servicing
capabilities to increase digital adoption and
provide
capacity for store colleagues to provide advice,
while upgrading store formats to the Next Generation
design
-
Scale the credit cards franchise through increasing
penetration of the U.S. Bank’s deposit base
with the support of Gen2 underwriting, and expand
the
Nordstrom partnership to gain servicing
control and build out scalable capabilities
to be a traditional co-brand partner of choice
-
Deepen penetration of mass affluent clients by scaling
the Financial Advisor workforce, delivering high-quality
referrals from re-imagined retail
distribution channels, and tailor investment products
and services
-
Accelerate commercial bank profitability and
deepen client relationships by capturing greater
deposit and fee opportunities including
expanding lead-
agent positions, and partner with TD
Securities to offer unique opportunities to Middle
Market and Specialty segment clients
●
Simpler & Faster:
-
Continue the execution of balance sheet restructuring
efforts that simplify the business
-
Deploy AI to automate operational processes
and provide productivity and enhanced insights
for front-line colleagues
-
Transform data and technology architecture to deliver
a scalable, cloud-native, modular environment
●
Disciplined Execution:
-
Deliver the medium-term cumulative
cost reduction target
-
Optimize store network, drive unit cost improvement
and re-engineer processes, lower third party
spend, and reduce the cost to operate
the core
infrastructure
Update on U.S. Balance Sheet Restructuring
Activities
Following the announcement of the Global
Resolution on October 10, 2024, the Bank
executed balance sheet restructuring
activities to help ensure the Bank can
continue to support customers’ financial needs
in the U.S., while not exceeding the
limitation on the combined total assets
of TD Bank, N.A. and TD Bank USA,
N.A. (the “U.S. Bank”). Since the fourth quarter
of fiscal 2024, and through fiscal 2025, the Bank
sold US$31.9 billion of bonds, resulting
in an aggregate loss of
US$1,592 million pre-tax. The net interest
income benefit from these sales and reinvestment
of proceeds was US$500 million pre-tax in
fiscal 2025 and is
expected to be approximately US$550
million pre-tax in fiscal 2026
.
In addition, the Bank reduced the U.S. Bank’s
assets by more than 10% from the asset
level as of September 30, 2024, largely
by selling or winding down
$22 billion of non-scalable or non-core
U.S. loan portfolios that did not align with the
U.S. Retail segment’s focused strategy or
have lower returns on investment.
This reduction in assets reduced the
total Bank's net interest income by approximately
US$100 million pre-tax in fiscal 2025 and
is expected to reduce net interest
income by approximately US$280 million pre-tax
in fiscal 2026
.
During the year, the Bank used proceeds from the sale of
the loans, investment maturities, and cash
on hand, to pay down US$43 billion of short-term
borrowings.
Accordingly, as of October 31, 2025, the combined total assets
of the U.S. Bank were US$382 billion.
As of September 30, 2025, the combined
total assets of the U.S. Bank, as measured
in accordance with the OCC Consent
Order which utilizes the average of spot
balances of June 30, 2025, and September
30, 2025, was US$388 billion.
In the aggregate, total losses associated
with the Bank’s U.S. balance sheet restructuring
activities from October 10, 2024, through
October 31, 2025, are
US$2,128 million pre-tax and US$1,597
million after-tax. As of October 31, 2025,
the Bank has largely completed its U.S. balance
sheet restructuring activities and
no additional losses associated with this
program are expected in fiscal 2026
.
38
The expected amount of net interest income benefit is subject to risks and uncertainties and are based on assumptions
regarding market factors and conditions which are not entirely
within the Bank’s control.
39
The Bank’s estimates regarding net interest income impacts are based on assumptions regarding the timing of
when the sale of the remaining assets are completed or when the
remaining loan portfolios are wound down.
40
The Bank’s expectations regarding U.S. balance sheet restructuring related losses are based on forward-looking
assumptions that have inherent risk and uncertainties. Results may vary
depending on factors both within and outside the Bank’s control. 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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 27
TABLE 18: U.S. RETAIL
(millions of dollars, except as noted)
Canadian Dollars
2025
2024
Net interest income – reported
$
12,368
$
11,600
Net interest income – adjusted
1,2
12,404
11,600
Non-interest income – reported
(63)
2,113
Non-interest income – adjusted
1,3
2,602
2,424
Total revenue – reported
12,305
13,713
Total revenue – adjusted
1,2,3
15,006
14,024
Provision for (recovery of) credit losses –
impaired
1,499
1,437
Provision for (recovery of) credit losses –
performing
15
95
Total provision for (recovery of) credit losses
1,514
1,532
Non-interest expenses – reported
9,599
13,141
Non-interest expenses – adjusted
1,4
9,599
8,466
Provision for (recovery of) income taxes – reported
(472)
69
Provision for (recovery of) income taxes – adjusted
1
202
255
U.S. Retail net income (loss) excluding Schwab
– reported
1,664
(1,029)
U.S. Retail net income excluding Schwab
– adjusted
1
3,691
3,771
Share of net income from investment in
Schwab
5,6
277
709
U.S. Retail net income (loss) – reported
$
1,941
$
(320)
U.S. Retail net income – adjusted
1
3,968
4,480
U.S. Dollars
Net interest income – reported
$
8,833
$
8,520
Net interest income – adjusted
1,2
8,858
8,520
Non-interest income – reported
(18)
1,554
Non-interest income – adjusted
1,3
1,859
1,780
Total revenue – reported
8,815
10,074
Total revenue – adjusted
1,2,3
10,717
10,300
Provision for (recovery of) credit losses –
impaired
1,065
1,056
Provision for (recovery of) credit losses –
performing
15
70
Total provision for (recovery of) credit losses
1,080
1,126
Non-interest expenses – reported
6,852
9,631
Non-interest expenses – adjusted
1,4
6,852
6,220
Provision for (recovery of) income taxes – reported
(331)
52
Provision for (recovery of) income taxes – adjusted
1
144
188
U.S. Retail net income (loss) excluding Schwab
– reported
1,214
(735)
U.S. Retail net income excluding Schwab
– adjusted
1
2,641
2,766
Share of net income from investment in
Schwab
5,6
196
523
U.S. Retail net income (loss) – reported
$
1,410
$
(212)
U.S. Retail net income – adjusted
1
2,837
3,289
Selected volumes and ratios
U.S. Retail return on common equity excluding
Schwab – reported
7
3.9
%
(2.5)
%
U.S. Retail return on common equity excluding
Schwab – adjusted
1,7
8.5
9.4
U.S. Retail return on common equity – reported
7
4.4
%
(0.7)
%
U.S. Retail return on common equity – adjusted
1,7
8.9
10.1
Net interest margin – reported
1,8
3.08
2.95
Net interest margin – adjusted
1,8
3.09
2.95
Efficiency ratio – reported
77.7
95.6
Efficiency ratio – adjusted
1
63.9
60.4
Assets under administration (billions of U.S.
dollars)
9
$
46
$
43
Assets under management (billions of U.S.
dollars)
9
10
8
Number of U.S. retail stores
1,100
1,132
Average number of full-time equivalent staff
28,715
27,842
1
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.
2
Adjusted net interest income excludes the following item of note:
i.
Balance sheet restructuring (impact of loan hedge rebalancing before the close of the correspondent loan sale)
– 2025: $36 million or US$25 million ($26 million or US$19 million
after-tax).
3
Adjusted non-interest income excludes the following item of note:
i.
Balance sheet restructuring – 2025: $2,665 million or US$1,877 million ($2,001 million or US$1,408 million after-tax),
2024: $311 million or US$226 million ($234 million
or
US$170 million after-tax).
4
Adjusted non-interest expenses exclude the following items of note:
i.
FDIC special assessment – 2024: $442 million or US$323 million ($333 million or US$243 million after-tax); and
ii.
Charges for the global resolution of the investigations into the Bank’s U.S. BSA/AML program – 2024:
$4,233 million or US$3,088 million (before and after-tax).
5
The Bank’s share of Schwab’s earnings was reported with a one-month lag. Refer to
Note 12 of the 2025 Consolidated Financial Statements for further details.
6
The after-tax amounts for amortization of acquired intangibles, the Bank’s share of acquisition and integration
charges associated with Schwab’s acquisition of TD Ameritrade,
the Bank’s
share of Schwab’s restructuring charges, and the Bank’s share of Schwab’s FDIC
special assessment charge were recorded in the Corporate segment.
7
Capital allocated to the business segment was 11.5% CET1 Capital.
8
Net interest margin is calculated by dividing U.S. Retail segment’s net interest income by average interest
-earning assets excluding the impact related to sweep deposits arrangements
and the impact of intercompany deposits and cash collateral, which management believes better reflects segment
performance. In addition, the value of tax-exempt interest income is
adjusted to its equivalent before-tax value. Net interest income and average interest-earning assets used in the
calculation are non-GAAP financial measures. 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.
9
For additional information about this metric, refer to the Glossary of this document.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 28
41
42
43
44
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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 29
45
$0
$1,000
$2,000
$3,000
2024
2025
NET INCOME
(millions of Canadian dollars)
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
$750
$800
2024
2025
AUA / AU
41
(billions of Canadian dollars)
AUA
AUM
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2024
2025
INSURANCE PREMIUMS
(millions of Canadian dollars)
BUSINESS SEGMENT ANALYSIS
Wealth Management and
Insurance
Wealth Management and Insurance provides wealth solutions and insurance protection to over 6 million customers in Canada
and asset management products to institutional clients in Canada and globally.
TABLE 19: REVENUE
(millions of Canadian dollars)
2025
2024
Wealth Management
$
7,012
$
6,042
Insurance
1
7,550
7,493
Total
$
14,562
$
13,535
1
Includes recoveries from reinsurers for catastrophe claims of nil (2024: $718 million)
KEY PRODUCT GROUPS
Wealth Management
●
Direct Investing – platforms and resources for
self-directed retail investors to facilitate
research, investment management and
trading in a range of investment
products through online, phone and mobile
channels.
●
Wealth Advice – wealth management advice and financial
planning solutions for mass affluent, high net
worth and ultra high net worth clients, integrated
with
other Wealth businesses and the broader Bank.
●
Asset Management – public and private
market investment management solutions
for retail and institutional clients, including a diversified
suite of investment
products designed to provide attractive risk-adjusted
returns.
Insurance
●
Property and Casualty – home, auto and
small business insurance provided through direct
channels and to members of affinity groups
such as professional
associations, post-secondary institutions
such as universities and colleges, and employer
groups.
●
Life and Health – credit protection for
Canadian Personal and Business Banking borrowing
customers, life and health insurance products,
credit card balance
protection, and travel insurance products, distributed
through customer-assisted and direct to consumer
channels
.
INDUSTRY PROFILE
The Canadian wealth management industry
includes banks, insurance companies, independent
asset managers, direct-to-consumer
providers, independent
financial advisors and planners, and full-service
and discount brokerages. Growth relies
on the ability to provide differentiated and
integrated wealth solutions and
holistic financial advice to retail and institutional
investors while keeping pace with technological
change and regulatory requirements. The property
and casualty
insurance industry in Canada is fragmented
and competitive, consisting of numerous
personal and commercial line writers
offering products through broker,
captive agent and direct distribution channels,
while the life and health insurance industry is
comprised of several large life and health
insurers, and also includes
several banks that provide life and health insurance.
We expect that providing innovative digital capabilities
and solutions will be a key differentiator for customers
buying and servicing their insurance policies
through direct channels.
45
Includes AUA administered by TD Investor Services, which is part of the Canadian Personal and Commercial Banking
segment.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 30
46
47
48
49
50
51
52
53
STRATEGIC OBJECTIVES, ACCOMPLISHMENTS
AND PRIORITIES
BUSINESS STRATEGY
BUSINESS HIGHLIGHTS IN 2025
Deeper Relationships
●
Continued to increase client depth across
TD to seamlessly meet clients’
needs across channels, leading to record
flows from Personal Banking to Wealth Management
and within Wealth Management,
and record flows from TD
Direct Investing to Advice
●
Maintained strong market share positions
and gained momentum across the businesses:
–
TD Direct Investing ranks #1 in market share
of revenue and total assets
–
TD Asset Management reinforced its position
as #1 institutional asset manager in
Canada
and continued to
expand its institutional presence, winning
new mandates domestically and globally
–
TD Asset Management was among the
fastest growing ETF manufacturers in the industry
–
TD Private Investment Advice increased
market share, outperforming bank-owned
peers and the overall
channel
–
TD Insurance ranked #1 as Canada’s Leading
Direct Distribution personal lines insurer
and leader in the
Affinity market in Canada
,
and #3 rank as personal home & auto insurer
in Canada
●
Wealth Management expanded co-location of Private
Bankers in Retail branches and Commercial
Banking Centres
and expanded Private Banking Direct and Financial
Planning Direct, broadening clients’
access to specialist
capabilities
●
Wealth Management recognized with multiple awards,
reflecting the strength of the business, products,
and
platforms:
–
TD Direct Investing was ranked #1 Digital Brokerage
in Canada by The Globe and Mail
for the third
consecutive year
–
TD Asset Management recognized in 7 categories
at the 2025
Canada London Stock Exchange Group
Lipper Fund Awards
–
TD Asset Management received 24 Fundata
FundGrade A+® Awards
●
TD Insurance maintained focus on deepening
client relationships, partnering with Wealth Management
to better
protect high-net-worth clients with travel, home
and auto insurance products
●
TD Insurance’s Affinity partnerships remain a core differentiator, with TD
Insurance ranked #1 in the General
Insurance Affinity market and leveraging these relationships
to extend reach into valuable client segments
●
General Insurance ran an innovative Pole Pillow
Campaign, with coverage from over 100+
media publications,
generating over 22 million total impressions
and 100% positive sentiment, and strengthening
TD Insurance’s #1
Rank in Awareness for Home & Auto Insurance
Simpler & Faster
●
Enabled digital onboarding for all TD
Wealth Financial Planning account types, with 90% of
all accounts now
onboarded digitally
●
Introduced capability for Wealth clients using
the TD App to access Omni Dial through
Easy Trade, enabling
automatic authentication and reducing call times
●
Leveraged digital authentication and expanded
eSign capabilities in TD Direct Investing,
driving a significant drop in
calls referred to the Retail branch
●
Introduced new services, features and
capabilities to enhance client experience:
–
Enhanced TD Direct Investing self-serve and
live chat capabilities
–
Launched TD Active Trader mobile app for Android and
TD Advanced Dashboard mobile app
–
Launched a new High Net Worth planning tool
in Advice
–
Broadened TD Asset Management ETF
offerings and launched a new private market alternatives
fund
●
TD Insurance remained Canada’s leading digital direct
insurer, with over 75% of customers digitally engaged,
more
than 40% of eligible Home & Auto transactions
completed online, and the TD Insurance
app recognized as
“Canada’s Top-Rated Home and Auto Insurance App”
by Apple and Google
●
Launched a new usage-based auto insurance
program to deliver proactive, personalized
driving advice to clients
and reward safe driving habits
Disciplined Execution
●
Continued to invest in Wealth Management operations,
enhancing advisor and client experience
through improved
efficiency, productivity and reduced operational risk
●
Strengthened control environment to systematically
address business risks
●
Maintained a robust reinsurance program and
became the first Canadian insurer to sponsor
a CAD denominated
catastrophe bond, providing additional sources
of capital protection against losses from
severe weather events
●
Extended complimentary Wildfire Defense Systems
coverage to more clients in Alberta and
Saskatchewan to build
resiliency against climate-related disruptions
46
Investor Economics, Retail Distribution Report, June 2025
47
Investor Economics, Managed Money Report, Spring 2025
48
Rankings based on data available from OSFI, Insurers, Insurance Bureau of Canada, and Provincial Regulators
as of December 2024
49
Based on market data released by MSA research for the six months period ended June 30, 2025
50
Globe and Mail, February 2025
51
2025 Canada London Stock Exchange Group Lipper Fund Awards: https://lipperfundawards.com/Awards/Canada/2025/Fund
52
Ipsos, TD Insurance ranking, English Canada past 12 months ending June 2025 among Home & Auto insurance
holders or next 12 months purchase intenders
53
Based on ratings on the App Store and Google Play as of September 15, 2025
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 31
KEY PRIORITIES FOR
2026
●
Deeper Relationships:
-
Deepen client relationships across TD through
partnerships between Canadian Personal
Banking, Wealth Management, Insurance and
Canadian
Business Banking to satisfy client needs holistically
while adhering to the Bank Act (Canada)
-
Expand distribution by deploying advisor
talent acquisitions and development programs
-
Accelerate client acquisition through investments
in Easy Trade and Active Trader platforms in Wealth Management
and continued success in
Insurance’s marketing sophistication
●
Simpler & Faster:
-
Continue to leverage AI capabilities and
end-to-end use of analytics to deliver personalized
and engaging experiences and advice, enhance
advisor
capacity and improve productivity, and in insurance claims fraud
detection to accelerate profitable growth
-
Further advance digital client onboarding
and account funding to enhance online,
same-day and self-serve capabilities
-
Enhance advisor capacity by leveraging
AI to improve productivity
-
Complete the unification of Wealth Management's
discretionary advice businesses and
client migration
●
Disciplined Execution:
-
Sustainably lower expense base by re-envisioning
Insurance business processes to further
enable AI opportunities and leverage
the advantage of TD
Insurance's low cost direct to consumer model
-
Deliver disciplined expense management by
expanding digital client onboarding in Wealth
Management,
productivity initiatives and structural cost
reduction while continuing to invest in risk
and control infrastructure
-
Provide Insurance clients with sound advice
and support they need to prepare for the impacts
of climate change
TABLE 20: WEALTH MANAGEMENT AND INSURANCE
(millions of Canadian dollars, except as noted)
2025
2024
Net interest income
$
1,493
$
1,226
Non-interest income
1
13,069
12,309
Total revenue
14,562
13,535
Insurance service expenses
2
6,089
6,647
Non-interest expenses
4,698
4,285
Provision for (recovery of) income taxes
986
648
Net income
$
2,789
$
1,955
Selected volumes and ratios
Return on common equity
44.3
%
31.8
%
Return on common equity – Wealth Management
3
62.1
52.0
Return on common equity – Insurance
24.2
10.7
Efficiency ratio
32.3
31.7
Efficiency ratio, net of ISE
4
55.4
62.2
Assets under administration (billions of Canadian dollars)
5
$
759
$
651
Assets under management (billions of Canadian dollars)
601
530
Average number of full-time equivalent staff
15,411
15,219
1
Includes recoveries from reinsurers for catastrophe claims of nil (2024: $718 million).
2
Includes estimated losses related to catastrophe claims of $101 million (2024: $1,223 million).
3
Capital allocated to the business segment was 11.5% CET1
Capital.
4
Efficiency ratio, net of ISE is calculated by dividing non-interest expenses by total revenue, net of ISE.
Total revenue, net of ISE
– 2025: $8,473 million, 2024: $6,888 million. Total
revenue, net of ISE is a non-GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” in the
“Financial Results Overview” section and the Glossary of this document
for additional information about this metric.
5
Includes
AUA administered by TD Investment Services Inc. which is part of the Canadian Personal and Commercial
Banking segment.
REVIEW OF FINANCIAL PERFORMANCE
Wealth Management and Insurance net income
for the year was $2,789 million, an increase
of $834
million, or 43%, compared with last year, reflecting lower
estimated losses from catastrophe claims
and higher revenue from both businesses,
partially offset by higher non-interest expenses.
Wealth Management net
income for the year was $2,070 million, an
increase of $434 million, or 27%, compared
with last year, and Insurance net income for the year was $719
million, an
increase of $400 million, compared with last
year. The ROE for the year was 44.3%, compared with 31.8%
last year. Wealth Management ROE for the year was
62.1%, compared with 52.0% last year, and Insurance ROE
for the year was 24.2% compared with 10.7%
last year.
Revenue for the year was $14,562 million.
This represents an increase of $1,027 million, or
8%, compared with last year. Non-interest income
was
$13,069 million. This represents an increase
of $760 million, or 6%, compared with last year, reflecting
higher insurance premiums, fee-based revenue,
and
transaction revenue in the current year, partially offset by the impact
of $718 million in reinsurance recoveries
for catastrophe claims in the prior year. Net interest
income was $1,493 million, an increase of
$267 million, or 22%, compared with last
year, reflecting higher deposit volumes and margins.
AUA were $759 billion as at October 31, 2025,
an increase of $108 billion, or 17%, compared
with last year, reflecting market appreciation and net asset
growth. AUM were $601 billion as at October
31, 2025, an increase of $71 billion, or
13%, compared with last year, primarily reflecting market appreciation
and net
asset growth.
Insurance service expenses for the year
were $6,089 million. This represents a decrease
of $558 million, or 8%, compared with last
year, driven by $916 million
of estimated losses from catastrophe claims
in the prior year, partially offset by
h
igher claims severity in the current
year.
Non-interest expenses for the year were
$4,698 million, an increase of $413 million, or
10%, compared with last year, reflecting higher variable
compensation,
and higher technology spend supporting
business growth.
The efficiency ratio for the year was 32.3%, compared
with 31.7% last year. The efficiency ratio, net of ISE for the
year was 55.5%, compared with 62.2% last
year.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 32
54
55
$0
$300
$600
$900
$1,200
$1,500
$1,800
$2,100
2024
2025
NET INCOME
54,55
(millions of Canadian dollars)
Reported
Adjusted
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
2024
2025
TOTAL REVENUE
54
(millions of Canadian dollars)
$25
$30
$35
$40
$45
$50
$55
$60
$65
$70
$75
$80
$85
$90
$95
$100
$105
2024
2025
AVERAGE GROSS LENDING
PORTFOLIO
(billions of Canadian dollars)
OPERATING ENVIRONMENT AND OUTLOOK
Market conditions are expected to be
challenging in fiscal 2026 with subdued economic
growth in the face of ongoing U.S. trade uncertainty.
Wealth Management
and Insurance’s continued focus on its strategic
priorities and investments in leading digital
platforms is expected to help offset headwinds on
fees from rising
competition and increased claims severity. Wealth Management and
Insurance will continue to support and deepen
relationships with clients, leveraging AI
capabilities to deliver personalization at
scale and enable simple, intuitive experiences.
The businesses will continue to deliver high-quality
advice, educational
content and innovative financial products
to customers, with disciplined execution to
navigate the changing environment.
BUSINESS SEGMENT ANALYSIS
Wholesale Banking
Operating under the brand names of TD Securities and TD Cowen, Wholesale Banking offers global markets and corporate
and investment banking services to corporate, government, and institutional clients in key global financial centres across
North America, Europe and Asia-Pacific.
TABLE 21: REVENUE
(millions of Canadian dollars)
2025
2024
Global markets
$
5,336
$
4,218
Corporate and investment banking
3,189
3,104
Other
(133)
(36)
Total
$
8,392
$
7,286
LINES OF BUSINESS
●
Global Markets – sales, trading and research,
debt and equity underwriting, client securitization,
prime services, and trade execution services
.
●
Corporate and Investment Banking – corporate
lending and syndications, debt and
equity underwriting, M&A and capital markets
advisory services, trade
finance, cash management, investment portfolios,
and related activities
55
.
●
Other – investment portfolios and other
accounting adjustments.
INDUSTRY PROFILE
The wholesale banking sector is a mature,
highly competitive market comprised of banks,
large global investment firms, and independent
investment banks and
broker dealers. Wholesale Banking provides
global markets and corporate and investment
banking services to corporate, government,
and institutional clients.
Firms continue to focus on generating
client-driven trading revenue and investment
banking fee income alongside strategic
deployment of their balance sheet.
Firms are also investing in technology to
support advancements in markets infrastructure,
platforms and systems, and growing levels
of electronic trading across
all markets. Competition is expected to remain
intense and longer term, wholesale
banks with a diversified client-focused business
model, a full suite of products
and services, and the ability to manage costs
and capital effectively will be well-positioned
to achieve attractive returns for shareholders.
54
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.
55
Certain revenue streams are shared between Global Markets and Corporate and Investment Banking lines of business
in accordance
with an established agreement.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 33
56
57
STRATEGIC OBJECTIVES, ACCOMPLISHMENTS
AND PRIORITIES
BUSINESS STRATEGY
BUSINESS HIGHLIGHTS IN
2025
Deeper Relationships
●
Completed the integration of Cowen, with clients
now facing a single dealer that delivers a
robust product suite and holistic
client solutions
●
Achieved four consecutive quarters with over $2
billion revenue
●
Corporate & Investment Banking continued to
deliver its strong client franchise and full-service
capabilities with multiple
award recognitions and notable transactions:
-
Continued to expand its product suite by
building a leading convertibles platform with marquee
wins, and delivered
innovative debt capital markets solutions for pre-capitalized
securities
-
Ranked #1 in Canadian Loan Syndications and #2 in
Canadian Corporate Debt Underwriting
-
Achieved Top 10 ranking in key U.S.
strategic growth areas, ranking #8 in U.S. Equity Underwriting,
and #8 in U.S.
Convertibles
56
-
Awarded Canada’s Best Investment Bank for Debt
Capital Markets by Euromoney Awards for Excellence
2025
-
Recognized at The Digital Banker Transaction
Banking Innovation Awards 2025 for Best Bank for
Trade Finance –
Canada, and Outstanding Use of Technology in
Trade Finance – North America
-
Sole Bookrunner on GameStop Corp.’s US$2.25 billion zero-coupon
convertible bond offering, the largest sole
bookrunner convertible offering in the U.S. since 2016
-
Led the NextEra Energy Capital Holdings $2 billion three-part
offering, the largest corporate Maple bond transaction
in 2025
-
$605 million unregistered block trade of Newmont
Corporation’s 13% interest in Orla Mining, TD’s largest
bookrunner equity transaction in the mining sector
-
Joint Bookrunner on the inaugural debt issuance from
the Climate Investment Funds Capital Markets
Mechanism, a
US$500 million bond offering
●
Global Markets delivered strong growth through its
broad product offering, and deep institutional relationships:
-
Continued to expand U.S. Prime Services
by enhancing cash prime services, streamlining global
clearing, and
progressing the build for arranged financing and synthetic prime
capabilities
-
Scaled TDS Automated Trading in investment grade
credit to become a Top 5 market
participant
-
TD became the first Canadian bank to
offer algorithmic swap trading, enhancing product offerings
for key clients
-
Recognized for excellence across the industry, including named Canada’s Best
FX Bank – 2025 by Euromoney,
voted #1 Overall Commodities Dealer by
Energy Risk Commodities Rankings 2025
-
Ranked #3 overall in the 2025 Extel Canada Research
Survey, and #2 in Washington Research and
Communications Infrastructure in the 2025 U.S. Extel
All-American Research Survey
-
Ranked #6 overall for U.S. Corporate Access by
Buy-Side investors, and #1 in U.S. Healthcare
Corporate Access in
Extel’s 2025 U.S. Corporate Access Survey (Buy-Side View)
Simpler & Faster
●
Unified Global Markets leadership across Equities and
Fixed Income, Currencies and Commodities, and realigned
Corporate & Investment Banking leadership to create
seamless client coverage
●
Deployed technology to enhance client and colleague
experiences:
-
Launched AI Front Office Assistant, a research
chatbot that aggregates insights to improve productivity and
enhance client service
-
Advanced initiative to increase speed for client
onboarding by enhancing internal workflow tracking systems and
building automated onboarding tools
-
Simplified client experience with TD One Portal,
which provides a single sign-on to access
TD Securities products
and services
●
Streamlined processes for new product approvals to
enable faster time to market and upgraded
core infrastructure and
systems to modernize operating platforms
Disciplined Execution
●
Strengthened risk and control frameworks by adding executive talent
in key risk areas and enhancing regulatory
responsiveness by improving organizational alignment
●
Enhanced first line risk management function through policy
review, implemented enhanced governance programs, and
adopted automation for testing and optimizing control
inventory
●
Implemented framework to identify capital redeployment opportunities and
drive higher client relationship returns
●
Launched cost-savings initiatives including modernizing platforms, simplifying
business processes, and optimizing real
estate, vendor and workforce strategy as
outlined in the section “Significant Events –
Restructuring Charges”
KEY PRIORITIES FOR
2026
●
Deeper Relationships
-
Deepen client relationships in corporate and
investment banking to drive revenue
by aligning balance sheet and resources
to key focus sectors
-
Progress the global integrated platforms, including
global transaction banking and prime services
solutions, to deliver a seamless client experience
with innovative, best-in-class products and
solutions
-
Enhance fixed income product suite and strengthen
e-trading capabilities across Global Markets
-
Advance leading cash equities market share
with enhanced product cross-sell and platform
capabilities, and continue to align partnerships
across
the business to provide holistic cross product
derivatives solutions for clients
●
Simpler & Faster
-
Continue to simplify organizational structure
and hire top talent
-
Continue to upgrade core systems to simplify
processes and modernize infrastructure
●
Disciplined Execution
-
Strengthen risk and control foundation by improving
agility and responsiveness for regulatory
compliance, automating processes, and enhancing
risk
management capabilities
-
Lower structural costs through moderation
of expenses, process simplification and
technology modernization, real estate and
vendor optimization,
and AI-driven efficiency gains
-
Advance disciplined approach to capital deployment
through client level returns focus and strategic
balance sheet deployment
56
For the 12 months ended October 31, 2025. Source: Bloomberg.
57
For the 12 months ended October 31, 2025, based on internal tracking.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 34
58
TABLE 22: WHOLESALE BANKING
(millions of Canadian dollars, except
as noted)
2025
2024
Net interest income (TEB)
$
(18)
$
582
Non-interest income
8,410
6,704
Total revenue
8,392
7,286
Provision for (recovery of) credit losses –
impaired
185
247
Provision for (recovery of) credit losses –
performing
105
70
Total provision for (recovery of) credit losses
290
317
Non-interest expenses – reported
6,048
5,576
Non-interest expenses – adjusted
1,2
5,886
5,197
Provision for (recovery of) income taxes
(TEB) – reported
444
275
Provision for (recovery of) income taxes
(TEB) – adjusted
1
479
357
Net income – reported
$
1,610
$
1,118
Net income – adjusted
1
1,737
1,415
Selected volumes and ratios
Trading-related revenue (TEB)
3
$
3,498
$
2,782
Average gross lending portfolio (billions of Canadian
dollars)
4
97.7
96.7
Return on common equity – reported
5
9.6
%
7.1
%
Return on common equity – adjusted
1,5
10.4
8.9
Efficiency ratio – reported
72.1
76.5
Efficiency ratio – adjusted
1
70.1
71.3
Average number of full-time equivalent staff
7,169
7,042
1.
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.
2.
Adjusted non-interest expenses exclude the acquisition and integration-related charges for the Cowen acquisition
– 2025: $162 million ($127 million after-tax), 2024: $379 million
($297 million after-tax).
3.
Includes net interest income (loss) (TEB) of $(1,326) million (2024 – $(653) million), and trading income (loss) of $4,824 million
(2024 – $3,435 million). Trading-related revenue (TEB) is a
non-GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” in the “Financial
Results Overview” section and the Glossary of this document for additional
information about this metric.
4
Includes gross loans relating to Wholesale Banking, excluding letters of credit, cash collateral, credit default swaps,
and allowance for credit losses.
5
Capital allocated to the business segment was 11.5% CET1
Capital.
REVIEW OF FINANCIAL PERFORMANCE
Wholesale Banking reported net income for
the year was $1,610 million, an increase of
$492 million, or 44%, compared with the prior
year, primarily reflecting
higher revenues and lower PCL, partially offset
by higher non-interest expenses and higher
income taxes. On an adjusted basis, net
income was $1,737 million, an
increase of $322
million, or 23%.
Revenue for the period was $8,392 million,
an increase of $1,106 million, or 15%,
compared with the prior year, primarily reflecting higher
trading-related
revenue, underwriting fees, including fees associated
with the sale of Schwab shares, and equity
commissions, partially offset by the net change in
fair value of
loan underwriting commitments.
PCL was $290 million, a decrease of $27
million compared with last year. PCL – impaired was $185
million, a decrease of $62 million, reflecting
a lower pace of
credit migration in the current year. PCL – performing was
$105 million, an increase of $35 million.
The current year performing provision reflects
credit impacts
from policy and trade uncertainty.
Reported non-interest expenses for the year
were $6,048 million, an increase of $472
million, or 8%, compared with the prior year, primarily reflecting
higher
variable compensation, front office costs, spend
supporting business growth, including technology, volume-related expenses,
and the impact of foreign exchange
translation,
partially offset by lower acquisition and integration-related
costs, and payments related to the U.S.
record keeping and trading regulatory matters
recorded last year. On an adjusted basis, non-interest expenses
were $5,886 million, an increase of $689
million, or 13%.
Effective November 1, 2025 there will no
longer be any acquisition and integration-related
charges related to the Cowen acquisition
in Wholesale Banking
.
OPERATING ENVIRONMENT AND OUTLOOK
The operating environment has improved in
fiscal 2025 and the outlook for fiscal 2026
is constructive, although risks remain
driven by economic and trade
uncertainty as well as geopolitical and sustainability
considerations. These factors may impact
corporate and investor sentiment and
market conditions which make
Wholesale Banking results difficult to forecast. TD
Securities is confident in its increasingly
diversified and client-focused business
model and believes it is well
positioned for growth.
58
The Bank's expectations regarding acquisition and integration-related charges related to the acquisition of Cowen are based
on forward-looking assumptions that have inherent risk and
uncertainties. Results may vary depending on factors both within and outside the Bank’s control. 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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 35
BUSINESS SEGMENT ANALYSIS
Corporate
Corporate segment is comprised of service and control functions. Certain costs relating to these functions are allocated to
operating business segments. The basis of allocation and methodologies are reviewed periodically to align with
management’s evaluation of the Bank’s business segments.
TABLE 23: CORPORATE
(millions of Canadian dollars)
2025
2024
Net income (loss) – reported
$
6,881
$
(1,130)
Adjustments for items of note
Amortization of acquired intangibles
171
290
Acquisition and integration charges related to the Schwab
transaction
–
109
Share of restructuring and other charges from investment
in Schwab
–
49
Restructuring charges
686
566
Impact from the terminated FHN acquisition-related capital hedging
strategy
205
242
Gain on sale of Schwab shares
(8,975)
(1,022)
Balance sheet restructuring
102
–
Indirect tax matters
–
226
Civil matter provision
–
274
Less: impact of income taxes on items of note
(144)
396
Net income (loss) – adjusted
1
$
(786)
$
(792)
Decomposition of items included in net (loss) –
adjusted
Net corporate expenses
2
$
(1,815)
$
(1,246)
Other
1,029
454
Net income (loss) – adjusted
1
$
(786)
$
(792)
Selected volumes
Average number of full-time equivalent staff
3
18,312
17,995
1
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.
2
For additional information about this metric, refer to the Glossary of this document.
3
Effective the third quarter of 2025, call center operations have been realigned from the Corporate segment
to the businesses, providing end-to-end ownership of customer experience.
The change mainly impacts the Canadian Personal and Commercial Banking segment. Average number
of full-time equivalent staff has been restated for comparative periods.
Corporate segment includes expenses related
to service and control functions, the impact
of treasury and balance sheet management
activities, certain enterprise
level tax items, and intercompany items such
as elimination of TEB and the retailer program
partners’ share of the results of the
U.S. strategic cards portfolio.
Corporate segment’s reported net income for the
year was $6,881 million, compared with
a net loss of $1,130 million last year. The higher net income primarily
reflects the gain on the Schwab sale transaction
and higher revenue from treasury and balance
sheet management activities, partially offset
by higher net
corporate expenses.
Net corporate expenses increased $569
million, primarily reflecting continued investments
in governance and controls. The adjusted
net loss
for the year was $786
million, compared with $792 million last
year.
2024 FINANCIAL RESULTS OVERVIEW
Summary of 2024 Performance
NET INCOME
Reported net income for the year was $8,842
million, a decrease of $1,792 million, or 17%,
compared with last year. The decrease primarily reflects
the impact of
the charges for the global resolution of the investigations
into the Bank’s U.S. BSA/AML program
in U.S. Retail, higher non-interest expenses,
including higher
governance and control investments, higher
insurance service expenses and higher
PCL, partially offset by higher revenues, the prior
year impact in the Corporate
segment of the Stanford litigation settlement,
the lower current period impact of the
terminated FHN acquisition-related capital
hedging strategy, and the current
year gain on sale of Schwab shares in the Corporate
segment. On an adjusted basis, net income
for the year was $14,277 million, a decrease of $718
million, or
5%, compared with last year. The reported ROE for the year
was 8.2%, compared with 9.9% last year. The adjusted
ROE for the year was 13.6%, compared with
14.2% last year.
Reported diluted EPS for the year was $4.72,
a decrease of 14%, compared with $5.52
last year. Adjusted diluted EPS for the year was $7.81,
a decrease of
1%, compared with $7.91 last year.
Reported revenue was $57,223 million, an
increase of $6,533 million, or 13%, compared
with last year. Adjusted revenue was $56,789 million, an
increase of
$4,752 million, or 9%, compared with last
year.
NET INTEREST INCOME
Reported net interest income for the year
was $30,472 million, an increase of $528
million, or 2%, compared with last year. The increase primarily
reflects volume
growth and higher deposit margins in
Canadian Personal and Commercial Banking,
partially offset by lower net interest income in
Wholesale Banking. Adjusted
net interest income was $30,749 million, an
increase of $355 million, or 1%.
NON-INTEREST INCOME
Reported non-interest income for the year
was $26,751 million, an increase of $6,005
million, or 29%, compared with last year, primarily reflecting
higher lending
revenue, trading-related revenue, underwriting
fees, and equity commissions in Wholesale
Banking, the prior period impact of the terminated
FHN acquisition-
related capital hedging strategy and the current
year gain on sale of Schwab shares in the
Corporate segment, higher insurance premiums,
the impact of
reinsurance recoveries for catastrophe
claims, and higher fee-based and transaction
revenue in Wealth Management and Insurance.
Adjusted non-interest income
was $26,040 million, an increase of $4,397
million, or 20%.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 36
PROVISION FOR CREDIT LOSSES
PCL for the year was $4,253 million,
an increase of $1,320 million compared
with last year. PCL – impaired was $3,877 million, an increase
of $1,391 million,
reflecting credit migration in the non-retail and
consumer lending portfolios. PCL – performing
was $376 million, a decrease of $71 million.
The current year
performing provisions largely reflect current
credit conditions including credit migration, and
volume growth. Total PCL as an annualized percentage of credit
volume was 0.46%.
INSURANCE SERVICE EXPENSES
Insurance service expenses for the year
were $6,647 million. This represents an increase
of $1,633 million, or 33%, compared with last
year, of which
$916 million, or 18%, was driven by estimated
losses from catastrophe claims. The remaining
increase reflects less favourable prior years’
claims development
and increased claims severity.
NON-INTEREST EXPENSES
Reported non-interest expenses for the year
were $35,493 million, an increase of $5,638
million, or 19%, compared with last year, primarily reflecting
the impact of
charges for the global resolution of the investigations
into the Bank’s U.S. BSA/AML program in
U.S. Retail, investments in risk and control
infrastructure, higher
employee-related expenses, including TD
Cowen, the FDIC special assessment in
U.S. Retail, and higher technology spend
supporting business growth, partially
offset by the prior year impacts of the Stanford litigation
settlement and the payment related to
termination of the First Horizon transaction in
the Corporate
segment. On an adjusted basis, non-interest
expenses were $29,148 million, an increase
of $2,631 million, or 10%.
PROVISION FOR INCOME TAXES
Reported total income and other taxes decreased
by $42 million, or 0.8%, compared with
last year, reflecting a decrease in income
tax expense of $427 million, or
13.7%, partially offset by an increase in other
taxes of $385 million, or 19%.
Adjusted total income and other taxes
decreased by $102 million from last year, or
1.8%, reflecting a decrease in income tax expense
of $296 million, or 8.1%, and an increase
in other taxes of $194 million, or 9.6%.
The Bank’s reported effective income tax rate was
24.8% for 2024, compared with 24.2%
last year. The year-over-year increase primarily
reflects the tax impact
of the non-deductible charges for the global
resolution of the investigations into the Bank’s
U.S. BSA/AML program and
lower tax-exempt dividend income, partially
offset by the favourable tax impact associated
with the gain on sale of Schwab shares, while
the prior year tax rate was significantly impacted
by adjustments
associated with the implementation of the Canada
Recovery Dividend and the Canadian federal
tax rate increase as well as the terminated
First Horizon
transaction. For a reconciliation of the Bank’s
effective income tax rate with the Canadian
statutory income tax rate, refer to Note 24
of the 2024 Consolidated
Financial Statements.
The Bank reported its investment in Schwab
using the equity method of accounting. Schwab’s
tax expense (2024: $215 million; 2023: $279
million) was not part
of the Bank’s effective tax rate.
BALANCE SHEET
Total assets
were $2,062 billion as at October 31, 2024,
an increase of $107 billion, from October
31, 2023. The impact of foreign exchange
translation from the
depreciation in the Canadian dollar increased
total assets by $3 billion. The increase in
total assets reflects an increase in cash and
interest-bearing deposits with
banks of $71 billion, loans, net of allowances
for loan losses of $53 billion, trading loans,
securities, and other of $24 billion, financial
assets at fair value through
other comprehensive income of $24 billion,
securities purchased under reverse repurchase
agreements of $4 billion and financial
assets designated at fair value
through profit or loss of $1 billion. The increase
was partially offset by a decrease in debt securities
at amortized cost of $37 billion, other assets
of $23 billion,
derivative assets of $9 billion and non-trading
financial assets at fair value through profit or loss
of $1 billion.
Total liabilities
were $1,947 billion as at October 31, 2024,
an increase of $104 billion from October 31,
2023. The impact of foreign exchange translation
from the
depreciation in the Canadian dollar increased
total liabilities by $3 billion. The increase in
total liabilities reflects an increase in deposits
of $71 billion, obligations
related to securities sold under repurchase agreements
of $35 billion, financial liabilities designated
at fair value through profit or loss of $16
billion and
subordinated notes and debentures of $2 billion.
The increase was partially offset by a decrease in
other liabilities of $16 billion, derivative
liabilities of $3 billion
and trading deposits of $1 billion.
Equity
was $115 billion as at October 31, 2024, an increase of $3 billion from
October 31, 2023. The increase reflects gains
in accumulated other comprehensive
income, partially offset by lower retained earnings.
The increase in accumulated other comprehensive
income is primarily driven by gains on
cash flow hedges and
the Bank’s share of the other comprehensive
income from investment in Schwab.
The retained earnings decreased as the net
income for the year is more than
offset by the dividends paid and the premium on the
repurchase of common shares.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 37
GROUP FINANCIAL CONDITION
Balance Sheet Review
TABLE 24: SELECTED CONSOLIDATED
BALANCE SHEET ITEMS
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Assets
Cash and Interest-bearing deposits
with banks
$
116,929
$
176,367
Trading loans, securities, and other
220,136
175,770
Non-trading financial assets at fair value through
profit or loss
7,395
5,869
Derivatives
82,972
78,061
Financial assets designated at fair value through
profit or loss
6,986
6,417
Financial assets at fair value through other
comprehensive income
126,369
93,897
Debt securities at amortized cost, net of allowance
for credit losses
240,439
271,615
Securities purchased under reverse repurchase
agreements
247,078
208,217
Loans, net of allowance for loan losses
953,012
949,549
Investment in Schwab
–
9,024
Other
93,242
86,965
Total assets
$
2,094,558
$
2,061,751
Liabilities
Trading deposits
$
37,882
$
30,412
Derivatives
79,356
68,368
Financial liabilities designated at fair value
through profit or loss
197,635
207,914
Deposits
1,267,104
1,268,680
Obligations related to securities sold
under repurchase agreements
221,150
201,900
Subordinated notes and debentures
10,733
11,473
Other
152,871
157,844
Total liabilities
1,966,731
1,946,591
Total equity
127,827
115,160
Total liabilities and equity
$
2,094,558
$
2,061,751
Total assets
were $2,095 billion as at October 31, 2025,
an increase of $33 billion, from October
31, 2024. The impact of foreign exchange
translation from the
depreciation in the Canadian dollar increased
total assets by $8 billion.
The increase in total assets reflects an increase
in trading loans, securities, and other of
$44 billion, securities purchased under reverse
repurchase agreements of
$39 billion, financial assets at fair value through
other comprehensive income of $32 billion,
other assets of $6 billion, derivative assets of
$5 billion, loans, net of
allowances for loan losses of $3 billion, non-trading
financial assets at fair value through profit
or loss of $2 billion, and financial assets
designated at fair value
through profit or loss of $1 billion. The increase
was partially offset by a decrease in cash and interest-bearing
deposits with banks of $59 billion, debt securities
at
amortized cost of $31 billion, and investment
in Schwab of $9 billion.
Cash and interest-bearing deposits with
banks
decreased $59 billion primarily reflecting
cash management activities and the reduction
of excess liquidity in
relation to the U.S. balance sheet restructuring
activities, partially offset by proceeds from
the sale of Schwab.
Trading loans, securities, and other
increased $44 billion primarily in commodities
held-for-trading, equity securities, and
securitized mortgages.
Non-trading financial assets at fair
value through profit or loss
increased $2 billion primarily reflecting
new investments.
Derivative
assets increased $5 billion primarily reflecting
changes in mark-to-market values of equity
and commodity contracts.
Financial assets designated at fair value
through profit or loss
increased $1 billion primarily reflecting purchases,
partially offset by maturities and sales.
Financial assets at fair value through other
comprehensive income
increased $32 billion primarily reflecting new
investments primarily in government
securities and asset-backed securities, partially
offset by maturities and sales.
Debt securities at amortized cost, net
of allowance for credit losses
decreased $31 billion primarily reflecting
maturities and sales as a result of the U.S.
balance sheet restructuring activities, partially
offset by new investments and the impact of
foreign exchange translation.
Securities purchased under reverse repurchase
agreements
increased $39 billion primarily reflecting
an increase in volume.
Loans, net of allowance for loan losses
increased $3 billion primarily reflecting
volume growth in consumer instalment and
other personal loans and the impact
of foreign exchange translation, partially offset
by the impact of deconsolidation of
U.S. asset-backed commercial paper (ABCP)
conduits, sale of U.S. residential
mortgage loans (correspondent lending loans)
in relation to the U.S. balance sheet restructuring
activities and other volume reductions in
residential mortgages.
Investment in Schwab
decreased by $9 billion, which reflects
the sale of the Bank’s entire remaining equity
investment in Schwab on February 12, 2025.
Other
assets
increased $6 billion primarily reflecting increase
in amounts receivable from brokers,
dealers and clients due to higher volumes
of pending trades.
Total liabilities
were $1,967 billion as at October 31, 2025,
an increase of $20 billion from October
31, 2024. The impact of foreign exchange
translation from the
depreciation in the Canadian dollar increased
total liabilities by $8 billion.
The increase in total liabilities reflects an
increase in obligations related to securities
sold under repurchase agreements of $19 billion,
derivative liabilities of
$11 billion, and trading deposits of $7 billion. The increase was partially
offset by a decrease in financial liabilities designated
at fair value through profit or loss of
$10 billion, other liabilities of $5 billion, deposits
of $1 billion and subordinated notes and debentures
of $1 billion.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 38
Trading deposits
increased $7 billion primarily reflecting
new issuances, partially offset by maturities.
Derivative
liabilities
increased $11 billion primarily reflecting changes in mark-to-market
values of equity and commodity contracts.
Financial liabilities designated at fair value
through profit or loss
decreased $10 billion primarily reflecting
maturities, partially offset by new issuances and
the
impact of foreign exchange translation.
Deposits
decreased $1 billion primarily reflecting lower
volume in bank deposits, including higher
payments on advances to Federal Home
Loan Bank (FHLB),
partially offset by higher volumes in business and
government and personal deposits, and
the impact of foreign exchange translation.
Obligations related to securities sold
under repurchase agreements
increased $19 billion primarily reflecting
an increase in volume and the impact
of foreign
exchange translation.
Subordinated notes and debentures
decreased $1 billion reflecting redemptions,
partially offset by new issuances.
Other
liabilities decreased $5 billion primarily
reflecting the impact of deconsolidation
of U.S. ABCP conduits, decrease in provisions
for investigations related to
the Bank’s U.S. BSA/AML program due
to payments, partially offset by increase in volume
in securitization liabilities and obligations
related to securities sold short.
Equity
was $128 billion as at October 31, 2025, an increase
of $13 billion from October 31, 2024.
The increase primarily reflects an increase in retained
earnings
and gains in accumulated other comprehensive
income. The retained earnings increased
as a result of higher net income primarily
driven by the sale of investment
in Schwab, partially offset by the dividends paid and
the premium on the repurchase of common
shares. The increase in accumulated other
comprehensive
income is primarily driven by gains on
cash flow hedges and the Bank’s share of the other
comprehensive income from investment in Schwab.
GROUP FINANCIAL CONDITION
Credit Portfolio Quality
AT A GLANCE OVERVIEW
●
Loans, net of allowance for loan losses
were $953 billion, an increase of $4
billion compared with last year.
●
Impaired loans net of Stage 3 allowances
were $3,832 million, an increase of $425
million compared with last year.
●
Provision for credit losses was $4,506
million, compared with $4,253 million
last year.
●
Total allowance for credit losses including off-balance sheet
positions increased by $604 million to $9,745
million.
LOAN PORTFOLIO
The Bank increased its loans net of allowance
for loan losses by $4 billion compared to
the prior year, primarily reflecting volume growth in the real
estate secured
lending and Canadian commercial portfolios,
partially offset by lower loans in the U.S. Retail
segment reflecting the impact of balance sheet
restructuring activities
and foreign exchange.
While the majority of the Bank’s credit risk exposure
is related to loans, the Bank also engaged
in activities that have off-balance sheet credit risk.
These include
credit instruments and derivative financial instruments,
as explained in Note 29 of the 2025
Consolidated Financial Statements.
CONCENTRATION OF CREDIT RISK
The Bank’s loan portfolio continued to be concentrated
in Canadian and U.S. consumer lending,
comprised of residential mortgages, consumer
instalment and
other personal loans, and credit card loans, representing
64% of total loans net of Stage 3 allowances,
compared with 63% in the prior year. During the year, these
portfolios increased by $15 billion, or 3%, and
totaled $615 billion at year end. Residential
mortgages represented 33% of total loans
net of Stage 3 allowances in
2025, compared with 35% in the prior year. Consumer instalment
and other personal loans, and credit
card loans were 31% of total loans net of Stage
3
allowances in 2025, compared with 28%
in the prior year.
The Bank’s business and government loan portfolio
was 36% of total loans net of Stage 3 allowances,
compared with 37% in the prior year. The largest
business and government sector concentrations
in Canada were the Real estate and
Financial sectors, which comprised 6% and
2% of net loans, respectively.
Real estate and Financial sectors were
the largest U.S. sector concentrations in
2025, representing 4% and 3% of net loans,
respectively.
Geographically, the credit portfolio remained concentrated in
Canada. In 2025, the percentage of loans
net of Stage 3 allowances held in Canada
was 69%,
compared with 66% in the prior year. The largest Canadian
regional exposure was in Ontario, which
represented 41% of total loans net of Stage
3 allowances for
2025, compared with 39% in the prior year.
The remaining credit portfolio was predominantly
in the U.S., which represented 30% of loans
net of Stage 3 allowances, compared
with 33% in the prior year.
Exposures to other geographic regions were
relatively small. The largest U.S. regional
exposures were in New York and New England which represented 6%
and
4% of total loans net of Stage 3 allowances,
respectively, compared with 6% and 5%, respectively, in the prior year.
Under IFRS 9,
Financial Instruments
(IFRS 9), the Bank calculates allowances
for expected credit losses (ECLs) on debt
securities at amortized cost (DSAC)
and debt securities at fair value through
other comprehensive income (FVOCI). The
Bank has $363 billion in such debt securities
of which $363 billion are
performing securities (Stage 1 and 2) and none
are impaired.
The allowance for credit losses on DSAC and
debt securities at FVOCI was $2 million
and $2 million,
respectively.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 39
TABLE 25: LOANS, NET OF STAGE 3 ALLOWANCE FOR LOAN
LOSSES BY INDUSTRY SECTOR
1,2
(millions of Canadian dollars, except as noted)
As at
Percentage of total
October 31
October 31
October 31
October 31
2025
2024
2025
2024
Stage 3
allowances for
Gross
loan losses
Net
Net
loans
impaired
loans
loans
Canada
Residential mortgages
$
267,469
$
45
$
267,424
$
273,041
28.0
%
28.6
%
Consumer instalment and other personal
HELOC
3
147,927
37
147,890
123,005
15.6
12.9
Indirect Auto
32,094
100
31,994
29,739
3.3
3.1
Other
21,032
51
20,981
19,837
2.2
2.1
Credit card
21,867
106
21,761
20,420
2.0
2.0
Total personal
490,389
339
490,050
466,042
51.1
48.7
Real estate
Residential
28,802
1
28,801
27,867
3.0
2.9
Non-residential
27,781
11
27,770
25,937
2.9
2.7
Total real estate
56,583
12
56,571
53,804
5.9
5.6
Agriculture
12,770
6
12,764
11,211
1.3
1.2
Automotive
11,307
46
11,261
10,305
1.2
1.1
Financial
23,234
6
23,228
20,197
2.4
2.1
Food, beverage, and tobacco
3,429
13
3,416
3,291
0.4
0.3
Forestry
817
22
795
850
0.1
0.1
Government, public sector entities, and education
4,460
7
4,453
3,569
0.5
0.4
Health and social services
10,606
43
10,563
9,864
1.1
1.0
Industrial construction and trade contractors
6,120
27
6,093
6,164
0.6
0.6
Metals and mining
2,485
18
2,467
2,921
0.3
0.3
Oil and gas
2,605
4
2,601
2,254
0.3
0.2
Power and utilities
4,959
–
4,959
8,526
0.5
0.9
Professional and other services
5,649
30
5,619
5,690
0.6
0.6
Retail sector
5,225
61
5,164
4,954
0.5
0.5
Sundry manufacturing and wholesale
4,509
130
4,379
4,611
0.5
0.5
Telecommunications, cable, and media
1,558
6
1,552
5,319
0.2
0.6
Transportation
4,180
21
4,159
4,074
0.4
0.4
Other
6,962
17
6,945
5,799
0.7
0.6
Total business and government
167,458
469
166,989
163,403
17.5
17.0
Total Canada
657,847
808
657,039
629,445
68.6
65.7
United States
Residential mortgages
47,594
35
47,559
58,548
5.0
6.1
Consumer instalment and other personal
HELOC
3
12,481
22
12,459
11,503
1.3
1.3
Indirect Auto
44,225
58
44,167
42,923
4.6
4.5
Other
1,231
6
1,225
1,094
0.1
0.1
Credit card
19,789
354
19,435
19,835
2.0
2.1
Total personal
125,320
475
124,845
133,903
13.0
14.1
Real estate
Residential
14,627
10
14,617
13,717
1.5
1.4
Non-residential
27,843
33
27,810
28,127
2.8
2.9
Total real estate
42,470
43
42,427
41,844
4.3
4.3
Agriculture
976
–
976
1,182
0.1
0.1
Automotive
3,593
11
3,582
13,119
0.4
1.4
Financial
27,414
–
27,414
25,418
2.9
2.7
Food, beverage, and tobacco
4,561
–
4,561
4,583
0.5
0.5
Forestry
661
16
645
573
0.1
0.1
Government, public sector entities, and education
18,050
1
18,049
17,390
1.8
1.8
Health and social services
14,574
5
14,569
15,246
1.5
1.6
Industrial construction and trade contractors
3,016
9
3,007
2,551
0.3
0.3
Metals and mining
2,072
1
2,071
1,906
0.2
0.2
Oil and gas
767
5
762
1,581
0.1
0.2
Power and utilities
7,007
70
6,937
6,355
0.7
0.7
Professional and other services
16,708
33
16,675
18,410
1.7
1.9
Retail sector
6,569
8
6,561
6,191
0.7
0.6
Sundry manufacturing and wholesale
8,499
4
8,495
9,690
0.9
1.0
Telecommunications, cable, and media
4,712
67
4,645
7,703
0.5
0.8
Transportation
3,372
21
3,351
5,045
0.3
0.5
Other
2,048
11
2,037
4,098
0.2
0.4
Total business and government
167,069
305
166,764
182,885
17.2
19.1
Total United States
292,389
780
291,609
316,788
30.2
33.2
International
Personal
49
–
49
25
–
–
Business and government
11,704
–
11,704
10,073
1.2
1.1
Total international
11,753
–
11,753
10,098
1.2
1.1
Total
$
961,989
$
1,588
$
960,401
$
956,331
100.0
%
100.0
%
Stage 1 and Stage 2 allowance for loan losses – performing
Personal, business and government
7,101
6,552
Total, net of allowance
$
953,300
$
949,779
Percentage change over previous year – loans, net of Stage 3 allowance for loan losses (impaired)
0.4
%
3.9
%
Percentage change over previous year – loans, net of allowance
0.4
3.9
1
Primarily based on the geographic location of the customer’s address.
2
Includes loans that are measured at FVOCI.
3
Home equity line of credit.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 40
TABLE 26: LOANS, NET OF STAGE 3 ALLOWANCE FOR LOAN
LOSSES BY GEOGRAPHY
1,2
(millions of Canadian dollars, except
as noted)
As at
Percentage of total
October 31
October 31
October 31
October 31
2025
2024
2025
2024
Stage 3
allowances for
loan losses
Gross loans
impaired
Net loans
Net loans
Canada
Atlantic provinces
$
15,236
$
15
$
15,221
$
14,482
1.6
%
1.5
%
British Columbia
3
107,010
61
106,949
103,044
11.1
10.8
Ontario
3
396,616
598
396,018
374,859
41.3
39.2
Prairies
3
85,597
73
85,524
84,681
8.9
8.8
Québec
53,388
61
53,327
52,379
5.6
5.5
Total Canada
657,847
808
657,039
629,445
68.5
65.8
United States
Carolinas (North and South)
17,460
27
17,433
17,922
1.8
1.9
Florida
29,127
56
29,071
27,792
3.0
2.9
New England
4
41,491
56
41,435
49,054
4.3
5.1
New Jersey
26,396
56
26,340
27,763
2.7
2.9
New York
59,260
154
59,106
59,327
6.2
6.2
Pennsylvania
16,667
22
16,645
17,495
1.7
1.8
Other
5
101,988
409
101,579
117,435
10.6
12.3
Total United States
292,389
780
291,609
316,788
30.3
33.1
International
Europe
6,070
–
6,070
5,441
0.6
0.6
Other
5,683
–
5,683
4,657
0.6
0.5
Total international
11,753
–
11,753
10,098
1.2
1.1
Total excluding other loans
961,989
1,588
960,401
956,331
100.0
100.0
Total
$
961,989
$
1,588
$
960,401
$
956,331
100.0
%
100.0
%
Stage 1 and Stage 2 allowances
7,101
6,552
Total, net of allowance
$
953,300
$
949,779
Percentage change over previous year – loans,
net of Stage 3 allowances for loan losses (impaired)
2025
2024
Canada
4.4
%
4.4
%
United States
(7.9)
3.3
International
16.4
0.5
Other loans
–
(100.0)
Total
0.4
%
3.9
%
1
Primarily based on the geographic location of the customer’s address.
2
Includes loans that are measured at FVOCI.
3
The territories are included as follows: Yukon is included in British Columbia; Nunavut
is included in Ontario; and Northwest Territories
is included in the Prairies region.
4
The states included in New England are as follows: Connecticut, Maine, Massachusetts, New Hampshire, and Vermont.
5
Includes loans attributable to other states/regions including those outside TD’s core U.S. geographic
footprint.
REAL ESTATE SECURED LENDING
Retail real estate secured lending includes
mortgages and lines of credit to North American
consumers to satisfy financing needs including
home purchases and
refinancing. While the Bank retains first lien
on the majority of properties held as security, there is a small
portion of loans with second liens, but
most of these are
behind a TD mortgage or home equity line of
credit that is in first position. In Canada,
credit policies are designed so that the
combined exposure of all uninsured
facilities on one property does not exceed 80%
of the collateral value at origination. Lending
at a higher loan-to-value ratio is permitted
by legislation but requires
default insurance. This insurance is contractual
coverage for the life of eligible facilities and
protects the Bank’s real estate secured lending
portfolio against
potential losses caused by borrowers’ default.
The Bank may also purchase default insurance
on lower loan-to-value ratio loans. The insurance
is provided by
either government-backed entities or approved
private mortgage insurers. In the
U.S., for residential mortgage originations,
mortgage insurance is usually obtained
from either government-backed entities
or approved private mortgage insurers
when the loan-to-value exceeds 80% of
the collateral value at origination.
The Bank regularly performs stress tests
on its real estate lending portfolio as part
of its overall stress testing program. This is
done with a view to determine the
extent to which the portfolio would be vulnerable
to a severe downturn in economic conditions.
The effect of severe changes in house prices,
interest rates, and
unemployment levels are among the factors
considered when assessing the impact
on credit losses and the Bank’s overall profitability. A variety of portfolio
segments, including dwelling type and geographical
regions, are examined during the exercise
to determine whether specific vulnerabilities exist.
TABLE 27: CANADIAN REAL ESTATE
SECURED LENDING
1,2
(millions of Canadian dollars)
As at
Amortizing
Non-amortizing
Total
Residential
Home equity
Total amortizing real
Home equity
Mortgages
lines of credit
estate secured lending
lines of credit
October 31, 2025
Total
$
267,469
$
110,829
$
378,298
$
37,098
$
415,396
October 31, 2024
Total
$
273,069
$
89,369
$
362,438
$
33,667
$
396,105
1
Excludes loans classified as trading as the Bank intends to sell the loans immediately or in the near term, and loans
designated at FVTPL for which no allowance is recorded.
2
Amortizing includes loans where the fixed contractual payments are no longer sufficient to cover the
interest based on the rates in effect at October 31, 2025
and October 31, 2024,
respectively.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 41
TABLE 28: REAL ESTATE SECURED
LENDING
1,2
(millions of Canadian dollars, except as noted)
As at
Residential mortgages
Home equity lines of credit
Total
Insured
3
Uninsured
Insured
3
Uninsured
Insured
3
Uninsured
October 31, 2025
Canada
Atlantic provinces
$
2,377
0.9
%
$
5,038
1.9
%
$
139
0.1
%
$
2,833
1.9
%
$
2,516
0.6
%
$
7,871
1.9
%
British Columbia
4
7,849
2.9
47,101
17.6
708
0.5
28,551
19.3
8,557
2.1
75,652
18.2
Ontario
4
21,505
8.1
124,702
46.6
2,412
1.6
80,826
54.7
23,917
5.7
205,528
49.5
Prairies
4
16,350
6.1
22,746
8.5
1,320
0.9
15,738
10.6
17,670
4.3
38,484
9.3
Québec
5,933
2.2
13,868
5.2
433
0.3
14,967
10.1
6,366
1.5
28,835
6.9
Total Canada
54,014
20.2
%
213,455
79.8
%
5,012
3.4
%
142,915
96.6
%
59,026
14.2
%
356,370
85.8
%
United States
1,544
46,050
–
12,481
1,544
58,531
Total
$
55,558
$
259,505
$
5,012
$
155,396
$
60,570
$
414,901
October 31, 2024
Canada
Atlantic provinces
$
2,445
0.9
%
$
4,753
1.7
%
$
158
0.1
%
$
2,207
1.8
%
$
2,603
0.7
%
$
6,960
1.8
%
British Columbia
4
8,311
3.0
48,362
17.7
804
0.7
22,840
18.6
9,115
2.3
71,202
18.0
Ontario
4
21,943
8.1
126,294
46.3
2,734
2.2
67,567
54.9
24,677
6.2
193,861
48.9
Prairies
4
17,685
6.5
22,120
8.1
1,499
1.2
12,459
10.1
19,184
4.8
34,579
8.7
Québec
6,616
2.4
14,540
5.3
509
0.4
12,259
10.0
7,125
1.8
26,799
6.8
Total Canada
57,000
20.9
%
216,069
79.1
%
5,704
4.6
%
117,332
95.4
%
62,704
15.8
%
333,401
84.2
%
United States
1,517
57,063
–
11,525
1,517
68,588
Total
$
58,517
$
273,132
$
5,704
$
128,857
$
64,221
$
401,989
1
Geographic location is based on the address of the property mortgaged.
2
Excludes loans classified as trading as the Bank intends to sell the loans immediately or in the near term, and loans
designated at FVTPL for which no allowance is recorded.
3
Default insurance is contractual coverage for the life of eligible facilities whereby the Bank’s exposure
to real estate secured lending, all or in part, is protected against potential losses
caused by borrower default. It is provided by either government-backed entities or other approved private mortgage
insurers.
4
The territories are included as follows: Yukon is included in British Columbia; Nunavut
is included in Ontario; and the Northwest Territories
is included in the Prairies region.
The following table provides a summary
of the period over which the Bank’s residential
mortgages would be fully repaid based on the amount
of the most recent
payment received. All figures are calculated
based on current customer payment amounts,
including voluntary payments larger
than the original contractual
amounts and/or other voluntary prepayments.
The most recent customer payment amount
may exceed the original contractual amount
due.
Balances with a remaining amortization longer
than 30 years primarily reflect Canadian
variable rate mortgages where prior interest rate
increases relative to
current customer payment levels have resulted
in a longer current amortization period.
At renewal, the amortization period for
Canadian mortgages reverts to the
remaining contractual amortization, which
may require increased payments.
TABLE 29: RESIDENTIAL MORTGAGES
BY REMAINING AMORTIZATION
1,2,3
As at
<=5
>5 – 10
>10 – 15
>15 – 20
>20 – 25
>25 – 30
>30 – 35
>35
years
years
years
years
years
years
years
years
Total
October 31, 2025
Canada
0.8
%
2.9
%
8.3
%
20.0
%
31.9
%
30.2
%
1.2
%
4.7
%
100.0
%
United States
2.6
1.6
3.5
9.0
24.1
57.8
0.8
0.6
100.0
Total
1.1
%
2.7
%
7.5
%
18.3
%
30.8
%
34.5
%
1.1
%
4.0
%
100.0
%
October 31, 2024
Canada
0.8
%
2.7
%
6.4
%
16.8
%
33.3
%
28.9
%
2.4
%
8.7
%
100.0
%
United States
2.3
1.3
3.4
7.6
14.2
70.2
0.5
0.5
100.0
Total
1.0
%
2.5
%
5.9
%
15.1
%
29.9
%
36.2
%
2.1
%
7.3
%
100.0
%
1
Excludes loans classified as trading as the Bank intends to sell the loans immediately or in the near term, and loans
designated at FVTPL for which no allowance is recorded.
2
Percentage based on outstanding balance.
3
A de minimis portion of the mortgage portfolio in Canada (October 31, 2024: $15.6 billion or 6%) relates to mortgages
in which the fixed contractual payments are no longer sufficient to
cover the interest based on the rates in effect at October 31, 2025 and October 31, 2024, respectively.
TABLE 30: UNINSURED AVERAGE
LOAN-TO-VALUE – Newly Originated and Newly
Acquired
1,2,3
For the 12 months ended
October 31, 2025
October 31, 2024
Residential
Home equity
Residential
Home equity
mortgages
lines of credit
4,5
Total
mortgages
lines of credit
4,5
Total
Canada
Atlantic provinces
69
%
69
%
69
%
69
%
67
%
68
%
British Columbia
6
66
65
66
66
61
64
Ontario
6
68
66
67
67
61
64
Prairies
6
73
72
72
73
69
71
Québec
69
70
70
69
68
69
Total Canada
68
67
68
68
63
66
United States
70
59
66
73
61
68
Total
69
%
67
%
67
%
69
%
63
%
66
%
1
Geographic location is based on the address of the property mortgaged.
2
Excludes loans classified as trading as the Bank intends to sell the loans immediately or in the near term, and loans
designated at FVTPL for which no allowance is recorded.
3
Based on house price at origination.
4
HELOC loan-to-value includes first position collateral mortgage if applicable.
5
HELOC fixed rate advantage option is included in loan-to-value calculation.
6
The territories are included as follows: Yukon is included in British Columbia; Nunavut
is included in Ontario; and the Northwest Territories
is included in the Prairies region.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 42
SOVEREIGN RISK
The following table provides a summary
of the Bank’s direct credit exposures outside
of Canada and the U.S. (Europe excludes
United Kingdom).
TABLE 31: TOTAL NET EXPOSURE BY
REGION AND COUNTERPARTY
(millions of Canadian dollars)
As at
Loans and commitments
1
Derivatives, repos, and securities lending
2
Trading and investment portfolio
3
Total
Corporate
Sovereign
Financial
Total
Corporate
Sovereign
Financial
Total
Corporate
Sovereign
Financial
Total
Exposure
4
October 31, 2025
Region
Europe
$
8,895
$
8
$
5,019
$
13,922
$
5,331
$
1,359
$
9,647
$
16,337
$
1,116
$
25,876
$
1,982
$
28,974
$
59,233
United Kingdom
6,731
2,577
2,483
11,791
3,199
1,537
12,237
16,973
270
176
661
1,107
29,871
Asia
182
23
2,527
2,732
241
538
3,795
4,574
138
8,346
1,829
10,313
17,619
Other
5
227
–
690
917
705
410
2,353
3,468
110
216
1,967
2,293
6,678
Total
$
16,035
$
2,608
$
10,719
$
29,362
$
9,476
$
3,844
$
28,032
$
41,352
$
1,634
$
34,614
$
6,439
$
42,687
$
113,401
October 31, 2024
Region
Europe
$
8,490
$
8
$
5,050
$
13,548
$
4,847
$
2,117
$
8,145
$
15,109
$
1,157
$
24,124
$
2,660
$
27,941
$
56,598
United Kingdom
8,462
3,124
2,661
14,247
3,490
1,172
13,536
18,198
866
1,691
1,104
3,661
36,106
Asia
241
30
2,412
2,683
519
533
2,739
3,791
290
10,486
893
11,669
18,143
Other
5
209
–
598
807
370
416
2,481
3,267
218
1,012
3,187
4,417
8,491
Total
$
17,402
$
3,162
$
10,721
$
31,285
$
9,226
$
4,238
$
26,901
$
40,365
$
2,531
$
37,313
$
7,844
$
47,688
$
119,338
1
Exposures, including interest-bearing deposits with banks, are presented net of impairment charges where applicable.
2
Exposures are calculated on a fair value basis and presented net of collateral. Derivatives are presented as net
exposures where there is an International Swaps and Derivatives
Association master netting agreement.
3
Trading exposures are net of eligible short positions.
4
In addition to the exposures identified above, the Bank also has $30.3 billion (October 31, 2024 – $35.5 billion)
of exposure to supranational entities.
5
Other regional exposure largely attributable to Australia.
IMPAIRED LOANS
A loan is considered impaired and migrates
to Stage 3 when it is 90 days or more past due
for retail exposures, rated borrower
risk rating (BRR) 9 for non-retail
exposures, or when there is objective evidence
that there has been a deterioration of credit
quality to the extent that the Bank no longer has
reasonable assurance
as to the timely collection of the full amount
of principal and interest. Gross impaired loans
increased $471 million, or 10%, compared
with the prior year.
In Canada, impaired loans net of Stage 3 allowances
increased by $38 million, or 3% in 2025.
Residential mortgages, consumer instalment
and other personal
loans, and credit cards, had net impaired
loans of $649 million, an increase of $137
million, or 27%, compared with the prior year, reflecting credit
migration.
Business and government impaired loans net
of Stage 3 allowances were $523 million,
a decrease of $99 million, compared with $622
million in the prior year,
reflecting a decrease in the Canadian Commercial
lending portfolio as resolutions outpaced
new formations.
In the U.S., impaired loans net of Stage 3
allowances increased by $409 million, or
18% in 2025. Residential mortgages,
consumer instalment and other
personal loans, and credit cards, had net
impaired loans of $1,157 million, an increase
of $39 million, or 3%, compared
with the prior year, reflecting credit
migration. Business and government net impaired
loans were $1,500 million, an increase
of $370 million, compared with $1,130
million in the prior year, reflecting
an increase in the Wholesale Banking and
U.S. Commercial lending portfolios as new
formations outpaced resolutions, and
the impact of foreign exchange.
Geographically, 31% of total net impaired loans were located in
Canada and 69% in the U.S. The largest
regional concentration of net impaired loans in
Canada
was in Ontario, representing 22% of total
net impaired loans, compared with 24%
in the prior year. The largest regional concentration of net
impaired loans in the
U.S. was in New York, representing 30% of total net impaired loans,
compared with 23% in the prior year.
TABLE 32: CHANGES IN GROSS IMPAIRED
LOANS
1
(millions of Canadian dollars)
2025
2024
Personal, Business and Government Loans
Impaired loans as at beginning of period
$
4,949
$
3,299
Classified as impaired during the period
9,073
8,655
Transferred to performing during the period
(1,438)
(1,094)
Net repayments
(2,388)
(1,801)
Disposals of loans
(65)
(158)
Amounts written off
(4,725)
(3,984)
Exchange and other movements
14
32
Impaired loans as at end of year
$
5,420
$
4,949
1
Includes loans that are measured at FVOCI.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 43
TABLE 33: IMPAIRED LOANS NET OF
STAGE 3 ALLOWANCE FOR
LOAN LOSSES BY INDUSTRY
SECTOR
1,2,3
(millions of Canadian dollars, except as noted)
As at
Percentage of total
Oct. 31
Oct. 31
Oct. 31
Oct. 31
2025
2024
2025
2024
Stage 3
Gross
allowances for
Net
Net
impaired
loan losses
impaired
impaired
loans
impaired
loans
loans
Canada
Residential mortgages
$
410
$
45
$
365
$
247
9.5
%
7.2
%
Consumer instalment and other
personal
HELOC
206
37
169
154
4.4
4.5
Indirect auto
128
100
28
34
0.8
1.0
Other
74
51
23
24
0.6
0.7
Credit card
4
170
106
64
53
1.7
1.6
Total personal
988
339
649
512
17.0
15.0
Real estate
Residential
5
1
4
46
0.1
1.4
Non-residential
60
11
49
75
1.3
2.2
Total real estate
65
12
53
121
1.4
3.6
Agriculture
31
6
25
49
0.7
1.5
Automotive
128
46
82
76
2.1
2.2
Financial
7
6
1
11
–
0.3
Food, beverage, and tobacco
20
13
7
30
0.2
0.9
Forestry
39
22
17
7
0.4
0.2
Government, public sector entities,
and education
11
7
4
4
0.1
0.1
Health and social services
83
43
40
80
1.0
2.4
Industrial construction and trade
contractors
56
27
29
27
0.8
0.8
Metals and mining
58
18
40
8
1.0
0.2
Oil and gas
4
4
–
–
–
–
Power and utilities
–
–
–
–
–
–
Professional and other services
58
30
28
31
0.8
0.9
Retail sector
124
61
63
78
1.6
2.3
Sundry manufacturing and wholesale
206
130
76
63
2.0
1.8
Telecommunications, cable, and
media
7
6
1
4
–
0.1
Transportation
49
21
28
20
0.7
0.6
Other
46
17
29
13
0.8
0.4
Total business and government
992
469
523
622
13.6
18.3
Total Canada
1,980
808
1,172
1,134
30.6
33.3
United States
Residential mortgages
568
35
533
458
13.9
13.5
Consumer instalment and other
personal
HELOC
302
22
280
260
7.3
7.6
Indirect auto
349
58
291
251
7.6
7.4
Other
15
6
9
5
0.2
0.1
Credit card
5
398
354
44
144
1.1
4.2
Total personal
1,632
475
1,157
1,118
30.1
32.8
Real estate
Residential
178
10
168
191
4.4
5.6
Non-residential
574
33
541
384
14.1
11.3
Total real estate
752
43
709
575
18.5
16.9
Agriculture
2
–
2
2
0.1
0.1
Automotive
18
11
7
4
0.2
0.1
Financial
1
–
1
1
–
–
Food, beverage, and tobacco
10
–
10
10
0.3
0.3
Forestry
28
16
12
–
0.3
–
Government, public sector entities,
and education
50
1
49
47
1.3
1.4
Health and social services
47
5
42
49
1.1
1.4
Industrial construction and trade
contractors
40
9
31
34
0.8
1.0
Metals and mining
6
1
5
2
0.1
0.1
Oil and gas
5
5
–
–
–
–
Power and utilities
98
70
28
31
0.7
0.9
Professional and other services
191
33
158
141
4.1
4.1
Retail sector
65
8
57
46
1.5
1.3
Sundry manufacturing and wholesale
50
4
46
42
1.2
1.2
Telecommunications, cable, and
media
350
67
283
105
7.4
3.1
Transportation
64
21
43
12
1.1
0.4
Other
28
11
17
29
0.5
0.9
Total business and government
1,805
305
1,500
1,130
39.2
33.2
Total United States
3,437
780
2,657
2,248
69.3
66.0
International
3
–
3
25
0.1
0.7
Total
$
5,420
$
1,588
$
3,832
$
3,407
100.0
%
100.0
%
Net impaired loans as a % of common equity
3.30
%
3.27
%
1
Primarily based on the geographic location of the customer’s address.
2
Includes loans that are measured at FVOCI.
3
Excludes, debt securities classified as loans under IAS 39
, Financial Instruments: Recognition and Measurement
and DSAC and debt securities at FVOCI under IFRS 9.
4
Credit cards are considered impaired when they are 90 days past due and written off at 180 days past due.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 44
TABLE 34: IMPAIRED LOANS NET OF STAGE 3
ALLOWANCE FOR LOAN LOSSES BY GEOGRAPHY
1,2,3
(millions of Canadian dollars, except as noted)
As at
Percentage of total
October 31
October 31
October 31
October 31
2025
2024
2025
2024
Stage 3
Gross
allowances for
Net
Net
impaired
loan losses
impaired
impaired
loans
impaired
loans
loans
Canada
Atlantic provinces
$
38
$
15
$
23
$
21
0.6
%
0.6
%
British Columbia
4
193
61
132
130
3.5
3.8
Ontario
4
1,421
598
823
801
21.5
23.5
Prairies
4
186
73
113
136
2.9
4.0
Québec
142
61
81
46
2.1
1.4
Total Canada
1,980
808
1,172
1,134
30.6
33.3
United States
Carolinas (North and South)
131
27
104
101
2.7
3.0
Florida
271
56
215
242
5.6
7.1
New England
5
329
56
273
232
7.1
6.8
New Jersey
320
56
264
260
6.9
7.6
New York
1,285
154
1,131
770
29.5
22.6
Pennsylvania
133
22
111
123
2.9
3.6
Other
968
409
559
520
14.6
15.3
Total United States
3,437
780
2,657
2,248
69.3
66.0
Total International
3
–
3
25
0.1
0.7
Total
$
5,420
$
1,588
$
3,832
$
3,407
100.0
%
100.0
%
Net impaired loans as a % of net loans
0.40
%
0.36
%
1
Primarily based on the geographic location of the customer’s address.
2
Includes loans that are measured at FVOCI.
3
Credit cards are considered impaired when they are 90 days past due and written off at 180 days past
due.
4
The territories are included as follows: Yukon is included in British Columbia; Nunavut
is included in Ontario; and the Northwest Territories
is included in the Prairies region.
5
The states included in New England are as follows: Connecticut, Maine, Massachusetts, New Hampshire, and Vermont.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses including
off-balance sheet positions of $9,745 million as
at October 31, 2025, was comprised of Stage
3 allowance for impaired
loans of $1,604 million, Stage 2 allowance of
$4,928 million, and Stage 1 allowance
of $3,209 million, and allowance for debt
securities of $4 million. The Stage 1
and 2 allowances are for performing loans and
off-balance sheet instruments.
Stage 3 allowances (impaired)
The Stage 3 allowance for loan losses increased
$51 million, or 3%, compared with last
year, largely reflected in the consumer lending portfolios, and
the impact of
foreign exchange.
Stage 1 and Stage 2 allowances (performing)
As at October 31, 2025, the performing allowance
was $8,137 million, up from $7,584 million as at
October 31, 2024. The increase this year largely
reflected credit
impacts from policy and trade uncertainty,
credit conditions, including credit migration,
and the impact of foreign exchange. The performing
allowance for debt
securities is flat compared with last year.
Forward-looking information, including
macroeconomic variables deemed to be
predictive of ECLs based on the Bank’s experience,
is used to determine ECL
scenarios and associated probability weights
to determine the probability-weighted ECLs.
Each quarter, all base forecast macroeconomic variables
are refreshed,
resulting in new upside and downside
macroeconomic scenarios. The probability
weightings assigned to each ECL scenario
are also reviewed each quarter and
updated as required, as part of the Bank’s ECL governance
process. As a result of periodic reviews
and quarterly updates, the allowance
for credit losses may be
revised to reflect updates in loss estimates
based on the Bank’s recent loss experience and
its forward-looking views. The Bank
periodically reviews the
methodology and has performed certain additional
quantitative and qualitative portfolio and
loan level assessments of significant increase
in credit risk. Refer to
Note 3 of the Bank’s 2025 Consolidated Financial
Statements for further details on forward-looking
information.
The probability-weighted allowance for
credit losses reflects the Bank’s forward-looking
views. To the extent that certain anticipated effects cannot be fully
incorporated into quantitative models, management
continues to exercise expert credit judgment
in determining the amount of ECLs, including
for risks related to
elevated uncertainty associated with policy and
trade, and such adjustments will be updated
as appropriate in future periods as additional
information becomes
available. Refer to Note 3 of the Bank’s 2025
Consolidated Financial Statements for additional
detail.
PROVISION FOR CREDIT
LOSSES
The PCL is the amount charged to income
to bring the total allowance for credit
losses, including both Stage 1 and 2 allowances
(performing) and Stage 3
allowance (impaired), to a level that management
considers adequate to absorb expected and
incurred credit-related losses in
the Bank’s loan portfolio. Provisions
are reduced by any recoveries in the year.
In Canada, PCL – impaired related to residential
mortgages, consumer instalment and other personal
loans, and credit card loans was $1,353
million, an
increase of $195 million, or 17%, compared
to 2024 reflecting credit migration. PCL –
impaired related to business and government
loans was $344 million, a
decrease of $101 million, compared to $445
million in the prior year, reflecting lower impairments.
In the U.S., PCL – impaired related to residential
mortgages, consumer instalment and other personal
loans, and credit card loans was $1,698
million, a
decrease of $14 million, or 1%, compared to
2024. PCL – impaired related to business
and government loans was $597 million,
an increase of $140 million,
compared to $457 million in the prior year, largely reflecting
credit migration and the impact of foreign exchange.
Geographically, the largest regional concentration of PCL – impaired
in Canada was in Ontario, consistent
with the prior year. The largest regional
concentration of PCL – impaired in the U.S.
was in New York, consistent with the prior year.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 45
The following table provides a summary
of provisions charged to the Consolidated
Statement of Income.
TABLE 35: PROVISION FOR CREDIT LOSSES
1
(millions of Canadian dollars)
2025
2024
Provision for credit losses – Stage 3 (impaired)
Canadian Personal and Commercial
Banking
$
1,710
$
1,555
U.S. Retail
1,499
1,437
Wholesale Banking
185
247
Corporate
2
615
638
Total provision for (recovery of) credit losses
– Stage 3
4,009
3,877
Provision for credit losses – Stage 1 and
Stage 2 (performing)
Canadian Personal and Commercial
Banking
433
200
U.S. Retail
15
95
Wholesale Banking
105
70
Corporate
2
(56)
11
Total provision for (recovery of) credit losses
– Stage 1 and 2
497
376
Total Provision for (recovery of) credit
losses
$
4,506
$
4,253
1
Includes PCL for off-balance sheet instruments.
2
Includes PCL on the retailer program partners’
share of the U.S. strategic cards portfolio.
TABLE 36: PROVISION FOR CREDIT LOSSES
BY INDUSTRY SECTOR
1,2
(millions of Canadian dollars, except as noted)
For the years ended
Percentage of total
October 31
October 31
October 31
October 31
2025
2024
2025
2024
Stage 3 provision for credit losses (impaired)
Canada
Residential mortgages
$
21
$
9
0.5
%
0.2
%
Consumer instalment and other personal
HELOC
9
7
0.2
0.2
Indirect auto
440
396
11.0
10.2
Other
279
244
7.0
6.3
Credit card
604
502
15.0
12.9
Total personal
1,353
1,158
33.7
29.8
Real estate
Residential
5
2
0.1
–
Non-residential
(1)
19
–
0.5
Total real estate
4
21
0.1
0.5
Agriculture
1
7
–
0.2
Automotive
50
69
1.2
1.8
Financial
(16)
37
(0.4)
1.0
Food, beverage, and tobacco
56
81
1.4
2.1
Forestry
12
3
0.3
0.1
Government, public sector entities, and education
1
–
–
–
Health and social services
7
18
0.2
0.4
Industrial construction and trade contractors
32
24
0.8
0.6
Metals and mining
9
4
0.2
0.1
Oil and gas
–
–
–
–
Power and utilities
–
–
–
–
Professional and other services
16
30
0.4
0.8
Retail sector
35
44
0.9
1.1
Sundry manufacturing and wholesale
79
63
2.0
1.6
Telecommunications, cable, and media
3
3
0.1
0.1
Transportation
43
31
1.1
0.8
Other
12
10
0.3
0.3
Total business and government
344
445
8.6
11.5
Total Canada
1,697
1,603
42.3
41.3
United States
Residential mortgages
3
(2)
0.1
(0.1)
Consumer instalment and other personal
HELOC
(1)
3
–
0.1
Indirect auto
351
355
8.7
9.2
Other
183
233
4.6
6.0
Credit card
1,162
1,123
29.0
29.0
Total personal
1,698
1,712
42.4
44.2
Real estate
Residential
56
13
1.4
0.3
Non-residential
41
89
1.0
2.3
Total real estate
97
102
2.4
2.6
Agriculture
2
1
0.1
–
Automotive
16
4
0.4
0.1
Financial
–
1
–
–
Food, beverage, and tobacco
6
10
0.1
0.3
Forestry
3
–
0.1
–
Government, public sector entities, and education
5
17
0.1
0.5
Health and social services
5
6
0.1
0.2
Industrial construction and trade contractors
64
18
1.6
0.5
Metals and mining
–
–
–
–
Oil and gas
–
–
–
–
Power and utilities
7
65
0.2
1.7
Professional and other services
43
47
1.1
1.2
Retail sector
67
29
1.7
0.7
Sundry manufacturing and wholesale
5
39
0.1
1.0
Telecommunications, cable, and media
160
53
4.0
1.4
Transportation
33
9
0.8
0.2
Other
84
56
2.1
1.4
Total business and government
597
457
14.9
11.8
Total United States
2,295
2,169
57.3
56.0
International
17
105
0.4
2.7
Total Stage 3 provision for credit losses (impaired)
$
4,009
$
3,877
100.0
%
100.0
%
Stage 1 and 2 provision for credit losses
Personal, business, and government
$
496
$
376
Debt securities at amortized cost and FVOCI
1
–
Total Stage 1 and 2 provision for credit losses
497
376
Total provision for credit losses
$
4,506
$
4,253
1
Primarily based on the geographic location of the customer’s address.
2
Includes loans that are measured at FVOCI.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 46
TABLE 37: PROVISION FOR CREDIT LOSSES
BY GEOGRAPHY
1,2
(millions of Canadian dollars, except
as noted)
For the years ended
Percentage of total
October 31
October 31
October 31
October 31
2025
2024
2025
2024
Canada
Atlantic provinces
$
72
$
63
1.6
%
1.5
%
British Columbia
3
204
186
4.5
4.4
Ontario
3
940
938
20.9
22.0
Prairies
3
305
276
6.8
6.5
Québec
176
140
3.9
3.3
Total Canada
1,697
1,603
37.7
37.7
United States
Carolinas (North and South)
96
93
2.1
2.2
Florida
187
242
4.2
5.7
New England
4
199
186
4.4
4.4
New Jersey
160
158
3.6
3.7
New York
391
328
8.7
7.7
Pennsylvania
101
79
2.1
1.8
Other
5
1,161
1,083
25.8
25.5
Total United States
2,295
2,169
50.9
51.0
International
17
105
0.4
2.5
Total Stage 3 provision for credit losses (impaired)
4,009
3,877
89.0
91.2
Stage 1 and 2 provision for credit losses
497
376
11.0
8.8
Total provision for credit losses
$
4,506
$
4,253
100.0
%
100.0
%
Provision for credit losses as a % of average
October 31
October 31
net loans
5
2025
2024
Canada
Residential mortgages
0.01
%
–
%
Credit card, consumer instalment and other personal
0.66
0.62
Business and government
0.19
0.25
Total Canada
0.26
0.25
United States
Residential mortgages
0.01
–
Credit card, consumer instalment and other personal
2.28
2.43
Business and government
0.36
0.28
Total United States
0.79
0.75
International
0.38
2.49
Total Stage 3 provision for credit losses (impaired)
0.42
0.42
Stage 1 and 2 provision for credit losses
0.05
0.04
Total provision for credit losses as a % of average net loans
0.47
%
0.46
%
1
Primarily based on the geographic location of the customer’s address.
2
Includes loans that are measured at FVOCI.
3
The territories are included as follows: Yukon is included in British Columbia; Nunavut
is included in Ontario; and Northwest Territories
is included in the Prairies region.
4
The states included in New England are as follows: Connecticut, Maine, Massachusetts, New Hampshire, and Vermont.
5
Includes PCL attributable to other states/regions including those outside TD’s core U.S. geographic
footprint.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 47
GROUP FINANCIAL CONDITION
Capital Position
TABLE 38: CAPITAL STRUCTURE
AND RATIOS – Basel III
(millions of Canadian dollars, except
as noted)
2025
2024
Common Equity Tier 1 Capital
Common shares plus related contributed
surplus
$
25,010
$
25,543
Retained earnings
78,320
70,826
Accumulated other comprehensive income
12,874
7,904
Common Equity Tier 1 Capital before
regulatory adjustments
116,204
104,273
Common Equity Tier 1 Capital regulatory adjustments
Prudential valuation adjustments
(165)
–
Goodwill (net of related tax liability)
(18,753)
(18,645)
Intangibles (net of related tax liability)
(3,316)
(2,921)
Deferred tax assets excluding those arising
from temporary differences
(202)
(212)
Cash flow hedge reserve
867
3,015
Shortfall of provisions to expected losses
–
–
Gains and losses due to changes in own
credit risk on fair valued liabilities
(166)
(193)
Defined benefit pension fund net assets (net
of related tax liability)
(811)
(731)
Investment in own shares
(9)
(21)
Non-significant investments in the capital of
banking, financial, and insurance entities,
net of eligible
short positions (amount above 10% threshold)
–
(1,835)
Significant investments in the common
stock of banking, financial, and insurance
entities
that are outside the scope of regulatory
consolidation, net of eligible short positions
(amount above 10% threshold)
–
–
Equity investments in funds subject to
the fall-back approach
(90)
(32)
Other deductions or regulatory adjustments
to CET1 as determined by OSFI
20
16
Total regulatory adjustments to Common
Equity Tier 1 Capital
(22,625)
(21,559)
Common Equity Tier 1 Capital
93,579
82,714
Additional Tier 1 Capital instruments
Directly issued qualifying
Additional Tier 1 instruments plus stock
surplus
11,623
10,887
Additional Tier 1 Capital instruments before
regulatory adjustments
11,623
10,887
Additional Tier 1 Capital instruments
regulatory adjustments
Non-significant investments in the capital of
banking, financial, and insurance entities,
net of eligible
short positions (amount above 10% threshold)
–
(3)
Significant investments in the capital of banking,
financial, and insurance entities that are
outside
the scope of regulatory consolidation, net of
eligible short positions
(700)
(350)
Total regulatory adjustments to
Additional Tier 1 Capital
(700)
(353)
Additional Tier 1 Capital
10,923
10,534
Tier 1 Capital
104,502
93,248
Tier 2 Capital instruments and provisions
Directly issued qualifying Tier 2 instruments
plus related stock surplus
10,733
11,273
Collective allowances
1,661
1,512
Tier 2 Capital before regulatory adjustments
12,394
12,785
Tier 2 regulatory adjustments
Investment in own Tier 2 instruments
–
–
Non-significant investments in the capital of
banking, financial, and insurance entities,
net of eligible
short positions (amount above 10% threshold)
1
–
(224)
Non-significant investments in the other
TLAC-eligible instruments issued by G-SIBs
and Canadian
D-SIBs, where the institution does not own more
than 10% of the issued common share
capital
of the entity: amount previously designated
for the 5% threshold but that no longer meets
the
conditions
(30)
(64)
Significant investments in the capital of banking,
financial, and insurance entities that are
outside
the scope of regulatory consolidation, net of
eligible short positions
–
–
Total regulatory adjustments to Tier
2 Capital
(30)
(288)
Tier 2 Capital
12,364
12,497
Total Capital
$
116,866
$
105,745
Risk-weighted assets
$
636,424
$
630,900
Capital Ratios and Multiples
Common Equity Tier 1 Capital (as percentage
of risk-weighted assets)
14.7
%
13.1
%
Tier 1 Capital (as percentage of risk-weighted assets)
16.4
14.8
Total Capital (as percentage of risk-weighted
assets)
18.4
16.8
Leverage ratio
2
4.6
4.2
1
Includes other TLAC-eligible instruments issued by global systemically important banks (G-SIBs) and
Canadian domestic systemically important banks (D-SIBs) that are outside the
scope of regulatory consolidation, where the institution does not own more than 10% of the issued common share
capital of the entity.
2
The Leverage ratio is calculated as Tier 1 Capital divided by leverage exposure, as defined
in the “Regulatory Capital” section of this document.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 48
THE BANK’S CAPITAL MANAGEMENT OBJECTIVES
The Bank’s capital management objectives are:
●
To maintain an adequate level of capital based on the Bank’s risk profile
as determined by:
–
the Bank’s Risk Appetite Statement (RAS);
–
capital requirements defined by relevant
regulatory authorities; and
–
the Bank’s internal assessment of capital requirements,
including stress test analysis, consistent
with the Bank’s risk profile and risk tolerance levels.
●
Manage capital levels, in order to:
–
insulate the Bank from unexpected loss events;
–
maintain stakeholder confidence in the Bank;
–
establish that the Bank has adequate capital
under a severe but plausible stress event;
and
–
facilitate business growth and/or strategic
deployment consistent with the Bank’s
strategy and risk appetite.
●
To have the most economic weighted-average cost of capital achievable, while
preserving the appropriate mix of
capital instruments to meet targeted
capitalization levels and provide a satisfactory
return on shareholders’ equity.
●
To support strong external debt ratings, in order to manage the Bank’s overall cost
of funds and to maintain access to required
funding (in the event of
unexpected loss or business growth).
●
To maintain a robust capital planning process and framework to support capital
funding decisions such as issuances, redemptions
and distributions which in
turn support the Bank’s capital adequacy.
These objectives are applied in a manner
consistent with the Bank’s overall objective of providing
a satisfactory return on shareholders’
equity.
CAPITAL SOURCES
The Bank’s capital is primarily derived from common
shareholders and retained earnings. Other
sources of capital include the Bank’s preferred
shareholders,
limited recourse capital noteholders,
perpetual subordinated capital noteholders,
and holders of the Bank’s subordinated debt.
CAPITAL MANAGEMENT
The Treasury and Balance Sheet Management (TBSM)
group manages capital for the Bank and
is responsible for forecasting and
monitoring compliance with
capital targets, recommending capital
management actions, managing the internal
capital adequacy assessment process (ICAAP),
and developing and
maintaining capital management policies. Oversight
of capital management is provided by Risk
Management and the Asset Liability and Capital
Committee
(ALCO). The Board of Directors (the Board)
is ultimately responsible for oversight
of capital adequacy risk management.
The Bank continues to hold sufficient capital levels
to provide flexibility to support organic growth
and strategic priorities.
Strong capital ratios are the result of
the Bank’s internal capital generation,
management of the balance sheet, and periodic
issuance of capital securities.
ECONOMIC CAPITAL
Economic capital,
an internal measure of capital requirements,
is a key component of the Bank’s internal assessment
of capital adequacy. The economic capital
framework requires assessment of all
material risks to the Bank and determination
of the amount of risk-based capital required
to cover unexpected losses from
the Bank’s business operations in a manner consistent
with the Bank’s capital management objectives.
The Bank operates its capital regime under
the Basel Capital Framework. In addition
to addressing Pillar 1 risks covering
credit, market, and operational risks,
the Bank’s economic capital framework captures
other material Pillar 2 risks including non-trading
market risk, additional credit risk,
and “Other risks”, such as
business risk and insurance risk. The framework
also captures diversification benefits
across risk types and business segments.
Components of economic capital at the Bank
reflect the requirements laid out in OSFI’s
ICAAP Guideline which includes senior
management oversight, sound
capital assessment and planning, comprehensive
assessment of risk, stress testing, monitoring
and reporting and internal control review.
REGULATORY CAPITAL
Capital requirements established by the Basel
Committee on Banking Supervision (BCBS)
are commonly referred to as Basel
III. Under Basel III, Total Capital
consists of three components, namely CET1,
Additional Tier 1, and Tier 2 Capital. Risk sensitive regulatory
capital ratios are calculated by dividing
CET1, Tier 1,
and Total Capital by risk-weighted assets
(RWA), inclusive of any minimum requirements outlined
under the regulatory floor. Basel III also introduced a non-risk
sensitive leverage ratio to act as a supplementary
measure to the risk-sensitive capital requirements.
The leverage ratio is calculated by dividing
Tier 1 Capital by
leverage exposure which is primarily comprised
of on-balance sheet assets with adjustments
made to derivative and securities financing
transaction exposures,
and credit equivalent amounts of off-balance sheet
exposures. TD manages its regulatory capital
in accordance with OSFI’s implementation of
the Basel III Capital
Framework.
OSFI’s Capital Requirements under Basel
III
OSFI’s CAR and LR guidelines detail how the
Basel III capital rules apply to Canadian banks.
The Domestic Stability Buffer (DSB) level increased
from 3% to 3.5% as of November 1,
2023, and has remained stable since. Currently, the DSB can range
from
0 to 4%, with the effective level adjusted by OSFI
in response to developments in Canada’s
financial system and the broader economy.
OSFI has implemented the Basel III reforms
with adjustments to make them suitable
for domestic implementation. The Basel III reforms
impact the calculation of
credit risk, market risk and operational risk
for Canadian banks, as well as amend
the LR Guideline to include a requirement for
domestic systemically important
banks (D-SIBs) to hold a leverage ratio
buffer of 0.50% in addition to the regulatory minimum
requirement of 3.0%. The LR buffer requirement
also applies to the
TLAC leverage ratio.
On November 1, 2023, the standardized
capital floor transitioned to 67.5% of RWA from the previous 65%
of RWA. OSFI has stated that the floor will remain at
67.5% until further notice.
The Bank has implemented OSFI’s Parental Stand-Alone
(Solo) Total Loss Absorbing Capacity (TLAC) Framework for D-SIBs, which
establishes a risk-based
measure intended to ensure that a non-viable
D-SIB has sufficient loss absorbing capacity on a
stand-alone, legal entity basis to support its
resolution. The Bank is
compliant with the requirements set out in this
framework.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 49
The table below summarizes OSFI’s published
regulatory minimum capital targets
for the Bank as at October 31, 2025.
REGULATORY CAPITAL
AND TLAC TARGET RATIOS
Capital
Pillar 1
Pillar 1 & 2
Conservation
D-SIB / G-SIB
Regulatory
Regulatory
Minimum
Buffer
Surcharge
1
Target
2
DSB
Target
CET1
4.5
%
2.5
%
1.0
%
8.0
%
3.5
%
11.5
%
Tier 1
6.0
2.5
1.0
9.5
3.5
13.0
Total Capital
8.0
2.5
1.0
11.5
3.5
15.0
Leverage
3.0
n/a
3
0.5
3.5
n/a
3.5
TLAC
18.0
2.5
1.0
21.5
3.5
25.0
TLAC Leverage
6.75
n/a
0.50
7.25
n/a
7.25
1
The higher of the D-SIB and G-SIB surcharge applies to risk weighted capital. The D-SIB surcharge is currently equivalent
to the Bank’s 1% G-SIB additional common equity requirement
for risk weighted capital. The G-SIB surcharge may increase above 1%,
to a maximum of 4.5%, if the Bank’s G-SIB score increases above certain thresholds.
OSFI’s LR Guideline
includes a requirement for D-SIBs to hold a leverage ratio buffer set at 50% of a D-SIB’s
higher loss absorbency risk-weighted requirements, effectively 0.50%. This buffer
also applies to
the TLAC Leverage ratio.
2
The Bank’s countercyclical buffer requirement is 0% as of October 31, 2025.
3
Not applicable.
Capital Position and Capital Ratios
The Basel framework allows qualifying banks
to determine capital levels consistent with
the way they measure, manage, and
mitigate risks. It specifies
methodologies for the measurement of credit,
trading market, and operational risks. The
Bank uses the Internal Ratings-Based
approaches to credit risk for all
material portfolios.
For accounting purposes, IFRS is followed
for consolidation of subsidiaries and joint ventures.
For regulatory capital purposes, all subsidiaries
of the Bank are
consolidated except for insurance subsidiaries
which are deconsolidated and follow prescribed
treatment as per OSFI’s CAR guidelines. Insurance
subsidiaries
are subject to their own capital adequacy reporting,
such as OSFI’s Minimum Capital Test for General Insurance and Life Insurance
Capital Adequacy Test for Life
and Health.
Some of the Bank’s subsidiaries are individually
regulated by either OSFI or other regulators.
Many of these entities have minimum capital
requirements which
may limit the Bank’s ability to repatriate or redeploy
capital or funds for other uses.
As at October 31, 2025, the Bank’s CET1, Tier 1, and Total Capital ratios were 14.7%, 16.4%, and
18.4%, respectively. The increase in the Bank’s CET1 Capital
ratio from 13.1% as at October 31, 2024,
was primarily attributable to the sale of Schwab
shares and internal capital generation, offset by
common shares
repurchased for cancellation, RWA growth across various
segments and the impact of U.S. balance
sheet restructuring.
As at October 31, 2025, the Bank’s leverage ratio
was 4.6%. Compared with the Bank’s leverage ratio
of 4.2% at October 31, 2024, the increase
was
attributable primarily to the sale of Schwab
shares and internal capital generation, offset by
common shares repurchased for cancellation,
leverage exposures
increases across various segments and the impact
of U.S. balance sheet restructuring.
Common Equity Tier 1 Capital
CET1 Capital was $93.6 billion as at
October 31, 2025. Earnings and the sale of
Schwab shares contributed the majority
of CET1 Capital growth in the year.
Capital management funding activities during
the year included common share issuance
of $0.3 billion under the dividend reinvestment
plan and from stock option
exercises,
offset by common shares repurchased of
$6.1 billion.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 50
Tier 1 and Tier 2 Capital
Tier 1 Capital was $104.5 billion as at October 31,
2025, consisting of CET1 Capital and Additional
Tier 1 Capital of $93.6 billion and $10.9 billion, respectively.
The Bank’s Tier 1 Capital management activities during the
year consisted of the issue and redemption
of Tier 1-qualifying capital instruments
as follows:
●
On December 18, 2024, the Bank issued $750
million 5.909% Fixed Rate Reset Limited Recourse
Capital Notes, Series 5 NVCC (the “LRCNs”).
The
LRCNs will bear interest at a rate of 5.909 per
cent annually, payable quarterly, for the initial period ending on, but excluding, January
1, 2030.
Thereafter, the interest rate on the LRCNs will reset every
five years at a rate equal to the prevailing
Government of Canada Yield plus 3.10 per cent.
The LRCNs will mature on January 1, 2085.
Concurrently with the issuance of the LRCNs,
the Bank issued 750,000 Non-Cumulative
5.909% Fixed
Rate Reset Preferred Shares, Series 32
NVCC (“Preferred Shares Series 32”). The Preferred
Shares Series 32 are eliminated on the
Bank’s
Consolidated Financial Statements.
●
On September 23, 2025, the Bank issued
US$750 million 6.350% Fixed Rate Reset
Limited Recourse Capital Notes, Series
6 NVCC (the “LRCNs”).
The LRCNs will bear interest at a rate of
6.350 per cent annually, payable quarterly, for the initial period ending on, but excluding,
October 31, 2030.
Thereafter, the interest rate on the LRCNs will reset every
five years at a rate equal to the prevailing
U.S. Treasury Rate plus 2.721 per cent. The
LRCNs will mature on October 31, 2085.
Concurrently with the issuance of the LRCNs,
the Bank issued 750,000 Non-Cumulative 6.350%
Fixed Rate
Reset Preferred Shares, Series 33 NVCC (“Preferred
Shares Series 33”). The Preferred Shares
Series 33 are eliminated on the Bank’s Consolidated
Financial Statements
●
On January 31, 2025, the Bank redeemed
all of its 20 million outstanding Non-Cumulative
5-Year Rate Reset Class A First Preferred Shares NVCC,
Series 5 (“Series 5 Preferred Shares”), at a redemption
price of $25.00 per Series 5 Preferred
Share, for a total redemption cost of approximately
$500 million.
●
On July 31, 2025, the Bank redeemed all of
its 14 million outstanding Non-Cumulative
5-Year Rate Reset Class A First Preferred Shares NVCC, Series
7 (“Series 7 Preferred Shares”), at a redemption
price of $25.00 per Series 7 Preferred
Share, for a total redemption cost of approximately
$350 million.
●
On October 31, 2025, the Bank redeemed
all of its 8 million outstanding Non-Cumulative
5-Year Rate Reset Class A First Preferred Shares NVCC,
Series 9 (“Series 9 Preferred Shares”), at a redemption
price of $25.00 per Series 9 Preferred
Share, for a total redemption cost of approximately
$200 million.
Tier 2 Capital was $12.4 billion as at October 31, 2025.
Tier 2 Capital management activities during the year
consisted of the issue and redemption of
Tier 2-
qualifying capital instruments
as follows:
●
On January 23, 2025, the Bank issued EUR
750 million of non-viability contingent capital
(NVCC) fixed rate reset notes constituting
subordinated
indebtedness of the Bank, maturing on January
23, 2036. These notes will bear interest at
a fixed rate of 4.030% per annum (paid
annually) until
January 23, 2031, and at the 5-year mid-swap rate
plus 1.500% thereafter (paid annually)
until maturity on January 23, 2036. With prior
approval of
OSFI, the Bank may, at its option, redeem the notes on January
23, 2031, in whole but not in part, at par
plus accrued and unpaid interest by giving not
more than 60 nor less than 10 days’ notice to
holders.
●
On January 31, 2025, the Bank issued $1 billion
of NVCC medium-term notes constituting
subordinated indebtedness of the Bank,
maturing on
February 1, 2035. These notes will bear interest
at a fixed rate of 4.231% per annum (paid
semi-annually) until February 1, 2030, and
at Daily
Compounded Canadian Overnight Repo
Rate Average plus 1.540% thereafter (paid
quarterly) until maturity on February 1, 2035.
With prior approval of
OSFI, the Bank may, at its option, redeem the notes on or after
February 1, 2030, in whole or in part, at par
plus accrued and unpaid interest by giving
not more than 60 nor less than 10 days’ notice
to holders.
●
On July 23, 2025, the Bank issued AUD
30 million of NVCC fixed-to-floating rate
subordinated notes of the Bank, maturing
on July 23, 2040. These
notes bear interest at a fixed rate of 5.930%
per annum (paid semi-annually) until
July 23, 2035, and at the 3-month Bank Bill
Swap rate plus 1.870%
thereafter (paid quarterly) until maturity on
July 23, 2040. With prior approval of OSFI,
the Bank may, at its option, redeem the notes on July 23, 2035,
in whole but not in part, at par plus accrued and
unpaid interest by giving not more than 60
nor less than 10 days’ notice to holders
●
On September 25, 2025 the Bank issued
JPY 14 billion of fixed rate reset subordinated
notes of the Bank maturing on September
25, 2030. These
notes bear interest at a fixed rate of 2.058% per
annum (paid semi-annually) until September
25, 2030 and at the 5-year Tokyo Overnight Average
Rate (TONA) mid-swap rate plus 0.97% thereafter
(paid semi-annually) until maturity on September
25, 2035. With prior approval of OSFI, the
Bank
may, at its option, redeem the notes on September 25, 2035, in
whole but not in part, at par plus accrued and
unpaid interest by giving not more than
60 nor less than 10 days’ notice to holders
●
On April 22, 2025, the Bank redeemed all of
its outstanding $3 billion 3.105% NVCC
medium-term notes due April 22, 2030
constituting subordinated
indebtedness of the Bank, at a redemption price
of 100 per cent of the principal amount, plus
accrued and unpaid interest to, but excluding,
April 22, 2025.
INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS
The Bank’s Internal Capital Adequacy Assessment
Process (ICAAP) is an integrated enterprise-wide
process that encompasses the governance,
management,
and control of risk and capital functions within
the Bank. It provides a framework for relating
risks to capital requirements through
the Bank’s capital modelling and
stress testing practices which help inform
the Bank’s overall capital adequacy requirements.
The ICAAP is led by TBSM with support
from numerous functional areas who collectively
help assess the Bank’s internal capital adequacy. This assessment
evaluates the capacity to bear risk in alignment
with the Bank’s risk profile and RAS. TBSM assesses
and monitors the overall adequacy
of the Bank’s available
capital in relation to both internal and regulatory
capital requirements under normal and
stressed conditions.
NVCC Provision
If an NVCC trigger event were to occur, for all series of
Class A First Preferred Shares excluding
the preferred shares issued with respect
to LRCNs, the maximum
number of common shares that could be issued,
assuming there are no declared and unpaid
dividends on the respective series
of preferred shares at the time of
conversion, would be 0.6 billion in aggregate.
The LRCNs, by virtue of the recourse
to the preferred shares held in the Limited
Recourse Trust, include NVCC provisions. For LRCNs, if
an NVCC trigger were
to occur, the maximum number of common shares that
could be issued, assuming there are
no declared and unpaid dividends on the preferred
shares series
issued in connection with such LRCNs,
would be 1.7 billion in aggregate.
For NVCC subordinated notes and debentures
(including Perpetual Notes), if an
NVCC trigger event were to occur, the maximum number of common
shares
that could be issued, assuming there is no accrued
and unpaid interest on the respective
subordinated notes and debentures, would be
3.3 billion in aggregate.
DIVIDEND RESTRICTIONS
The Bank is prohibited by the
Bank Act (Canada)
from declaring dividends on its preferred
or common shares if there are reasonable
grounds for believing that the
Bank is, or the payment would cause the
Bank to be, in contravention of the capital adequacy
and liquidity regulations of the
Bank Act (Canada)
or directions of
OSFI. The Bank does not anticipate that this
condition will restrict it from paying dividends
in the normal course of business. In addition,
the ability to pay dividends
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 51
on common shares without the approval of
the holders of the outstanding preferred
shares is restricted unless all dividends on
the preferred shares have been
declared and paid or set apart for payment.
Currently, these limitations do not restrict the payment of dividends
on common shares or preferred shares.
DIVIDENDS
On December 3, 2025, the Board approved a
dividend in an amount of one dollar and eight
cents ($1.08) per fully paid common share in
the capital stock of the
Bank for the quarter ending January 31, 2026,
payable on and after January 31, 2026,
to shareholders of record at the close of
business on January 9, 2026. The
Bank has moved from an annual dividend
review cycle to a semi-annual cycle to support
the alignment of shareholder return with earnings
growth.
At October 31, 2025, the quarterly dividend
was $1.05 per common share. Common
share cash dividends declared and paid during
the year totalled $4.20 per
share (2024 – $4.08), representing a payout
ratio of 50%, at the high end of the Bank’s target
payout range of 40-50% of adjusted earnings.
For cash dividends
payable on the Bank’s preferred shares, refer
to Note 19 of the 2025 Consolidated Financial
Statements. As at October 31, 2025, 1,689
million common shares
were outstanding (2024 – 1,750 million).
DIVIDEND REINVESTMENT PLAN
The Bank offers a Dividend Reinvestment Plan (DRIP)
for its common shareholders. Participation
in the plan is optional and under the
terms of the plan, cash
dividends on common shares are used
to purchase additional common shares. At
the option of the Bank, the common shares
may be issued from treasury at an
average market price based on the last
five trading days before the date of the dividend
payment, with a discount of between 0%
to 5% at the Bank’s discretion or
purchased from the open market at market
prices.
During the year ended October 31, 2025,
the Bank satisfied the DRIP requirements
through common shares issued from treasury
with no discount for the first
three months and open market common
share purchases in the last nine months.
During the year ended October 31, 2024,
the Bank satisfied the DRIP
requirements through common shares issued
from treasury with no discount.
NORMAL COURSE ISSUER BID
On August 28, 2023, the Bank announced
that the Toronto Stock Exchange (TSX) and OSFI approved a normal course issuer
bid (2023 NCIB) to repurchase for
cancellation up to 90 million of its common
shares. The 2023 NCIB commenced on August
31, 2023 and continued until August 31, 2024.
During the year ended
October 31, 2024, the Bank repurchased 49.4
million common shares under the 2023 NCIB,
at an average price of $80.15 per share
for a total amount of
$4.0 billion.
On February 24, 2025, the Bank announced
that the TSX and OSFI had approved a normal
course issuer bid (2025 NCIB) to purchase
for cancellation up to
100 million of its common shares for up to
$8 billion.
The 2025 NCIB commenced on March
3, 2025 and will end on February 28, 2026,
or such earlier date as the
Bank may determine. From the commencement
of the 2025 NCIB to October 31, 2025,
the Bank repurchased 64.6 million shares
under the program, at an
average price of $94.29 per share for a total amount
of $6.1 billion.
The Bank intends to initiate a new normal
course issuer bid program upon the completion
of the 2025 NCIB, subject to regulatory approval.
The Bank is targeting
$6-7 billion of common share repurchases
in fiscal 2026 under the new program,
subject to market conditions.
RISK-WEIGHTED ASSETS
Based on Basel III, RWA are calculated for each of credit
risk, market risk, and operational risk.
Details of the Bank’s RWA are included in the following table.
TABLE 39: RISK-WEIGHTED ASSETS
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Credit risk
Retail
Residential secured
$
61,307
$
58,215
Qualifying revolving retail
43,917
40,186
Other retail
57,717
53,929
Non-retail
Corporate
220,561
222,370
Sovereign
14,869
12,929
Bank
12,287
11,555
Securitization exposures
18,049
16,524
Subordinated debt, equity, and other
capital instruments
25,933
37,986
Other assets
31,779
36,454
Exposures subject to standardized or Internal
Ratings-Based (IRB) approaches
486,419
490,148
Total credit risk
486,419
490,148
Market risk
20,403
20,676
Operational risk
129,602
120,076
Total
$
636,424
$
630,900
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 52
RISK-WEIGHTED ASSETS BY SEGMENT
The following chart provides a breakdown of
the Bank’s RWA as at October 31, 2025. RWA reflects capital requirements assessed
based on regulatory prescribed
rules for credit risk, trading market risk, and operational
risk. The results shown in the chart do
not reflect attribution of goodwill and intangibles.
For additional
information on the risks highlighted below, refer to the “Managing
Risk” section of this document.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 53
TABLE 40: EQUITY AND
OTHER SECURITIES
1
(thousands of shares/units and millions of Canadian
dollars, except as noted)
As at
October 31, 2025
October 31, 2024
Number of
Number of
shares/units
Amount
shares/units
Amount
Common shares
Common shares outstanding
1,689,496
$
24,727
1,750,272
$
25,373
Treasury – common shares
–
–
(213)
(17)
Total common shares
1,689,496
$
24,727
1,750,059
$
25,356
Stock options
Vested
5,160
5,400
Non-vested
9,027
9,312
Preferred shares – Class A
Series 1
20,000
$
500
20,000
$
500
Series 5
2
–
–
20,000
500
Series 7
3
–
–
14,000
350
Series 9
4
–
–
8,000
200
Series 16
14,000
350
14,000
350
Series 18
14,000
350
14,000
350
Series 27
850
850
850
850
Series 28
800
800
800
800
49,650
$
2,850
91,650
$
3,900
Other equity instruments
5,6
Limited Recourse Capital Notes – Series 1
1,750
1,750
1,750
1,750
Limited Recourse Capital Notes – Series 2
1,500
1,500
1,500
1,500
Limited Recourse Capital Notes – Series 3
7
1,750
2,403
1,750
2,403
Limited Recourse Capital Notes – Series 4
7
750
1,023
750
1,023
Limited Recourse Capital Notes – Series 5
8
750
750
–
–
Limited Recourse Capital Notes – Series 6
7,9
750
1,037
–
–
Perpetual Subordinated Capital Notes – Series
2023-9
10
1
312
1
312
56,901
$
11,625
97,401
$
10,888
Treasury – preferred shares and other equity
instruments
(29)
(4)
(163)
(18)
Total preferred shares and other equity
instruments
56,872
$
11,621
97,238
$
10,870
1
For further details, including the conversion and exchange features, distributions, and significant terms and conditions,
refer to Note 19 of the Bank’s 2025 Consolidated Financial
Statements.
2
On January 31, 2025, the Bank redeemed all of its 20 million outstanding Non-Cumulative 5-Year
Rate Reset Class A First Preferred Shares Non-Viability Contingent Capital
(NVCC),
Series 5 (“Series 5 Preferred Shares”), at a redemption price of $25.00 per Series 5 Preferred Share,
for a total redemption cost of approximately $500 million.
3
On July 31, 2025, the Bank redeemed all of its 14 million outstanding Non-Cumulative 5-Year
Rate Reset Class A First Preferred Shares NVCC, Series 7 (“Series 7 Preferred Shares”), at
a redemption price of $25.00 per Series 7 Preferred Share, for a total redemption cost of approximately $350 million.
4
On October 31, 2025, the Bank redeemed all of its 8 million outstanding Non-Cumulative 5-Year
Rate Reset Class A First Preferred Shares NVCC, Series 9 (“Series 9 Preferred
Shares”), at a redemption price of $25.00 per Series 9 Preferred Share, for a total redemption cost of approximately
$200 million.
5
For other equity instruments, the number of shares/units represents the number of notes issued.
6
Refer to the “Preferred Shares and Other Equity Instruments – Significant Terms
and Conditions” table in Note 19 of the Bank’s 2025 Consolidated Financial Statements
for further
details.
7
For LRCNs – Series 3, 4, and 6, the amount represents the Canadian dollar equivalent of the U.S. dollar notional
amount.
8
On December 18, 2024, the Bank issued CA$750 million 5.909% Fixed Rate Reset Limited Recourse Capital Notes,
Series 5 NVCC (the “Series 5 LRCNs”). The Series 5 LRCNs will
bear an interest rate of 5.909 per cent annually, payable quarterly,
for the initial period ending on, but excluding, January 1, 2030. Thereafter,
the interest rate on the Series 5 LRCNs will
reset every five years at a rate equal to the prevailing Government of Canada Yield
plus 3.10 per cent. The Series 5 LRCNs will mature on January 1, 2085. Concurrently with the
issuance of the Series 5 LRCNs, the Bank issued 750,000 Non-Cumulative 5.909% Fixed Rate Reset Preferred
Shares, Series 32 NVCC (“Preferred Shares Series 32”). The Preferred
Shares Series 32 are eliminated on the Bank’s Consolidated Financial Statements.
9
On September 23, 2025, the Bank issued US$750 million 6.350% Fixed Rate Reset Limited Recourse Capital Notes,
Series 6 NVCC (the “Series 6 LRCNs”). The Series 6 LRCNs will
bear interest at a rate of 6.350 per cent annually, payable
quarterly, for the initial period ending on, but excluding,
October 31, 2030. Thereafter, the interest rate on the Series
6 LRCNs
will reset every five years at a rate equal to the prevailing U.S. Treasury Rate plus
2.721 per cent. The Series 6 LRCNs will mature on October 31, 2085. Concurrently with
the issuance of
the Series 6 LRCNs, the Bank issued 750,000 Non-Cumulative 6.350% Fixed Rate Reset Preferred
Shares, Series 33 NVCC (“Preferred Shares Series 33”). The Preferred Shares
Series 33 are eliminated on the Bank’s Consolidated Financial Statements.
10
For Perpetual Subordinated Capital Notes (AT1), the amount
represents the Canadian dollar equivalent of the Singapore dollar notional amount.
Future Regulatory Capital Developments
On February 12, 2025, OSFI deferred increases
to the Basel III standardized capital floor level
until further notice. The capital floor subjects
banks using internal
model-based approaches to a floor, with the floor calculated
as a percentage of RWA under the standardized approach.
OSFI will notify the Bank at least two
years prior to resuming an increase in
the capital floor level.
On September 11, 2025, OSFI released revisions to the Capital Adequacy
Requirements Guideline. The update includes
many refinements to the calculation of
regulatory capital requirements, with
the aggregate impact immaterial to the
capital position of the Bank. This change
is effective November 1, 2025.
On February 20, 2025, OSFI published the
Capital and Liquidity Treatment of Crypto-asset Exposures
(Banking) Guideline (Crypto-asset Guideline).
Subsequently
on October 29, 2025, OSFI released revisions
to the Crypto-asset Guideline. The update
includes a requirement that an institution’s
gross exposure to certain
crypto-assets, as defined in the Guideline,
should not exceed 5% of the institution’s net
Tier 1 capital. This change is effective November 1, 2025.
Global Systemically Important Banks
Designation and Disclosures
The Financial Stability Board (FSB), in
consultation with the BCBS and national authorities,
identifies G-SIBs.
The G-SIB assessment methodology is
based on the
submissions of the largest global banks.
Twelve indicators are used in the G-SIB assessment methodology
to determine systemic importance. The
score for a
particular indicator is calculated by dividing
the individual bank value by the aggregate
amount for the indicator summed across all
banks included in the
assessment. Accordingly, an individual bank’s ranking is reliant on the
results and submissions of other global
banks.
The Bank is required to publish the twelve indicators
used in the G-SIB indicator-based assessment
framework. Public disclosure of financial
year-end data is
required annually, no later than the date of a bank’s first quarter public
disclosure of shareholder financial data
in the following year.
Public communications on G-SIB status are
issued annually each November. On November 22, 2019, the
Bank was designated as a G-SIB by the
FSB. The
Bank continued to maintain its G-SIB status
when the FSB published the 2025 list of G-SIBs
on November 27, 2025. As a result of this
designation, the Bank is
subject to an additional loss absorbency
requirement (CET1 as a percentage
of RWA) of 1% under applicable FSB member authority requirements;
however, in
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 54
accordance with OSFI’s CAR guideline, the
higher of the D-SIB and G-SIB surcharges applies
to Canadian banks designated as a G-SIB.
As the D-SIB surcharge
is currently equal to the incremental 1%
G-SIB common equity ratio requirement,
the Bank’s G-SIB designation has no additional
impact on the Bank’s minimum
CET1 regulatory requirements. The G-SIB
surcharge may increase above 1% if
the Bank’s G-SIB score increases above certain
thresholds to a maximum of
4.5%.
As a result of the Bank’s G-SIB designation, the
U.S. Federal Reserve requires that TD Group
US Holding LLC (TDGUS), as TD’s U.S. Intermediate
Holding
Company (IHC), maintain a minimum amount
of TLAC and long-term debt.
GROUP FINANCIAL CONDITION
Securitization and Off
-
Balance Sheet Arrangements
In the normal course of operations, the Bank
engages in a variety of financial transactions
that, under IFRS, are either not recorded on
the Bank’s Consolidated
Balance Sheet or are recorded in amounts that
differ from the full contract or notional
amounts. These off-balance sheet arrangements
involve, among other risks,
varying elements of market, credit, and liquidity
risks
which are discussed in the “Managing
Risk” section of this document.
Off-balance sheet arrangements are
generally undertaken for risk management,
capital management, and funding management
purposes and include securitizations,
contractual obligations, and
certain commitments and guarantees.
STRUCTURED ENTITIES
TD carries out certain business activities
through arrangements with structured entities
(SEs). The Bank uses SEs to raise capital,
obtain sources of liquidity by
securitizing certain of the Bank’s financial assets,
to assist TD’s clients in securitizing their financial
assets, and to create investment products
for the Bank’s
clients. Securitizations are an important part
of the financial markets, providing liquidity
by facilitating investor access to specific
portfolios of assets and risks.
Refer to Notes 2, 9, and 10 of the 2025 Consolidated
Financial Statements for further information
regarding the Bank’s involvement with SEs.
Securitization of Bank-Originated Assets
The Bank securitizes residential mortgages,
credit card loans,
and business and government loans to enhance
its liquidity position, to diversify sources
of funding,
and to optimize the management of the balance
sheet.
The Bank securitizes residential mortgages
under the National Housing Act Mortgage-Backed
Securities (NHA MBS) program sponsored
by the Canada
Mortgage and Housing Corporation (CMHC).
The securitization of the residential mortgages
with the CMHC does not qualify for derecognition
and the mortgages
remain on the Bank’s Consolidated Balance Sheet.
Additionally, the Bank securitizes credit card loans by selling
them to Bank-sponsored SEs that are
consolidated by the Bank. The Bank also
securitizes U.S. residential mortgages with
U.S. government-sponsored entities which
qualify for derecognition and are
removed from the Bank’s Consolidated Balance
Sheet. Refer to Notes 9 and 10 of the 2025
Consolidated Financial Statements for further
information.
Residential Mortgage Loans
The Bank securitizes residential mortgage
loans through significant unconsolidated
SEs and Canadian non-SE third parties.
Residential mortgage loans
securitized by the Bank may give rise
to full derecognition of the financial assets depending
on the individual arrangement of each transaction.
In instances where
the Bank fully derecognizes residential
mortgage loans, the Bank may be exposed
to the risks of transferred loans through
retained interests. As at
October 31, 2025, there were $28.6 billion of
securitized residential mortgage loans outstanding
through significant unconsolidated SEs (October
31, 2024 –
$24.0 billion), and $10.0 billion outstanding
through non-SE third parties (October 31, 2024
– $6.7 billion).
Credit Card Loans
The Bank securitizes credit card loans through
an SE. The Bank consolidates the
SE as it serves as a financing vehicle
for the Bank’s assets, the Bank has power
over the key economic decisions of the SE, and
the Bank is exposed to the majority of the residual
risks of the SE. As at October 31, 2025, the Bank
had
$4.0 billion of securitized credit card receivables
outstanding (October 31, 2024 – $3.0 billion).
Due to the nature of the credit card receivables,
their carrying
amounts approximate fair value.
Business and Government Loans
The Bank securitizes business and government
loans through Canadian non-SE third parties.
Business and government loans securitized
by the Bank may be
derecognized from the Bank’s balance sheet
depending on the individual arrangement
of each transaction. In instances where
the Bank fully derecognizes
business and government loans, the Bank
may be exposed to the risks of transferred loans
through retained interests. There are no ECLs
on the retained interests
of the securitized business and government
loans as the loans are all government insured.
As at October 31, 2025, the Bank had
$97 million of securitized
business and government loans outstanding
(October 31, 2024
– $189 million), with carrying value of retained
interests of $1 million (October 31, 2024
–
$1 million).
Securitization of Third-Party Originated
Assets
Significant Unconsolidated Special Purpose
Entities
Multi-Seller Conduits
The Bank securitizes third party-originated
assets through Bank-sponsored SEs, including
its Canadian multi-seller conduits which are
not consolidated. Effective
July 31, 2025, the Bank’s U.S. multi-seller
conduits are deconsolidated, as described below. Multi-seller
conduits securitize third-party originated
assets. The Bank
administers multi-seller conduits and provides
liquidity facilities as well as securities
distribution services; it may also provide
credit enhancements. TD’s total
potential exposure to loss through the provision
of liquidity facilities for multi-seller conduits
was $57.5 billion as at October 31, 2025
(October 31, 2024 –
$16.8 billion). As at October 31, 2025, the Bank had
funded exposure of $38.5 billion under
such liquidity facilities relating to outstanding issuances
of ABCP
(October 31, 2024
– $15.4 billion).
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 55
TABLE 41: FUNDED EXPOSURE TO THIRD-PARTY
ORIGINATED ASSETS SECURITIZED
BY BANK-SPONSORED UNCONSOLIDATED
CONDUITS
1
(millions of Canadian dollars, except
as noted)
As at
October 31, 2025
October 31, 2024
Residential mortgage loans
$
13,023
$
8,527
Automobile loans and leases
11,949
5,580
Telecommunication receivables
2
6,239
n/a
Trade receivables
4,726
–
Equipment leases
1,225
1,246
Credit card receivables
2
851
n/a
Consumer loans
2
240
n/a
Insurance premium receivables
2
145
n/a
Investment loans
66
66
Total funded exposure
$
38,464
$
15,419
1
The Bank’s funded exposure through the provision of liquidity facilities only relates to outstanding issuances
of ABCP funding ‘A’ or above rated assets.
2
Balances as at October 31, 2025 pertain only to the U.S. multi-seller ABCP conduits that were deconsolidated prospectively
effective July 31, 2025, as described below.
As at October 31, 2025, the Bank held $2.0
billion of ABCP issued by Bank-sponsored
multi-seller conduits recorded on its 2025
Consolidated Balance Sheet
(October 31, 2024 – $0.4 billion).
CONSOLIDATION OF STRUCTURED ENTITIES
Effective July 31, 2025, the Bank concluded that it
no longer controls its U.S. multi-seller ABCP
conduits due to a change in the Bank’s exposure
to variable
returns and has therefore deconsolidated
these conduits prospectively. The deconsolidation has resulted
in a decrease of $17,702 million of Business
and
government loans, $2,695 million of Non-trading
financial assets at fair value through profit or
loss (FVTPL), $77 million of Other assets
and $19,332 million of
Other liabilities on the Consolidated Balance
Sheet. The Bank concurrently recognized
$1,142 million in Trading loans, securities, and other
on the Consolidated
Balance Sheet, representing the ABCPs purchased
by the Bank ($1,111 million as at October 31, 2024, which was previously eliminated upon
consolidation).
Impacts on the Consolidated Statement of
Income as a result of deconsolidation are
minimal. In addition, the Bank continues to provide
liquidity facilities to these
conduits. The total committed undrawn amount
under these facilities as at October 31,
2025 was $16.0 billion (October 31, 2024
– $13.1 billion).
COMMITMENTS
The Bank enters into various commitments
to meet the financing needs of the Bank’s
clients,
to earn fee income,
and to lease premises and equipment.
Significant
commitments of the Bank include financial
and performance standby letters of credit,
documentary and commercial letters of
credit,
commitments to extend credit,
and obligations under long-term non-cancellable
leases for premises and equipment.
These products may expose the Bank to liquidity, credit, and
reputational
risks. There are adequate risk management and
control processes in place to mitigate
these risks. Certain commitments still remain
off-balance sheet. Note 25 of
the 2025 Consolidated Financial Statements
provides detailed information about the
Bank’s commitments including credit-related
arrangements and long-term
commitments or leases.
GUARANTEES
In the normal course of business, the Bank
enters into various guarantee contracts
to support its clients. The Bank’s significant
types of guarantee products are
financial and performance standby letters of
credit, credit enhancements, and indemnification
agreements. Certain guarantees remain
off-balance sheet. Refer to
Note 25 of the 2025 Consolidated Financial
Statements for further information.
GROUP FINANCIAL CONDITION
Related
P
arty Transactions
TRANSACTIONS WITH KEY MANAGEMENT
PERSONNEL, THEIR CLOSE FAMILY MEMBERS,
AND THEIR RELATED ENTITIES
Key management personnel are those persons
having authority and responsibility
for planning, directing,
and controlling the activities of the Bank, directly
or
indirectly. The Bank considers certain of its officers and directors to be
key management personnel. The Bank
makes loans to its key management personnel,
their
close family members,
and their related entities on market
terms and conditions with the exception of
banking products and services for key
management
personnel, which are subject to approved policy
guidelines that govern all employees.
In addition, the Bank offers deferred share and
other plans to non-employee directors, executives,
and certain other key employees. Refer
to Note 21 of the 2025
Consolidated Financial Statements for more
details.
In the ordinary course of business, the Bank
also provides various banking services to associated
and other related corporations on terms
similar to those
offered to non-related parties.
TRANSACTIONS WITH SUBSIDIARIES,
SCHWAB, AND SYMCOR INC.
Transactions between the Bank and its subsidiaries
meet the definition of related party transactions.
If these transactions are eliminated on
consolidation, they are
not disclosed as related party transactions.
Transactions between the Bank, Schwab, and Symcor
Inc. (Symcor) also qualify as related party
transactions. As the Bank’s entire remaining
equity investment
in Schwab was sold on February 12, 2025, Schwab
is no longer a related party as of October
31, 2025, but was a related party up to the date
of sale. There were
no significant transactions between the Bank,
Schwab, and Symcor during the year ended
October 31, 2025, other than as described
in the following sections and
in Note 12 of the 2025 Consolidated Financial
Statements.
i)
TRANSACTIONS WITH SCHWAB
Prior to the sale of the Bank’s entire remaining equity
investment in Schwab on February
12, 2025, the Bank had significant influence
over Schwab and accounted
for its investment in Schwab using the equity
method. Pursuant to the Stockholder Agreement
in relation to the Bank’s equity investment in Schwab,
subject to
certain conditions, the Bank had the right
to designate two members of Schwab’s Board of
Directors and had representation on two Board
Committees. Prior to the
sale, the Bank’s designated directors were the Bank’s former
Group President and Chief Executive Officer
and the Bank’s former Chair of the Board.
A description of significant
transactions between the Bank and its affiliates
with Schwab is set forth below.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 56
Insured Deposit Account Agreement
As at October 31, 2025, deposits under
the Schwab IDA Agreement were $106 billion
(US$76 billion) (October 31, 2024 – $117 billion (US$84 billion)).
The Bank
paid fees of $405 million related to sweep deposit
accounts from November 1, 2024 to February
11, 2025, the period in which Schwab was a related party to
the
Bank. The Bank paid fees, net of the termination
fees received from Schwab, of $908
million during the year ended October 31, 2024.
As at October 31, 2025, amounts receivable
from Schwab were $49 million (October
31, 2024 – $12 million). As at October 31,
2025, amounts payable to
Schwab were $38 million (October 31, 2024
– $42 million).
ii) TRANSACTIONS WITH SYMCOR
The Bank has one-third ownership in Symcor, a Canadian
provider of business process outsourcing
services offering a diverse portfolio of integrated
solutions in
item processing, statement processing and
production, and cash management
services. The Bank accounts for Symcor’s
results using the equity method of
accounting. During the year ended October 31,
2025, the Bank paid $89 million (October
31, 2024 – $88 million)
for these services. As at October 31, 2025,
the
amount payable to Symcor was $7 million
(October 31, 2024 – $6 million).
The Bank and two other shareholder banks
have also provided a $100 million unsecured
loan facility to Symcor which was undrawn
as at October 31, 2025 and
October 31, 2024.
GROUP FINANCIAL CONDITION
Financial Instruments
As a financial institution, the Bank’s assets and
liabilities are substantially composed
of financial instruments. Financial assets
of the Bank include, but are not
limited to, cash, interest-bearing deposits, securities,
loans,
derivative instruments and securities purchased
under reverse repurchase agreements;
while financial
liabilities include, but are not limited to, deposits,
obligations related to securities sold
short, securitization liabilities, obligations
related to securities sold under
repurchase agreements, derivative instruments,
and subordinated debt.
The Bank uses financial instruments
for both trading and non-trading activities. The
Bank typically engages in trading activities
by the purchase and sale of
securities to provide liquidity and meet the needs
of clients and, less frequently, by taking trading positions with the
objective of earning a profit. Trading financial
instruments include, but are not limited to,
trading securities, trading deposits, and
trading derivatives. Non-trading financial instruments
include the majority of the
Bank’s lending portfolio, non-trading securities,
hedging derivatives,
and the majority of the Bank’s financial
liabilities. In accordance with accounting
standards
related to financial instruments, financial assets
or liabilities classified as held-for-trading, non-trading
FVTPL, designated at FVTPL,
FVOCI,
and all derivatives are
measured at fair value in the Bank’s 2025 Consolidated
Financial Statements. Debt securities,
most loans, and other liabilities are carried
at amortized cost using
the effective interest rate (EIR) method. For details
on how fair values of financial instruments
are determined, refer to the “Accounting
Judgments, Estimates, and
Assumptions”
– “Fair Value Measurements” section of this document.
The use of financial instruments allows
the Bank to earn profits in trading, interest,
and fee
income. Financial instruments also create
a variety of risks which the Bank
manages with its extensive risk management
policies and procedures. The key risks
include interest rate, credit, liquidity, market, and foreign exchange
risks. For a more detailed description on how
the Bank manages its risk, refer to the “Managing
Risk” section of this document.
RISK FACTORS AND
MANAGEMENT
Risk Factors That
May
Affect Future Results
In addition to the risks described in the “Managing
Risk” section, there are numerous other
risk factors, many of which are beyond
the Bank’s control and the
effects of which can be difficult to predict, that could
cause the Bank’s results to differ significantly from the
Bank’s plans, objectives, and estimates or could
impact
the Bank’s reputation or the sustainability of its business
model. All forward-looking statements, including
those in this MD&A, are, by their very nature,
subject to
inherent risks and uncertainties, general
and specific, which may cause the Bank’s actual results
to differ materially from the plan, objectives, estimates
or
expectations expressed in the forward-looking
statements. Some of these factors are discussed
below and others are noted in the “Caution
Regarding Forward-
Looking Statements” section of this document.
TOP AND EMERGING RISKS
The Bank considers it critical to regularly assess
its operating environment and highlight
top and emerging risks. These are risks with
a potential to have a material
effect on the Bank and where the attention of
senior management is focused due to the potential
magnitude or immediacy of their impacts.
Risks are identified, discussed, and actioned
by senior management and reported quarterly
to the Risk Committee and the Board. Specific
plans to mitigate top
and emerging risks are prepared, monitored,
and adjusted as required.
General Business and Economic Conditions
The Bank and its customers operate
in Canada, the U.S., and, to a lesser extent,
in other countries. As a result, the Bank’s earnings
are significantly affected by
the general business and economic conditions
in these regions, which could have
an adverse impact on the Bank’s results, business,
financial condition or
liquidity, and could result in changes to the way the Bank operates.
These conditions include short-term and
long-term interest rates, inflation, declines
in
economic activity (recession), volatility in
financial markets, and related market liquidity, funding costs, real estate
prices, employment levels, consumer
spending
and debt levels, evolving consumer trends
and related changes to business models,
business investment and overall business
sentiment, government policy
including levels of government spending,
monetary policy, fiscal policy (including tax policy and rate changes),
exchange rates, sovereign debt risks, and
the
effects of pandemics and other public health emergencies.
Geopolitical Risk
Government policy, international trade and political relations across
the globe may impact overall market and
economic stability, including in the regions where the
Bank operates, or where its customers operate.
Rapid changes and uncertainty related to global
trade and policy may require organizations
to adapt their
strategies to the evolving landscape and
may also reduce the predictability of business
outcomes. While the nature and extent of
risks may vary, they have the
potential to disrupt global economic growth,
create volatility in financial markets that
may affect the Bank’s trading and non-trading activities,
market liquidity,
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 57
funding costs, interest rates, foreign exchange,
commodity prices, credit spreads, fiscal policy, and directly and indirectly
influence general business and economic
conditions. Such factors may have an adverse
impact on the Bank and its customers.
The evolution of geopolitical, policy, trade and tax-related risks, including
the application or threat of any new or elevated
tariffs to goods imported into the U.S.,
any retaliatory tariffs, and renegotiation of the
Canada U.S. Mexico Agreement (CUSMA)
have the potential to increase economic
uncertainty, market volatility,
disrupt global supply chains and trade flows,
deteriorate business confidence and other
adverse impacts. For example, tariffs can threaten
to raise prices and
reduce demand for imported goods weighing
on activity in both importing and exporting
countries; if set at very high rates, tariffs may halt
the flow of trade
altogether and lead to shortages throughout
the supply chain.
Geopolitical risks consider ongoing global
tensions, including escalation of the Russia-Ukraine
war and the resulting tensions between
Russia and other nations,
social unrest and volatility in the Middle East,
the ongoing conflict between Israel and
Hamas, threats of terrorism and ongoing protectionist
measures due to a
decline in global alignment. These factors
can result in sanctions and countersanctions
and related operational complexities,
supply chain disruptions, increased
likelihood of cyber-attacks on critical public
and private infrastructure and networks and
have the potential to generate further
regulatory and policy uncertainty.
Should these geopolitical risks continue,
they may have an adverse impact on the Bank,
its business, financial condition and its
customers.
Inflation, Interest Rates and Recession
Uncertainty
Fluctuating interest rates and inflation, together
with overall macroeconomic conditions, could
have adverse impacts on the Bank’s cost of funding,
result in
increased loan delinquencies or impairments
and higher credit losses due to deterioration
in the financial condition of the Bank’s customers
and may necessitate
further increases in the Bank’s provision for credit
losses and net charge offs, all of which could
negatively impact the Bank’s business, financial
condition, liquidity
and results of operations. Inflation has declined
from peak levels, but households continue
to feel the effect of past price increases,
which have weighed on
confidence and reduced spending power. Heightened geopolitical
risk and elevated tariffs and trade barriers adds
uncertainty to the outlook for inflation and
interest rates. A reacceleration in inflation
could trigger a reversal in recent interest rate declines
and a tightening in financial conditions,
while a deterioration in
economic conditions, especially within
the labour market, could lead to faster decline
in interest rates. In addition, actual stress
levels experienced by the Bank’s
borrowers may differ from assumptions incorporated
in estimates or models used by the Bank.
The uncertain inflation and interest rate environment
increases
concerns around the possibility of a recession
in Canada, the U.S. and other regions
where the Bank and its customers operate and
continues to impact the
macroeconomic and business environment.
Such developments could have an adverse
impact on the Bank’s business, financial condition,
liquidity and results of
operations.
Remediation of the Bank’s U.S. BSA/AML Program
and Enterprise AML Program
On October 10, 2024, the Bank and certain
of its U.S. subsidiaries consented
to orders with the Office of the Comptroller of
the Currency (OCC), the Federal
Reserve Board (FRB), and the Financial
Crimes Enforcement Network (FinCEN) and
entered into plea agreements with the
Department of Justice (DOJ), Criminal
Division, Money Laundering and Asset Recovery
Section and the United States Attorney’s
Office for the District of New Jersey (collectively, the “Global
Resolution”). The Global Resolution includes
a number of limitations on the Bank’s U.S. business,
including an asset limit in certain entities (TD
Bank, N.A. and
TD Bank USA, N.A., collectively referred
to as the “U.S. Bank”) and more stringent
approval processes for new retail bank products,
services, markets and
branches, that could adversely affect the Bank’s business,
operations, financial condition, capital
and credit ratings (some of which were downgraded
following the
announcement of the Global Resolution),
cash flows and funding costs, as well as affect or restrict
the ability of the Bank’s U.S. business to compete
effectively.
Board certifications will be required for dividend
distributions from certain of the Bank’s U.S.
subsidiaries, namely TD Bank, N.A., TD Bank
US Holding Company,
TD Bank USA, N.A. and TD Group US
Holdings LLC, to help ensure the Bank continues
to prioritize the U.S. Bank Secrecy Act/Anti-Money
Laundering program
(U.S. BSA/AML program) remediation. More
details on the terms of the Global Resolution
are set out under the heading “Update
on the Remediation of the U.S.
Bank Secrecy Act/Anti-Money Laundering
Program and Enterprise AML Program”.
The orders and plea agreements have a number
of short-term and long-term deliverables
and obligations, many of which are overlapping
and interdependent.
Additional information about these deliverables
and obligations are set out in the “Update
on the Remediation of the U.S. Bank Secrecy
Act/Anti-Money
Laundering Program and Enterprise AML Program”
section.
Satisfying the terms of the Global Resolution,
including the requirement to remediate
the Bank’s U.S. BSA/AML program, is expected
to be a multi-year endeavor,
and will not be entirely within the Bank’s control including
because of (i) the requirement to obtain regulatory
approval or non-objection before proceeding
with
various steps, and (ii) the requirement for
the various deliverables to be acceptable
to the regulators and/or the Monitor. The Bank, its regulators
or applicable law
enforcement agencies in various jurisdictions
may also identify other issues as the Bank
remediates and enhances its risk and
control infrastructure, which may
result in additional regulatory proceedings or requirements
in the United States or elsewhere, and
may result in significant additional consequences.
Furthermore,
there is risk that the remediation may not
meet expectations set by regulators and
this may result in additional actions against
the Bank. Until the deficiencies in
the Bank’s U.S. BSA/AML program are fully remediated,
the Bank faces potentially escalating consequences.
For example, if the U.S. Bank does not achieve
compliance with all actionable articles in
the OCC consent orders (and for each successive
year that the U.S. Bank remains non-compliant),
the OCC may require
the U.S. Bank to further reduce total consolidated
assets by up to 7%. Furthermore, delays
in satisfying one regulatory requirement
could affect the Bank’s
progress on others. Failure to satisfy the
requirements of the Global Resolution on
a timely basis could result in additional
fines, penalties, business restrictions,
limitations on subsidiary capital distributions,
increased capital or liquidity requirements,
enforcement actions, increased regulatory
oversight, and other adverse
consequences, which could be significant.
Compliance with the terms of the Global
Resolution, as well as the implementation
of their requirements and
remediation of the U.S. BSA/AML program, is
expected to continue to increase the Bank’s
costs, require the Bank to revise some of
its business strategies and
plans and reallocate resources away from
managing its business and require the Bank
to undergo significant changes to its business,
operations, products and
services, and risk management practices.
In particular, the remediation process will expose the Bank
to the following risks that are described in
more detail below:
(i) Model Risk, as the Bank replaces and
enhances the portfolio of tools being used
to detect, escalate, investigate and action
financial crime risks, (ii) Technology
and Data Risk including risks associated
with data availability, as the Bank implements new technology and
data solutions, (iii) Third Party Risk, as the
Bank
engages third party advisors and vendors
to support the Bank’s change objectives, and (iv)
Operational Risk, as the Bank introduces
new organization structures,
creates new roles, onboards new talent, enhances
the global control environment, and invests
in updated processes and procedures
to support financial crime
risks. In addition, as a result of third-party reviews
of governance at the Bank, required in
connection with the remediation of the U.S. BSA/AML
program, the Bank
may be required to make changes in
management and/or governance. As noted
under “Update on U.S. BSA/AML Program
Remediation and Enterprise AML
Program Improvement Activities”, the Bank
continues to make progress on its assessment
and strengthening of the Bank’s Enterprise AML
program and will be
exposed to similar risks as noted above in respect
of the Bank’s U.S. BSA/AML Program, and
we have experienced an increase in identification
of reportable
transactions and/or events. The increase has
added to the operational backlog in our
FCRM investigations processing that the Bank
currently faces, but is working
towards remediating across the enterprise.
In addition, other issues with the Bank’s Enterprise
AML Program or its remediation may be
identified by the Bank or its
regulators, and may result in additional regulatory
or other actions, including broadening
the scope of remediation and improvements
required.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 58
The Global Resolution could have indirect
adverse effects on the Bank and its subsidiaries
and businesses, including subsidiaries
and businesses that are not
directly party to or subject to the orders and plea
agreements, including by jeopardizing
the status of certain regulatory qualifications,
permissions, or exemptions,
or by causing certain counterparties to seek
to terminate contracts or other relationships
with the Bank. For example, TD and its affiliates
sought and received a
permanent order from the U.S. Securities
and Exchange Commission (SEC) allowing
them to continue serving as an investment
adviser, depositor or principal
underwriter to certain investment companies
that are registered with the SEC. In addition,
TD and its affiliates also became disqualified from
relying on the U.S.
Department of Labor’s “qualified professional
asset manager” exemption for purposes
of providing asset management services
to employee benefit plans subject
to the U.S. Employee Retirement Income
Security Act of 1974 (ERISA), and, as
a result, TD has been relying on, and is
expect to continue to be required to rely
on, alternative exemptions for purposes
of ERISA compliance. In the future, the
Bank may be required to seek additional
waivers, consents, approvals or other
exemptions to continue operating its businesses
as presently conducted, and any failure
to obtain such waivers, consents, approvals
or other exemptions or to
comply with any undertaking when such
waivers, consents, approval or other exemptions
are granted could adversely affect the Bank’s results
of operations or
financial condition.
Failure to comply with the terms of the plea
agreements with the DOJ during the five-year
term of probation, including by failing
to complete the compliance
undertakings, failing to cooperate or to report
alleged misconduct as required, or committing
additional crimes, could also subject the Bank
to further prosecution
and additional financial penalties and ongoing
compliance commitments, and could result
in an extension of the length of the term
of probation. In addition, the
Bank’s current or former directors, officers and employees,
as well as the current or former directors,
officers and employees of the U.S. Bank,
may become
subject to civil or criminal investigations or enforcement
proceedings in relation to the Bank’s U.S. BSA/AML
program, which could result in claims against
the
Bank for damages or indemnification, further disruptions
to the Bank’s personnel (including negative
impact on the morale of its personnel) and
its operations and
further damage to its reputation or to the
perceptions of the Bank among the Bank’s customers,
service providers and investors.
The Global Resolution (including the limitations imposed
on the Bank’s U.S. businesses imposed by
the terms of the Global Resolution) may negatively
affect the
Bank’s brand and reputation, if any of the Bank’s or
U.S. Bank’s former or current directors, officers or
employees become subject to, or have adverse
findings
arising from, civil or criminal investigations
or enforcement proceedings, or if the Bank
is unable to satisfy the terms of
the Global Resolution (including the
requirement to remediate the Bank’s U.S. BSA/AML
program) in a manner that is acceptable
to the regulators and/or the Monitor. This potential negative impact
on
the Bank’s brand and reputation, as well as the limitations
imposed on the Bank’s U.S. businesses by
the Global Resolution, may adversely affect:
(i) the Bank’s
ability to attract and retain customers and employees;
(ii) the willingness of key third parties, including
service providers, vendors, financial counterparties,
government agencies, and other market participants,
to transact with the Bank; and (iii) the willingness
of investors to retain Bank securities in their
investment
portfolios or to acquire Bank securities. See
also “Level of Competition, Shifts in Consumer
Attitudes, and Disruptive Technology”, “Ability to Attract, Develop, and
Retain Key Talent”, “Third Party Risk”, and “Value and Market Price of our Common Shares and other
Securities”, below.
The value and trading price of the Bank’s securities
could be negatively affected by a number of
factors related to the terms of the Global Resolution,
the
remediation of the issues resulting in the investigations
or the strengthening of the Bank’s Enterprise
AML Program, including if: (i) the Bank
fails to satisfy the
terms of the Global Resolution (including
the requirement to remediate the Bank’s U.S. BSA/AML
program) in a manner that is acceptable
to the regulators and/or
the Monitor; (ii) the impact of the non-monetary
penalties imposed on the Bank are more negative
or sustained longer than anticipated, including
if the limitations
imposed on the Bank’s U.S. businesses weaken
the Bank’s U.S. franchise; (iii) the Bank becomes
subject to further prosecution or financial penalties
(which may
occur if the Bank fails to comply with the
terms of the plea agreements with the DOJ
during the five-year term of probation);
(iv) the Bank’s or U.S. Bank’s former or
current directors, officers or employees become
subject to, or have adverse findings arising
from, civil or criminal investigations or enforcement
proceedings in
relation to the Bank’s U.S. BSA/AML program; (v)
the impact on the Bank’s brand and reputation is
more negative or sustained than anticipated;
and/or (vi) if any
of the risks described in this “Remediation of
the Bank’s U.S. BSA/AML Program and Enterprise
AML Program” section materializes. The
foregoing factors may
also lead to rating agencies further downgrading
the Bank’s credit ratings and outlooks. See also
“Value and Market Price of our Common Shares and other
Securities” and “Downgrade, Suspension
or Withdrawal of Ratings Assigned by any
Rating Agency”, below.
See also the risks described under “Regulatory
Oversight and Compliance Risk”.
Regulatory Oversight and Compliance
Risk
The Bank and its businesses are subject
to extensive regulation and oversight by
a number of different governments, regulators and
self-regulatory organizations
(collectively, “Bank regulators”) around the world. Regulatory and
legislative changes, as well as changes in
the Bank’s regulators’ expectations occur in all
jurisdictions in which the Bank operates.
Bank regulators around the world continue
to focus on capital, liquidity, and interest rate risk (IRR) risk
management; consumer protection and
fair access; data
access, use and management; technology and
cybersecurity; insider risk, conduct risk
and internal risk and control frameworks
across the three lines of defense;
foreign interference; and financial crime including
money laundering, terrorist financing and economic
sanctions risks and threats, among others.
There is
heightened focus by Bank regulators globally
on the impact of tariffs, interest rates and inflation
on customers, as well as on the Bank’s operations
and its
management and oversight of risks associated
with these matters. In addition, these risks continue
to rapidly evolve, as a result of new or emerging
threats,
including geopolitical and those associated
with the use of new, emerging and interrelated technologies, digital
and crypto-assets, quantum computing,
artificial
intelligence (AI), machine learning, models
and decision-making tools.
The content and application of laws, rules and
regulations affecting financial services institutions
may sometimes vary according to factors such
as the size of the
institution, the jurisdiction in which it is organized
or operates, and other criteria. There
can also be significant differences in the ways that
similar regulatory
initiatives affecting the financial services industry are
implemented in Canada, the United States
and other countries and regions in
which the Bank does business.
For example, when adopting rules that are
intended to implement a global regulatory
standard, a national regulator may introduce
additional or more restrictive
requirements. Furthermore, some of the Bank’s regulators
have the discretion to impose additional requirements,
standards or guidance regarding the Bank’s
capital, liquidity and IRR risk management,
or other matters within their regulatory scope,
and in some cases the Bank may be prohibited
by law from publicly
disclosing such additional requirements,
standards or guidance. Compliance with these additional
requirements, standards or guidance
may increase the Bank’s
compliance and operational costs, and
could adversely affect the Bank’s businesses and results
of operations. Regulators have indicated
the potential for
escalating consequences for banks that do
not timely resolve open issues or have
repeat issues. Furthermore, delays in satisfying
one regulatory requirement
could affect the Bank’s progress on others. Failure to satisfy
regulatory requirements on a timely basis
could result in additional fines, penalties, business
restrictions, limitations on subsidiary capital distributions,
increased capital or liquidity requirements,
enforcement actions, increased regulatory
oversight, and
other adverse consequences, which could be
significant. Compliance with any consent
orders, compliance agreements/orders or other
regulatory enforcements,
as well as the implementation of their requirements,
may increase the Bank’s costs, require the Bank
to reallocate resources away from managing
its business,
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 59
negatively impact the Bank’s capital and credit ratings,
cash flows and funding costs, require the Bank
to undergo significant changes to its business,
operations,
products and services, and risk management
practices, damage the Bank’s reputation, and
subject the Bank to other adverse consequences,
including additional
financial penalties, restrictions and limitations.
The Bank monitors and evaluates the potential
impact of applicable regulatory developments
(including enacted and proposed rules,
standards, public
enforcement actions, consent orders, and
regulatory guidance). However, while the Bank devotes
substantial compliance, legal, and operational
business
resources to facilitate compliance with these
developments by their respective effective dates,
and also to the consideration of other Bank
regulator expectations, it
is possible that: (i) the Bank may not be
able to accurately predict the impact of
regulatory developments, or the interpretation
or focus of enforcement actions
taken by governments, regulators and courts, (ii)
the Bank may not be able to develop or enhance
the platforms, technology, or operational procedures and
frameworks necessary to comply with, or adapt
to, such rules or expectations in advance
of or by their effective dates; or (iii) regulators and
other parties could
challenge the Bank’s compliance. Also, it may be
determined that the Bank has not adequately, completely or on
a timely basis addressed regulatory
developments or other regulatory requirements,
including enforcement actions, to which it
is subject, in a manner which meets Bank regulator
expectations.
At any given time, the Bank is subject
to a significant number of legal and regulatory
proceedings and to numerous governmental
and regulatory examinations.
Additionally, the Bank has been subject to regulatory enforcement
proceedings and has entered into
settlement agreements with Bank regulators,
and the Bank
may continue to face a greater number or
wider scope of investigations, enforcement
actions and litigation. The Bank could also
be subject to negative regulatory
evaluation or examination findings not only
because of violations of laws and regulations,
but also due to failures, as determined
by its regulators, to have
adequate policies and procedures, or to remedy
deficiencies on a timely basis. Regulatory
and legislative changes and changes in expectations
will continue to
increase the Bank’s compliance and operational
risks and costs. In addition, legislative and regulatory
initiatives could require the Bank to make
significant
modifications to its operations in the relevant
countries or regions in order to comply
with those requirements. This could result in increased
costs as well as
adversely affect the Bank’s businesses and results of operations.
See also the risks described under the heading
“Introduction of New and Changes
to Current Laws, Rules and Regulations” and “Remediation
of the Bank’s U.S.
BSA/AML Program and Enterprise AML Program”.
Executing on Long-Term Strategies and Shorter-Term
Key Strategic Priorities
The Bank has a number of strategies and priorities,
including those detailed in the “Strategic
Review”
section and each Segment’s “Business Segment
Analysis”
section of this document, which may include
large scale strategic or regulatory initiatives
that are at various stages of development
or implementation. Examples
include organic growth strategies; transforming
distribution models; anticipated cost reductions;
revenue acceleration; simplifying operating
models and processes;
projects to meet new regulatory requirements;
leveraging and scaling automation and AI
capabilities; and modernizing existing platforms,
technology and digital
capabilities. Strategies may adjust in response
to shifts in the internal and external environment
and/or changes in leadership. Risk can be
elevated due to the
size, scope, velocity, interdependency, and complexity of projects; limited timeframes to
complete projects; and competing priorities
for limited specialized
resources. The Bank may not achieve its
strategic or financial objectives. In addition,
the remediation of the Bank’s U.S. BSA/AML
Program and Enterprise AML
Program, including the limitations on the Bank’s U.S.
business, could adversely affect the Bank’s ability to
achieve some of its strategies and priorities.
The Bank regularly explores opportunities
which include acquisitions and dispositions of companies
or businesses, directly or indirectly, through its subsidiaries.
In
respect of acquisitions and dispositions,
the Bank undertakes transaction assessments
and due diligence before completing
a merger, acquisition or disposition to
confirm the transaction fits within the Bank’s
Risk Appetite, and closely monitors integration
activities and performance post-close.
However, the Bank’s ability to
successfully complete an acquisition or disposition
is often subject to regulatory and other
approvals, and the Bank cannot be certain
when, or if, or on what terms
and conditions, any required approvals
will be granted.
While there is significant management attention
on the governance, oversight, methodology, tools, and resources
needed to manage the Bank’s strategies and
priorities, the Bank’s ability to execute on them
is dependent on a number of assumptions
and factors. These include those set
out in the “Economic Summary and
Outlook”, “Key Priorities for 2026”, “2025 Accomplishments
and Focus for 2026”, “Operating Environment
and Outlook”, and “Managing Risk” sections
of this
document, as well as disciplined resource
and expense management and the Bank’s ability
to implement (and the costs associated
with the implementation of)
programs to comply with new or enhanced
regulations or regulator demands, all of
which may not be in the Bank’s control and are difficult
to predict.
In addition, from time to time, the Bank
may invest in companies without taking a controlling
position in those companies. This may adversely
impact the Bank
financially if the investment does not
perform or reputationally if the company makes
decisions the Bank does not agree with.
If any of the Bank’s strategies, priorities, acquisition
and integration activities, dispositions
or investments are not successfully executed,
or do not achieve their
financial or strategic objectives, there may be
an impact on the Bank’s operations and financial performance
and the Bank’s earnings could grow more slowly or
decline.
Schwab IDA Agreement Exposes the
Bank to Certain Risks
The Bank has an insured deposit account
agreement with Schwab and it may be affected
by actions taken by Schwab, or if Schwab does
not perform its
obligations, pursuant to the Schwab IDA Agreement
(as further described in the “Financial Results
Overview”
section of this document). Although the Schwab
IDA
Agreement requires Schwab to make certain
payments to the Bank to compensate it
for specific instances of non-performance
by Schwab, if Schwab does not
make such payments, the Bank’s financial results
would be impacted including from a loss
of revenues, a potential increase in the
cost of funding to replace the
deposits, and losses primarily related to hedging.
Technology and Cybersecurity Risk
Technology and Cybersecurity risks for large financial institutions like the
Bank continue to increase, especially due
to heightened geopolitical tensions and
a
challenging macroeconomic environment
that increase the risk of cyber-attacks. The rising
risk of attacks on critical infrastructure and
supply chains is due, in part,
to the proliferation, sophistication and constant
evolution of new technologies and
attack methodologies used by threat actors,
such as organized criminals, nation
states, sociopolitical entities and other internal
and external parties. Heightened risks
may also result from the size and scale of a
financial institution’s operations,
geographic footprint, the complexity of its
technology infrastructure, its reliance on internet
capabilities, cloud and telecommunications
technologies to conduct
financial transactions, such as the continued
development of mobile and internet banking
platforms, as well as opportunistic
threats by actors that have
accelerated exploitations of new weaknesses,
misconfigurations or vulnerabilities.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 60
The Bank’s technologies, systems and networks,
those of the Bank’s customers (including their
own devices), and those of third parties
providing services to the
Bank, continue to be subject to cyber-attacks,
and may be subject to disruption of
services, data security or other breaches (such
as loss or exposure of
confidential information, including customer
or employee information), identity theft and
corporate espionage, or other incidents.
The Bank has experienced service
disruptions due to technology failure or
connectivity issues triggered by a third party
and may be subject to service disruptions
in the future due to cyber-attacks
and/or technology failure or connectivity issues.
The Bank’s use of third-party service providers, including
their subcontractors and supply chain, which
are subject
to these potential incidents, increases the risk
of potential attack, breach or disruption;
and may delay our response as the Bank has
less immediate oversight and
direct control over the third parties’ technology
infrastructure or information security.
The Bank may experience material loss or
damage in the future as a result of online attacks
on banking systems and applications,
supply chain attacks,
ransomware attacks, introduction of malicious
software, denial of service attacks, malicious insiders
or service provider exfiltration of data,
AI-assisted attacks, and
phishing attacks, among others. Any of these
attacks could result in fraud, unauthorized
disclosure or theft of data or funds, or the disruption
of the Bank’s
operations. Cyber-attacks may include attempts
by malicious insiders or service providers
of the Bank to disrupt operations, access
or disclose sensitive
information or other data of the Bank, its customers,
or its employees. Attempts to deceive employees,
customers, service providers, or other users
of the Bank’s
systems continue to occur, in an effort to obtain sensitive information,
gain access to the Bank’s or its customers’ or employees’
data or customer or Bank funds, or
to disrupt the Bank’s operations. While these deception
attempts have not resulted in materially adverse
impacts on the Bank thus far, there can be no assurance
that future deception attempts may not be successful,
especially as threats become more
sophisticated. In addition, the Bank’s customers
may use personal
devices, such as computers, smartphones, and
tablets, which limits the Bank’s ability to mitigate
certain risks introduced through these personal
devices.
The Bank regularly reviews external events
and assesses, and may enhance, its controls
and response capabilities as it considers
necessary to help mitigate
against the risk of cyber-attacks or data security
or other breaches in response to the
evolving threat environment, but these
activities may not mitigate all risks,
and the Bank may experience loss or damage
arising from such attacks or breaches.
As a result, the industry and the Bank are
susceptible to experiencing
potential financial and non-financial loss and/or
harm from these attacks or breaches.
The adoption of certain technologies, such as
cloud computing, AI, machine
learning, robotics, and process automation
call for continued focus and investment
to manage the Bank’s risks. It is possible that the
Bank, or those with whom the
Bank does business, have not anticipated or
implemented or may not anticipate or
implement effective measures against all
such cyber and technology-related
risks, particularly because the tactics, techniques,
and procedures used by threat actors
change frequently and risks can originate
from a wide variety of sources
that have also become increasingly sophisticated.
Furthermore, the Bank’s owned and operated applications,
platforms, networks, processes, products,
and services could be subject to failures
or disruptions, or
non-compliance with regulations as a result
of human error, natural disasters, utility or infrastructure disruptions,
pandemics or other public health emergencies,
malicious insiders or service providers, cyber-attacks
or other criminal or terrorist acts, which
may impact the Bank’s operations. Such adverse
effects could limit
the Bank’s ability to deliver products and services
to customers, and/or damage the Bank’s reputation,
which in turn could lead to financial loss.
Cyber insurance
providers continue to be concerned about
systemic cyber risk, causing coverage term
changes across the industry. This has the potential to impact
the Bank’s
ability to mitigate risks through cyber insurance
and may limit the amount of coverage
available for financial losses.
The Bank’s investments in its technology and
cyber infrastructure, including the investment in
its risk and control environment, may be
inadequate to meet
regulatory expectations, remain competitive,
serve clients effectively, and avoid business disruptions or operational
errors.
Data Risk
Data risk is the risk associated with inadequate
or inappropriate use, management, or
protection of the Bank’s data assets, which
may adversely impact the Bank’s
operations, strategic objectives, reputation,
customer trust and financial results, and
may result in financial losses, regulatory investigations
and enforcement
proceedings, and legal proceedings.
Data use cases have increased due to process
automation and greater reliance on analytics
and business intelligence to support decision-making.
There are
heightened risks
and expectations for managing integrity and
quality of customer data and privacy. This risk highlights
the importance of effective controls to
mitigate data risk and build and maintain the
trust of our customers, shareholders, and
regulators. Data risk spans broadly across
multiple risk categories and
business segments and typically arises
out of operational risks such as technology, cybersecurity, AI, fraud, third-party, model, people and process risks.
TD’s investments to improve its risk and control
environment, modernize its data and technology, and operating
model changes to further enhance data
management and protection may be insufficient
to meet regulatory expectations, remain
competitive, serve clients effectively, and avoid business disruptions
or
operational errors.
Model Risk
Model Risk is the potential for adverse consequences
arising from decisions based on incorrect
or misused models and their outputs.
Model uncertainty remains
due to geopolitical events that could impact
model performance (i.e., data used to calibrate
models is not reflective of current environment
and structural economic
changes). Short-
and long-term mitigants have been identified
and executed to help improve resilience
of models trained on historical data; however,
management’s efforts to assess and update models
may not adequately or successfully improve
the predictiveness of such models.
External Fraud Activity
External fraud risk is the risk associated
with activities perpetuated by individuals or entities
outside of the organization, to deceive,
manipulate, or exploit the
organization or its customers,
or that have the potential to do the
same, for financial and/or non-financial gain
resulting in financial loss to the organization or
its
customers, and/or harm to shareholder
value or the Bank’s brand or reputation. These acts
are perpetrated by external parties, such
as customers or others. In
deciding whether to extend credit or enter into other
transactions with customers or counterparties,
the Bank may rely on information furnished
by or on behalf of
such customers, counterparties or other
external parties, including financial statements
and financial information and authentication
information. The Bank may
also rely on the representations of customers,
counterparties, and other external parties
as to the accuracy and completeness of
such information.
Misrepresentation of this information potentially
exposes the Bank to increased external
fraud events when transacting with customers
or counterparties. In order
to authenticate customers, whether through
the Bank’s phone or digital channels or in its branches
and stores, the Bank may also rely on certain
authentication
methods which could be subject to external
fraud because of the technologies utilized
by external threat actors.
Additionally, TD, and the industry, continues to experience elevated levels of fraud attempts.
The Bank’s investments in external fraud prevention
and detection
programs, capabilities, measures and defences,
keeps external fraud activity within tolerable
levels but may not successfully mitigate against
all external fraud
activity which could result in financial loss or
disruptions in the Bank’s businesses. In addition
to the risk of material loss (financial loss,
misappropriation of
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 61
confidential information or other assets of
the Bank or its customers and counterparties)
that could result from external fraud activity, the Bank could
face legal
action and customer and market confidence
in the Bank could be impacted by external
fraud activity.
Insider Risk
Insider risk is the risk associated with an individual
who has, or had, authorized access to TD’s people,
processes, technology, information, and facilities who
intentionally or recklessly misuses their access,
knowledge, or authority for improper, unlawful or unethical
activities that could negatively affect the Bank including
employees or customers.
The financial industry continues to observe
an increased number of insider risk cases,
leading to new or emerging threats. These
cases may lead to data or
privacy breaches, intellectual property theft,
fraud, operational disruptions, and regulatory
and compliance risks.
The Bank closely monitors the internal
threat environment across all typologies and
continues to invest in TD’s insider risk management
program, both in the first
line preventative, detective and resolution
tools and process, as well as in the second
line oversight activity. Notwithstanding these investments, the risk
of insider
fraudulent activity is not fully mitigated and
the Bank could be exposed to potential adverse
regulatory, financial, operational, legal, and reputational impacts and
losses as a result of insider events.
Conduct Risk
Conduct risk is the risk arising from employee
conduct or business practices causing unfair
outcomes to persons to whom we offer or sell
our products or services,
or harm to market integrity. Conduct risk may arise from the failure
to comply with laws, regulatory requirements and
standards, or the TD Code of Conduct and
Ethics.
Conduct risk is a risk across all industries
that can have significant impact to organizations,
including the Bank. From time to time,
some of the Bank’s employees
have failed, and may in the future fail to comply
with applicable laws, regulatory requirements
and standards, and the TD Code of
Conduct and Ethics. Our
systems and procedures, including the TD
Code of Conduct and Ethics, may be inadequate
to ensure that our employees comply with
the law and operate with
integrity, leading to damage to our business and reputation, regulatory
action, or other potential adverse impacts
to the Bank.
Third-Party Risk
The Bank recognizes the value of using
third parties to support its businesses, as
they provide access to modern applications,
processes, products and services,
specialized expertise, innovation, economies
of scale, and operational efficiencies. However, the Bank may become
dependent on third parties with respect
to
continuity, reliability, and security, and their associated processes, people and facilities. As the financial services
industry and its supply chains become
more
complex, the need for resilient, robust, holistic,
and sophisticated controls, and ongoing
oversight increases.
The Bank also recognizes that the applications,
platforms, networks, processes, products,
and services from third parties could be
subject to failures or disruptions
impacting the delivery of services or products
to the Bank. These failures or disruptions could
be because of human error, natural disasters, utility or infrastructure
disruptions, changes in the financial condition
of such third parties, other general business and
economic conditions which may impact
such third parties,
pandemics or other public health emergencies,
malicious insiders or service providers,
cyber-attacks or other criminal or terrorist acts,
or non-compliance with
regulations. Such adverse effects could limit the Bank’s
ability to deliver products and services
to customers, lead to disruptions in the Bank’s businesses,
expose
the Bank to financial losses that the Bank is
unable to recover from such third parties,
and expose the Bank to legal, operational
and regulatory risks, including
those outlined under the headings “Remediation
of the Bank’s U.S. BSA/AML Program and Enterprise
AML Program”, “Regulatory Oversight
and Compliance
Risk” and “Legal Proceedings”, and/or damage
the Bank’s reputation, which in turn could result
in an adverse impact to the Bank’s operations,
earnings or financial
condition.
Catastrophe Risk
Catastrophe risk is the possibility that single
or multiple large-scale catastrophic events
could contribute to increased variability in
insurance loss claims that differ
significantly from expectations. Catastrophic
events can increase volatility in the Bank’s insurance
business results and adversely affect liquidity, profitability and
financial condition. Examples include hurricanes,
earthquakes, hailstorms, windstorms,
floods, severe winter weather, wildfires, and man-made
disasters.
Although we use industry-standard models
to estimate the likelihood and financial impact
of natural disasters across the regions
where we operate, these events
and their associated losses remain inherently
unpredictable. The models assume various
conditions and probability scenarios and
may not accurately predict
future losses. Climate change adds further
uncertainty to the frequency and severity
of catastrophic events and to future trends and
exposures. Additionally, the
geographic concentration of insured individuals
can amplify claims.
These factors may lead to higher reinsurance
costs and reduced coverage for insurers,
which could, in turn, limit customers’
access to insurance due to availability
or affordability constraints. For the Bank, catastrophe
risk may ultimately increase credit losses
if real or personal property is damaged during
such events,
particularly when insurance coverage is insufficient.
Introduction of New and Changes to
Current Laws, Rules and Regulations
The financial services industry is highly regulated.
The Bank’s operations, profitability and reputation
could be adversely affected by the introduction of
new laws,
rules and regulations, amendments to, or
changes in interpretation or application of
current laws, rules and regulations, issuance
of judicial decisions, and changes
in enforcement pace or activities. These adverse
effects could also result from the fiscal, economic,
and monetary policies of various central
banks, regulatory
agencies, self-regulatory organizations and
governments in Canada, the U.S., the
United Kingdom, Ireland, Asia Pacific and
other countries and regions, and
changes in the interpretation or implementation
of those policies. Such adverse effects may include
incurring additional costs and devoting
additional resources to
address initial and ongoing compliance; limiting
the types or nature of products and services
the Bank can provide and fees it can charge; unfavourably
impacting
the pricing and delivery of products and services
the Bank provides; increasing the ability
of new and existing competitors to compete
on the basis of pricing,
products and services (including, in jurisdictions
outside Canada, the favouring of certain
domestic institutions); and increasing risks
associated with potential non-
compliance. In addition to the adverse impacts
described above, the Bank’s failure to comply
with applicable laws, rules and regulations
could result in sanctions,
financial and non-financial penalties, and
changes including restrictions on offering certain products
or services or on operating in certain jurisdictions,
that could
adversely impact its earnings, operations and
reputation. See also the risks described
under the heading “Remediation of
the Bank’s U.S. BSA/AML Program and
Enterprise AML Program” and “Regulatory Oversight
and Compliance Risk”.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
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The regulation of financial crime, including,
anti-money laundering, anti-terrorist financing
and economic sanctions, continues to be
a high priority globally, with an
increasing pace of regulatory change and geopolitical
events, along with heightened and evolving
regulatory standards in all the jurisdictions
in which the Bank
operates.
The global data and privacy landscape is dynamic
and regulatory expectations continue to evolve.
New and amended legislation is anticipated in
various
jurisdictions in which the Bank does business.
Canadian and global regulators have been increasingly
focused on conduct, operational resilience,
consumer protection and fair access matters
and risks, which
could lead to investigations, remediation requirements,
and higher compliance costs.
Regulators are maintaining their focus
on some sustainability-related matters, including
climate change, greenwashing and sustainable
finance. Regulators are
also adapting to shifts in policies causing
some regulators to pause the development
of disclosure rules and/or introducing amendments
to the existing disclosure
requirements in some of the jurisdictions in
which the Bank does business. In addition, there
may be changes in interpretation or application of
current laws, rules
and regulations to incorporate sustainability
matters in ways that were not previously
anticipated.
Despite the Bank’s monitoring and evaluation
of the potential impact of rules, proposals, public
enforcement actions, consent orders and
regulatory guidance,
unanticipated new regulations or regulatory interpretations
applicable to the Bank may be introduced
by governments and regulators around
the world and the
issuance of judicial decisions may result in
unanticipated consequences to the Bank.
Canada
In Canada, there are a number of government
and regulatory initiatives underway that
could impact financial institutions and initiatives
with respect to payments
evolution and modernization, open banking,
consumer protection, protection of customer
data, technology and cybersecurity, climate risk management
and
disclosure, greenwashing, dealing with vulnerable
persons, competitiveness of the financial
services industry, and anti-money laundering.
Some examples include:
●
The Client Relationship Model Phase 3 (CRM3)
requirements in Canada are set to take
effect starting January 1, 2026, promoting enhanced
transparency in reporting all costs associated
with investment funds, including direct and
indirect fees. This represents a significant
regulatory evolution
from Client Relationship Model Phase 2 (CRM2)
by requiring financial institutions to provide
investors with a detailed view of total investment
costs and
their impact on returns, thus aiming to improve
investor understanding and trust. The
impact largely steps from required upgrades
to IT systems to
produce scalable reporting. The transition
to CRM3 demands strategic planning and
resource allocation to manage compliance
without overwhelming
operational capacity, making it a potentially costly and complex endeavor
for major financial institutions in Canada.
●
The federal government is implementing
AML related requirements as part of its
mandated five-year review of Canada’s AML
Regime. In addition,
further changes are proposed under Bill C-2,
the Strong Borders Act
, which would provide FINTRAC with enhanced
supervisory and enforcement tools
and powers. Many of the provisions are anticipated
to have or will have short coming into
force dates once finalized. It can also be expected
that further
changes may be required following the completion
of the Financial Action Task Force (FATF) Mutual Evaluation of Canada’s AML Regime, which is
currently underway and anticipated to be
completed in mid-2026. The pace of this change,
the short timelines to implement and the
evolving risks could
result in increased costs and risk that may impact
the Bank’s businesses, operations and results.
●
The Canadian Securities Administrators (CSA)
is examining the implications of data
portability in Canadian capital markets
and is engaging industry
stakeholders through a new cohort-based and
forward-looking Testing Environment: the CSA Collaboratory. The first test within the CSA Collaboratory
will seek to provide the CSA with a greater
understanding of the impacts of data portability
solutions and in particular the collection,
analysis and
transfer of client data, which is sometimes referred
to as e-KYC solutions.
There also continues to be emphasis on reducing
regulatory burden in certain domains:
●
Canadian Investment Regulatory Organization
(CIRO) launched a consultation on exploring
the adoption of a Consumer-driven banking
framework with
a goal to reduce regulatory duplication, align
national standards, securities legislation,
while providing education and guidance. CIRO’s
Rule
Consolidation Project continues to move forward
in successive iterations, aimed to
secure adoption of prior Investment Dealer and
Partially
Consolidated (IDPC) and Mutual Fund
Dealers Association (MFDA) rules, with deemed
material impacts on stakeholders. This tranche
of proposed
rules has broad reach and relates to outsourcing
and service arrangements, continuing education,
reporting, and handling of complaints, internal
investigations and other reportable matters,
recordkeeping and client reporting,
financial insolvency, client asset use and custody, and financing
arrangements.
United States
The current U.S. regulatory environment
is marked by a shift in regulatory priorities
at the federal level. Federal regulators
have been working to: (i) ease capital
requirements, (ii) streamline bank merger processes,
(iii) facilitate engagement with digital
assets including cryptocurrency and
fintech partnerships, (iv) reduce
barriers to AI innovation, and (v) address
perceived biases in banking services.
These changes lead to heightened risks and
regulatory uncertainty – especially as
it pertains to the potential for increased state
scrutiny due to reduced Federal regulatory activity. Notable regulatory
changes include the CFPB’s withdrawal of 67
guidance documents and various proposed
rules, halting of ongoing examinations,
and termination of various enforcement
orders. In addition, the Federal
Reserve, OCC, and FDIC have issued a proposed
rule rescinding the 2023 Community
Reinvestment Act (CRA) final rule and replacing
it with the CRA
regulations which were in effect in 1995, with
limited technical amendments. The Agencies
prior CRA framework remains in effect given
the pending litigation.
With respect to regulatory capital requirements,
the banking agencies have jointly commenced
a holistic review of the U.S. capital framework
with the intent to
ensure U.S. capital requirements: (i) are appropriately
calibrated, (ii) free of unnecessary complexity
or duplication, and (iii) effectively support
financial stability
within the industry. As part of this review, the banking agencies are contemplating
potential changes to various components
of the regulatory capital framework,
including, risk-based capital, leverage-based
capital, stress testing, and capital surcharges applied
to the largest U.S. banking institutions.
The Federal Reserve
has indicated that work on proposed rules
for Supplementary Leverage Ratio (SLR), Stress
Capital Buffer (SCB), Globally Systemically
Important Bank (G-SIB)
surcharge, and Basel III are all in process.
It is unclear what the substance of the proposals,
any resulting final rules, the timing on finalization
of the rules, and the
time frame for compliance, will be. In April 2025,
the Federal Reserve issued a proposed rule
allowing the averaging of stress testing results
over a period of two
years. This is expected to be the first in a
series of proposals to provide greater transparency
in stress testing and reduce the volatility
of stress capital buffers
applied to large institutions during the stress
testing process.
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Under the prior administration, the FDIC, OCC,
and DOJ adopted final policy statements
on bank mergers, certain provisions of which
were expected to temper
merger activity among large banks. The
current administration has taken actions
to signal a more receptive attitude toward
large bank consolidations going
forward. An Executive Order issued in August
2025 revoked the previous administration
order which called for greater scrutiny of
mergers and acquisitions activity,
including in the banking sector. The OCC and FDIC have rescinded
their 2024 merger policy statements and
reinstated their previous approaches
to review of
proposed bank mergers, and the DOJ is also
expected to reassess its approach to bank
mergers.
There is growing momentum around reassessing
the prior Administration’s skeptical stance on
cryptocurrencies and digital assets. Following
an Executive Order
aimed at fostering digital assets and cryptocurrencies,
both the FDIC and OCC eliminated prior
approval requirements for insured banks
offering crypto-related
services, and rescinded previous risk guidance.
Additionally, the enactment of the GENIUS ACT created a statutory
framework for stablecoins, and the potential
for additional legislation regarding non-stablecoin
digital assets (including a push for overall
market structure legislation covering digital
assets).
The OCC removed references to reputational
risk from its examination guidance. The
Federal Reserve has announced it will remove
reputational risk from its
examination process and has commenced
the process of removing references to reputation
and reputational risk from its supervisory
materials and examination
manuals. The FDIC is expected to follow in
the near term; these changes may also
be codified through legislation.
An Executive Order was issued in August 2025
on debanking. The Executive Order directs
the banking regulators to review whether banks
are currently or
previously engaged in unlawful debanking,
and to impose remedial or disciplinary
measures on those banks found to have done
so. The regulators are required to
conduct this review within 120 days of the issuance
of the executive order. The OCC issued a request
for information to nine of its largest supervised
institutions
regarding debanking and announced it
will consider any unlawful debanking in evaluating
applications from their supervised institutions,
as well as in Community
Reinvestment Act examinations and
ratings. The Small Business Administration
is also engaging in a review of debanking
for SBA lenders.
Further to the Executive Order on debanking,
the OCC and FDIC introduced a joint proposed
rule which would prohibit the OCC and
FDIC from criticizing or taking
adverse actions against a financial institution on
the basis of reputational risk. This step
towards regulatory codification by the OCC
and FDIC follows earlier steps
taken by the OCC to remove references
to reputational risk from their examination
guidance, and announcements made by
the FRB that it has commenced the
process of removing reputational risk from its
supervisory materials and examination manuals.
The FDIC and OCC have also jointly issued
a proposed rule that would define “unsafe
and unsound practice”
and revise the framework for issuing Matters
Requiring Attention (MRA). This proposal is
intended to shift the focus of bank supervision
towards financial risk and away from process.
Both the joint proposed
rule on Reputational Risk and the joint proposed
rule on Unsafe and Unsound Practices and
Matters Requiring Attention have a 60 day
comment period ending on
December 29, 2025. On November 18, 2025,
the FRB publicly released an internal memorandum
on Supervisory Operating Principles,
which outlines internal
directives for bank examiners and other
supervisory staff which directs such staff to focus on
material financial risk and not processes
and procedures (among
other changes to the issuance, and evaluation
of MRAs and regulatory findings). This internal
memorandum is not a binding rule, but
it articulates the priorities of
the current FRB Vice Chair for Supervision, and
exam staff are expected to follow these principles.
It is expected that the federal banking
regulators will continue to
take steps which reorient banking regulations
to focus on material financial risks, and
to deemphasize reputational risks. The regulators
are expected to continue
their efforts to combat debanking,
including as they assess responses to
their information requests on this issue.
Europe
In Europe, there remains a degree of uncertainty
in connection with the future of the United
Kingdom – European Union relationship,
and reforms implemented
through the existing and forthcoming EU
law and regulation, including the Capital
Requirements Directive VI, could result in higher
operational and system costs
and potential changes in the types of products
and services the Bank can offer to customers in
the region.
Level of Competition, Shifts in Consumer
Attitudes, and Disruptive Technology
The Bank operates in a highly competitive industry, and its performance
is impacted by the level of competition.
Customer acquisition and retention can be
influenced by many factors, including
the Bank’s brand and reputation as well as the pricing,
market differentiation, and overall customer experience
of the Bank’s
products and services.
Enhanced competition from incumbents and
new entrants may impact the Bank’s pricing of
products and services and may cause it
to lose revenue and/or market
share. Increased competition requires the Bank
to make persistent short- and long-term investments
to modernize, remain competitive, and continue
delivering
differentiated value to its customers. In addition, the
Bank operates in environments where laws
and regulations that apply to it may
not universally or equitably
apply to its current and emerging competitors,
which could include the domestic institutions
in jurisdictions outside of Canada or the
U.S., or non-traditional
providers (such as Fintech or big technology
competitors) of financial products and services.
Non-depository or non-financial institutions
are often able to offer
products and services that were traditionally
banking products and compete with banks
in offering digital financial solutions (primarily
mobile or web-based
services), without facing the same regulatory
and capital requirements or oversight. These
competitors may also operate at much lower
costs relative to revenue
or balances than traditional banks or offer financial
services at a loss to drive user growth or
to support their other profitable businesses.
These third-parties can
seek to acquire customer relationships, react
quickly to changes in consumer behaviours,
and disintermediate customers from their
primary financial institution,
which can also increase fraud and privacy risks
for customers and financial institutions in
general. The nature of disruption is such
that it can be difficult to
anticipate and/or respond to adequately or
quickly, representing inherent risks to certain Bank businesses,
including payments, lending and self-directed
investing.
As such, this type of competition could also
adversely impact the Bank’s earnings and competitive
positioning.
As described in the “Remediation of the Bank’s
U.S. BSA/AML Program and Enterprise AML
Program” section above, on October 10, 2024,
the Bank and certain
of its U.S. subsidiaries consented to orders
with the OCC, the Federal Reserve Board
and FinCEN, and entered into plea agreements
with the U.S. DOJ. The
negative impact of potential non-compliance
with such orders and plea agreements on
the Bank’s brand and reputation, along with the number
of limitations on the
Bank’s U.S. business imposed by such orders, could
adversely affect the Bank’s ability to attract and
retain customers in the U.S. or elsewhere.
AI adoption by TD and by our third-party vendors,
including newer technologies such as
generative AI and agentic AI, presents
risks and challenges such as
regulatory and legal uncertainty, the risk of biased results or unreliable
outputs if commercially implemented,
compliance risks, reputational risks and operational
risks including sophisticated and scaled
fraud / scams, cyber, privacy, data-related, intellectual property, and third-party risks. Despite the Bank’s efforts to
evaluate such technologies before their use,
these efforts may not successfully mitigate
these technologies’ inherent risks and challenges,
which could result in
financial loss or disruption to the Bank’s businesses.
In addition, the Bank could face legal action
and customer and market confidence in
the Bank could be
impacted. Given the risk of potential disintermediation
from incumbents, new entrants and
Fintech / big technology competitors, the Bank
may be required to make
significant incremental investments in its innovation
strategies and frameworks in order to remain
competitive. reputational risks and operational
risks including
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 64
sophisticated and scaled fraud / scams,
cyber, privacy, data-related, intellectual property, and third-party risks. Despite the Bank’s efforts to evaluate such
technologies before their use, these efforts may not
successfully mitigate these technologies’
inherent risks and challenges, which could
result in financial loss or
disruption to the Bank’s businesses. In addition, the
Bank could face legal action and customer
and market confidence in the Bank could
be impacted. Given the
risk of potential disintermediation from incumbents,
new entrants and Fintech / big technology
competitors, the Bank may be required to
make significant
incremental investments in its innovation
strategies and frameworks in order to remain
competitive.
Adoption of digital assets such as cryptocurrencies,
stablecoins, tokenized deposits and/or
similar distributed ledger instruments is an
emerging market
development. Given market activity and
regulatory change, particularly in the U.S,
the Bank may need to make incremental investments
within its risk appetite to
participate in these digital asset businesses.
This may expose the Bank to new risks including,
but not limited to, fraud, cyber, privacy, data, legal and compliance,
operational, intellectual property, third-party, and liquidity risks. There is also the risk that
broad customer adoption may disintermediate
or substitute the Bank’s
payment products, investment services and/or
client deposits, impacting capital, fee income, and
its ability to acquire and/or retain customers.
Environmental and Social Risk (including
Climate-Related Risk)
As a financial institution, the Bank is subject
to environmental and social (E&S) risk. E&S
risk is a transverse risk, driving financial and
non-financial risks. Drivers
of E&S risk are often multi-faceted and can originate
from the Bank’s internal environment, including
its operations, business activities, environmental
and social-
related commitments, products, clients, colleagues,
or suppliers. Drivers of E&S risk can
also originate from the Bank’s external environment,
including the
communities in which the Bank operates, as
well as second-order impacts of physical risks
and the transition to a low-carbon
economy.
Climate-related risk is the risk of financial loss
or other harm resulting from the physical and
transition risks of climate change to the Bank,
its clients or the
communities in which the Bank operates.
This includes physical risks arising from
the consequences of a changing climate, including
acute physical risks
stemming from extreme weather events happening
with increasing severity and frequency (e.g.,
wildfires and floods), and chronic physical
risks stemming from
longer-term, progressive shifts in climatic
and environmental conditions (e.g., rising
sea levels and global warming). Transition risks arise
from the process of
shifting to a low-carbon economy, influenced by new and emerging
climate-related public policies, potential
and actual litigation, changing societal
demands and
preferences, technologies, stakeholder expectations,
and legal developments.
Social risk is the risk of financial loss or other
harm to the Bank, its clients or the communities
in which the Bank operates resulting
from social factors, including,
but not limited to, adverse human rights (e.g.,
discrimination, Indigenous Peoples’ rights,
modern slavery, including forced labour and child labour and human
trafficking), the social impacts of climate change (e.g.,
poverty, and economic and physical displacement) and the health
and wellbeing of employees (e.g.,
inclusion and diversity, pay equity, mental health, equality, physical wellbeing, and workplace safety).
E&S risks may have financial, reputational,
and/or other implications for both the Bank
and its stakeholders (including customers,
suppliers, and shareholders)
over a range of timeframes. These risks
may arise from the Bank’s actual or perceived actions,
or inaction, in relation to climate change
and other E&S issues, its
progress against its E&S targets or commitments,
or its disclosures on these matters.
These risks could also result from E&S matters
impacting the Bank’s
stakeholders. The Bank’s participation in external
E&S-related organizations or commitments
may exacerbate these risks and subject the
Bank to increased
scrutiny from its stakeholders. In addition,
the Bank may be subject to legal and
regulatory risks relating to E&S matters, including
regulatory orders, fines, and
enforcement actions, financial supervisory
capital adequacy requirements, and legal action
by shareholders or other stakeholders,
including the risks described in
the “Other Risk Factors – Legal Proceedings”
section.
Limitations on the availability and reliability
of data and methodologies may also impact
the Bank’s ability to assess and evaluate E&S
risks. Although these
limitations are expected to improve over time
as the Bank continues to advance its data
capabilities by working with internal and external
subject matter experts,
leading to more robust and reliable E&S risk
monitoring, analysis, and reporting, these
efforts are not expected to eliminate all E&S risks.
Failure to successfully manage E&S-related
expectations across various divergent perspectives
may negatively impact the Bank’s reputation and
financial results.
“Greenwashing” and “social washing” can
occur where claims of E&S benefits are
made in relation to products or services or
corporate performance that are false,
give a misleading impression, or are not supported
or substantiated. These claims have accelerated
in focus inside and outside the Bank.
Public commitments,
new products and disclosures can potentially
expose financial institutions to risk. Investigations
and fines related to greenwashing claims
have occurred in
jurisdictions in which the Bank operates, including
Canada, the U.S. and Europe. Requirements and
penalties for greenwashing continue to evolve,
and the Bank
continues to closely monitor trends in this
space.
OTHER RISK FACTORS
Legal Proceedings
Given the highly regulated and consumer-facing
nature of the financial services industry, the Bank is exposed
to significant regulatory, quasi-regulatory and self-
regulatory investigations and enforcement proceedings
related to its businesses and operations.
In addition, the Bank and its subsidiaries are
from time to time
named as defendants or are otherwise involved
in various class actions and other litigation
or disputes with third parties related
to their businesses and operations.
A single event involving a potential violation of
law or regulation may give rise to numerous
and overlapping investigations and proceedings
by multiple federal,
provincial, state or local agencies and officials in
Canada, the U.S. or other jurisdictions. In
addition, failure to satisfy settlement or
consent agreements could lead
to additional enforcement proceedings. For example,
failure to comply with the terms of the
U.S. BSA/AML related plea agreements with
the DOJ during the five-
year term of probation, including by failing
to complete the compliance undertakings,
failing to cooperate or to report alleged misconduct
as required, or committing
additional crimes, could also subject the Bank
to further prosecution and additional financial
penalties and ongoing compliance commitments,
and could result in
an extension of the length of the term of probation.
Furthermore, if another financial institution
violates a law or regulation relating to a particular
business activity
or practice, this will often give rise to an investigation
by regulators and other governmental agencies
of the same or similar activity or practice
by the Bank.
Actions currently pending against the Bank,
or in which the Bank is otherwise involved,
may result in judgments, settlements,
fines, penalties, disgorgements,
injunctions, increased exposure to litigation,
business improvement orders, limitations
or prohibitions from engaging in business
activities, changes to the operation
or management of business activities, or other
results adverse to the Bank, which
could materially affect the Bank’s businesses, financial
condition and operations,
and/or cause serious reputational harm to
the Bank, which could also affect the Bank’s future
business prospects. Moreover, some claims asserted against
the
Bank may be highly complex and include novel
or untested legal theories. The outcome of
such proceedings may be difficult to predict or
estimate, in some
instances, until late in the proceedings, investigations,
or enforcement matters, which may last
several years. Although the Bank establishes
reserves for these
matters according to accounting requirements,
the amount of loss ultimately incurred
in relation to those matters may be material
and may be substantially
different from the amounts accrued. Furthermore,
the Bank may not establish reserves for
matters where the outcome is uncertain. Regulators
and other
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 65
government agencies examine the operations
of the Bank and its subsidiaries on both a routine-
and targeted-exam basis, and they may pursue
regulatory
settlements, criminal proceedings or other enforcement
actions against the Bank in the future.
For additional information relating to the Bank’s
material legal proceedings, refer to Note 25
of the 2025 Consolidated Financial Statements.
Ability to Attract, Develop, and Retain
Key Talent
The Bank’s future performance is dependent on the
availability of qualified talent, the Bank’s ability
to attract, develop, and retain key talent
and effectively manage
changes in leadership. The Bank’s management understands
that the competition for talent continues across
geographies, industries, and emerging capabilities
in
a number of sectors including financial services.
This competition is expected to continue
as a result of the rapid speed of AI adoption,
regulatory expectations,
economic conditions, and ongoing changes
to established work models. This could result
in increased attrition, particularly in areas
where core professional and
specialized skills are required.
As described in the “Remediation of the Bank’s
U.S. BSA/AML Program and Enterprise AML
Program” section above, on October 10, 2024,
the Bank and certain
of its U.S. subsidiaries consented to orders
with the OCC, the Federal Reserve Board
and FinCEN, and entered into plea agreements
with the U.S. DOJ. The
negative impact of such orders and plea
agreements on the Bank’s reputation, along with
the number of limitations on the Bank’s U.S. business
imposed by such
orders, could adversely affect our ability to attract
and retain our talent in the U.S. or elsewhere.
Although it is the goal of the Bank’s enterprise programs,
management resource policies and practices
to attract, develop, and retain key talent
employed by the
Bank or an entity acquired by the Bank, the Bank
may not be able to do so, and these actions
may not be sufficient to mitigate attrition.
Foreign Exchange Rates, Interest Rates,
Credit Spreads, Equity Prices, and Commodity
Prices
Foreign exchange rate, interest rate, credit
spread, equity price, and commodity price
movements in Canada, the U.S., and other jurisdictions
in which the Bank
does business, impact the Bank’s financial position
and its future earnings. Changes in the value
of the Canadian dollar relative to the global
foreign exchange
rates may also affect the earnings of the Bank’s small business,
commercial, and corporate customers. A change
in the level of interest rates affects the interest
spread between the Bank’s deposits and loans, as
well as other interest-bearing assets and liabilities,
and, as a result, impacts the Bank’s net interest
income. In
particular, elevated interest rates would increase the Bank’s interest
income from its investments, loan products
and other assets but could also have
adverse
impacts on the Bank’s cost of funding and may also
result in the risks outlined under the heading
“Inflation, Interest Rates and Recession
Uncertainty”. A change in
the level of credit spreads affects the relative
valuation of assets and liabilities and, as a result,
impacts the Bank’s earnings and widening
credit spreads could
also result in significant losses on the holding
value of the Bank’s mark-to-market investments
or, if, to generate liquidity, the Bank has to sell assets that have
suffered a decline in value. A change in equity
prices for any unhedged tradeable equity
securities held by the Bank may impact its
financial position and future
earnings. A change in commodity prices
may impact the value of underlying assets
and liabilities. The trading and non-trading
market risk frameworks and policies
manage the Bank’s risk appetite for known
market risk, but such activities may not be
sufficient to mitigate against such market risk, and
the Bank remains
exposed to unforeseen market risk.
Downgrade, Suspension or Withdrawal
of Ratings Assigned by Any Rating
Agency
Credit ratings may impact the Bank’s access to, and
cost of, raising funding and its ability to engage
in certain business activities on a cost-effective
basis. Credit
ratings and outlooks provided by rating agencies
reflect their views and methodologies and
are subject to change based on a number
of factors including the
Bank’s financial strength, asset quality, competitive position, liquidity and
capital positions, corporate governance and risk
management, as well as factors not
entirely within the Bank’s control, including conditions
affecting the greater financial services industry. Adjustments to our
credit ratings may contribute to additional
collateral or funding obligations which, depending
on their severity, could have a material adverse effect on our liquidity, including credit-related
contingent features
in certain derivative contracts, our ability
to raise funds and/or borrowing costs.
Some of the Bank’s credit ratings were downgraded
following the remediation of the Bank’s U.S.
BSA/AML Program and Enterprise AML
Program, and the Bank’s
credit ratings and outlooks could be further
downgraded if the rating agencies consider
that the impact of the Global Resolution
on the Bank is more negative or
sustained longer than expected, including
if the Bank fails to meet the requirements
imposed by its regulators or if the non-monetary
penalties weaken the Bank’s
U.S. franchise.
Value and Market Price of our Common Shares
and other Securities
The market price of the Bank’s common shares and
other securities may be impacted by market
conditions and other factors, and securityholders
may not be able
to sell their securities at or above the price
at which they purchased such securities.
The volume, value and trading price of
the Bank’s securities could fluctuate
significantly in response to factors both related
and unrelated to our operating or financial
performance and/or future prospects, including:
(i) variations in the
Bank’s financial and operating results and financial
condition; (ii) the Bank’s ability to satisfy the terms
of the Global Resolution; (iii) the impact
of the Global
Resolution on the Bank’s businesses, operations and
financial condition,
including the asset limitation on the U.S.
Bank; (iv) the Bank being subject to further
prosecution or financial penalties, which
may occur if the Bank fails to comply
with the terms of the plea agreements
with the DOJ during the five-year term of
probation; (v) the Bank’s or U.S. Bank’s former or current
directors, officers or employees becoming subject
to civil or criminal investigations or enforcement
proceedings in relation to the Bank’s U.S. BSA/AML
program; (vi) differences between the Bank’s actual
financial and operating results and financial
condition and
those expected by investors and analysts,
including failure to meet financial targets;
(vii) changes in perception by investors
and analysts in the Bank’s businesses,
operations or financial condition; (viii) conduct
by the Bank’s employees, third party contractors
or agents that adversely affects the Bank’s reputation;
(ix) the
Bank’s inability to execute on long-term strategies
and shorter-term key strategic priorities; (x)
the occurrence of significant technology
or cybersecurity events; (xi)
changes in the general business, market
or economic conditions in the regions in
which the Bank operates including as a result of
geopolitical instability or in
conditions affecting financial institutions or the financial
services industry generally; (xii) fluctuations
in inflation and interest rates; (xiii) volatility
on exchanges on
which the Bank’s securities are traded; (xiv) actual
or prospective changes in applicable
laws, regulations or rules; and (xv) the
materialization of other risks
described in this “Risk Factors that May Affect
Future Results” section.
Interconnectivity of Financial Institutions
The financial services industry is highly interconnected
such that a significant volume of transactions
occur among the members of the industry. The
interconnectivity of multiple financial institutions
with central or common agents, exchanges
and clearinghouses increases the risk
that a financial or operational
failure at one institution or entity may cause
more widespread failures that could
materially impact our ability to conduct business.
Any such failure, termination or
constraint could adversely affect our ability to
effect transactions, service our clients, manage our
exposure to risk or result in financial loss or liability
to our clients.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 66
Additionally, the Bank routinely transacts among an array of different
financial products and services with counterparties
in the financial services industry, including
banks, investment banks, governments,
central banks, insurance companies and other
financial institutions. A rapid deterioration
of a counterparty, or of a
systemically significant market participant
that is not a counterparty of the Bank, could
lead to creditworthiness concerns of other
borrowers or counterparties in
related or dependent industries, and can lead
to substantial disruption within the financial
markets. These conditions could cause the
Bank to incur significant
losses or other adverse impacts to the Bank’s
financial condition. Furthermore, there is no
assurance that industry regulators or government
authorities will provide
support in the event of the failure or financial
distress of other banks or financial institutions,
or that they would do so in a timely fashion.
Accounting Policies and Methods Used
by the Bank
The Bank’s accounting policies and estimates are
essential to understanding its results of
operations and financial condition. Some
of the Bank’s policies require
subjective, complex judgments and estimates
as they relate to matters that are inherently
uncertain. Changes in these judgments
or estimates and changes to
accounting standards and policies could
have a materially adverse impact on the Bank’s
Consolidated Financial Statements, and its
reputation. Material
accounting policies as well as current
and future changes in accounting policies are
described in Note 2 and Note 4, respectively, and significant
accounting
judgments, estimates, and assumptions are
described in Note 3 of the 2025 Consolidated
Financial Statements.
RISK FACTORS AND MANAGEMENT
Managing Risk
EXECUTIVE SUMMARY
Growing profitability based on balanced revenue,
expenses and capital growth involves
selectively taking and managing risks
within the Bank’s risk appetite. The
Bank’s goal is to earn a stable and sustainable
rate of return for every dollar of risk it
takes, while putting significant emphasis
on investing in its businesses to
meet its strategic objectives.
The Bank’s Enterprise Risk Framework (ERF) reinforces
the Bank’s risk culture, which emphasizes transparency
and accountability, and supports a common
understanding among stakeholders of how
the Bank manages risk. The ERF addresses:
(1) how the Bank defines the types of
risk it is exposed to; (2) how the
Bank determines the risks arising from the
Bank’s strategy and operations; (3) risk management
governance and organization; and (4) how
the Bank manages risk
through processes that identify and assess,
measure, control, monitor, and report on risk. The Bank’s risk
management resources and processes
are designed to
both challenge and enable all its businesses
and operations to understand the risks they
face and to manage them within the Bank’s risk appetite.
RISKS INVOLVED IN
TD’S BUSINESSES
The Bank’s Risk Inventory sets out the Bank’s major
risk categories and related subcategories
to which the Bank’s businesses and operations could
be exposed.
The Risk Inventory facilitates consistent risk
identification, assessment, control,
measurement, monitoring, reporting, and
disclosure of TD’s risks. The Risk
Inventory is the starting point in developing
risk management strategies and processes.
The Bank’s major risk categories are: Strategic
Risk; Credit Risk; Market
Risk; Operational Risk excluding Technology, Cybersecurity and Data; Operational Risk – Technology, Cybersecurity and Data; Model Risk; Insurance
Risk;
Liquidity Risk; Capital Adequacy Risk; Compliance
Risk; Financial Crime Risk, and Reputational
Risk.
RISK APPETITE
The Bank’s Risk Appetite Statement (RAS) is
the primary means used to communicate how
the Bank views risk and determines the type and
amount of risk it is
willing to take to deliver on its strategy
and to enhance shareholder value. In
setting the risk appetite, the Bank takes into
account its vision, purpose, strategy,
shared commitments, and capacity to bear
risk under both normal and recessionary/stress
conditions. The core risk principles for the
Bank’s RAS are as follows:
The Bank takes risks required to build its business,
but only if those risks:
1.
Fit the business strategy, and can be understood and managed.
2.
Do not expose the enterprise to any significant
single loss event; TD does not ‘bet
the Bank’ on any single acquisition, business,
product or decision.
3.
Do not risk harming the TD brand.
The Bank’s Risk Appetite Governance Framework
(RAGF) describes the assumptions, responsibilities,
and processes established to define, maintain,
govern and
monitor TD’s risk appetite, and associated risk
measures. The Bank considers current operating
conditions and the impact of emerging risks in
developing and
applying its risk appetite. Adherence to the
Bank’s risk appetite is managed and monitored
across the Bank and is informed by the
RAGF and a broad collection of
principles, frameworks, policies, processes,
and tools.
The Bank’s RAS describes, by major risk category, the Bank’s risk principles
and establishes both qualitative and quantitative
measures, thresholds, and limits, as
appropriate. RAS measures consider both
normal and stress scenarios and include
those that can be monitored at the enterprise
level and cascaded to the
segments.
Risk Management is responsible for establishing
practices and processes to formulate,
monitor, and report on the Bank’s RAS measures. The Risk
Management
function also monitors and evaluates the effectiveness
of these practices and processes, as
well as the RAS measures. Compliance
with RAS principles and
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 67
measures is assessed and reported regularly
to senior management, the Board, and the Risk
Committee of the Board (Risk Committee);
other measures are
tracked on an ongoing basis by management,
and escalated to senior management and
the Board, as required.
RISK CULTURE
Risk culture is the attitudes and behaviours
around taking and managing risk in
the Bank and is guided by our shared commitments
and the TD Culture
Framework. The TD Culture Framework defines
culture at TD including expected behaviours
and desired outcomes, describes our fundamental
mechanisms to
drive; embed; and reinforce our desired
culture and provides a comprehensive approach
to culture oversight. The shared commitments
are the behaviours that
differentiate the Bank and help guide the way the
Bank runs its business, grows its leaders,
supports its colleagues, and serves its communities.
Risk culture is
one of the attributes that is integral to the Bank’s overall
organizational culture. The Risk Committee
engages with the Chief Risk Officer (CRO)
who leads a
diverse team of risk professionals to drive a
proactive risk culture. The central oversight
for organizational culture at TD is led by Human
Resources (HR) in
partnership with Risk Management.
The Bank’s risk culture starts with the “tone at
the top” set by the Chief Executive Officer (CEO)
and the Senior Executive Team (SET), and is supported by the
Bank’s vision, purpose, shared commitments,
Code of Conduct and Ethics and risk appetite.
These governing objectives describe and
drive the behaviours,
decision making, and business practices
that the Bank seeks to foster among its
employees, in building a culture where the only
risks taken are those within our
established risk appetite. The Bank’s risk culture reinforces
that it is everyone’s accountability to self-reflect,
learn from past experiences, encourage
open
communication, escalate matters on a
timely basis, and strive for transparency on
all aspects of risk taking. The Bank’s employees
are expected to challenge,
communicate, self-identify and escalate
in a timely, accurate and forthright manner when they believe
the Bank is operating outside of its desired
risk culture or
risk appetite.
Ethics, integrity and conduct is a pillar of
TD’s culture and is a key component of the Bank’s
risk culture. The Bank’s Code of Conduct and
Ethics guides
employees and directors to make decisions
that meet the highest standards of integrity, professionalism, and
ethical behaviour. Every Bank employee and director
is expected and required to assess business
decisions and actions on behalf of the organization
in light of whether it is right, legal, and
fair.
The Bank’s desired risk culture is reinforced by linking
compensation to management’s performance
against the Bank’s risk appetite. An annual consolidated
assessment of management’s performance against
the RAS is prepared by Risk Management,
reviewed by the Risk Committee, and
is used by the HR
Committee as a key input into compensation
decisions. All executives are individually assessed
against objectives that include consideration
of risk and control
behaviours. This comprehensive approach
allows the Bank to consider whether the actions
of senior management resulted in risk
and control events within their
area of responsibility.
In addition, Oversight Functions operate
independently from segments, supported
by an organizational structure that is designed
to provide objective oversight and
independent challenge. Oversight Function heads,
including the CRO, have unfettered access
to respective Board committees to raise risk,
compliance, and other
issues. Lastly, awareness and communication of the Bank’s RAS and
the ERF take place across the organization
through enterprise risk communication
programs, employee orientation and training,
and participation in internal risk management
conferences. These activities further strengthen
the Bank’s risk culture
by increasing the knowledge and understanding
of the Bank’s expectations for risk taking.
WHO MANAGES RISK
The Bank’s risk governance structure emphasizes
and balances strong independent oversight
with clear ownership for risk across the Bank.
Under the Bank’s
approach to risk governance, a “three lines
of defence” model is employed, in which
the first line of defence is the risk owner, the second line
provides risk
oversight, and the third line is internal audit.
The Bank’s risk governance model includes a
senior management committee structure that is
designed to support transparent risk reporting
and discussions. The
Bank’s overall risk and control oversight is provided
by the Board and its Committees.
The CEO and SET determine the Bank’s long-term direction
which is then
carried out by segments within the Bank’s risk appetite.
Risk Management, headed by the CRO,
sets enterprise risk strategy and policy
and provides independent
oversight to support a comprehensive and proactive
risk management approach. The
CRO, who is also a member of the SET, has unfettered access to the Risk
Committee. In addition, the Chief Anti-Money
Laundering Officer and the Chief Compliance
Officer have unfettered access to the Audit
Committee.
The Bank has a subsidiary governance framework
to support its overall risk governance structure,
including Boards of Directors, and committees
for various
subsidiary entities where appropriate. Specific
to the U.S. Retail business segment, oversight
of risk and controls is provided by the
respective U.S. subsidiaries’
Boards of Directors and their Board Risk and
Audit Committees. The U.S. Chief Risk Officer (U.S.
CRO) has unfettered access to the U.S. Board
Risk Committee,
the U.S. BSA Officer has unfettered access to the
U.S. Board Audit and U.S. Compliance
Committees, and the U.S. Chief Compliance Officer has
unfettered
access to the U.S. Audit Committee. In addition,
as further described in “Update on the
Remediation of the U.S. Bank Secrecy Act/Anti-Money
Laundering
Program and Enterprise AML Program”,
the Bank is undertaking a remediation of
its U.S. BSA/AML Program, which is a
cross-functional undertaking, spanning
business lines and control functions. The Bank
has established a dedicated program
management infrastructure to monitor execution
against the remediation
program. This work is being overseen by
the U.S. Compliance Committee and the Enterprise
Remediation Committee.
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RISK GOVERNANCE STRUCTURE
The Board of Directors
The Board oversees the Bank’s strategic direction,
the implementation of an effective risk culture
and the internal control framework across
the enterprise. It
accomplishes its risk management mandate
both directly and through its five committees:
Audit, Risk, HR, Corporate Governance and
Remediation. The Board
reviews and approves the Bank’s RAS and related
RAS measures at least annually, and monitors the Bank’s risk profile
and performance relative to its risk
appetite measures and principles. In addition,
the Board has oversight of the Bank’s management
of capital, liquidity and of the integrity and
effectiveness of the
Bank’s internal controls.
The Audit Committee
The Audit Committee oversees financial reporting,
the adequacy and effectiveness of internal
controls, including internal controls over financial
reporting, and the
activities of the Shareholders' Auditor,
Internal Audit Division, Finance Department,
TD Compliance Department,
and Financial Crime Risk Management
Department,
including Anti-Money Laundering/Anti-Terrorist Financing/Economic Sanctions/Anti-Bribery
and Anti-Corruption programs. The
Committee also
recommends to the Board and shareholders
regarding the appointment of the external
auditor.
In addition, the Committee has oversight
of the establishment and
maintenance of policies and programs reasonably
designed to achieve and maintain the
Bank’s compliance with applicable laws and regulations.
In support of this
oversight, the Committee reviews any significant
litigation and regulatory matters. The
Committee also acts as the audit committee
for certain subsidiaries of the
Bank that are federally regulated financial institutions.
The Risk Committee
The Risk Committee is responsible for reviewing
and approving the Enterprise Risk Framework
("ERF") and related risk category frameworks
and policies that are
designed to help manage the Bank's risk exposures.
The Committee also reviews
and recommends
the Enterprise RAS for approval by the Board
annually. In
addition, the Committee oversees the management
of TD’s risk profile and performance relative
to its risk appetite. In support of this oversight,
the Committee
reviews and approves significant enterprise-wide
risk management frameworks and
policies, provides a forum for a comprehensive
analysis of an enterprise view
of risk including consideration of trends, and
current and emerging risks.
The Human Resources Committee
The HR Committee oversees the management
of the Bank’s culture and approves the Bank’s Culture
Framework. It also satisfies itself that HR
risks are
appropriately identified, assessed, and
managed in a manner consistent with the risk
programs within the Bank, and with the
sustainable achievement of the
Bank’s business objectives. In addition, the Committee
monitors the Bank’s compensation strategy, plans, policies and practices,
including the appropriate
consideration of risk.
The Corporate Governance Committee
The Corporate Governance Committee develops,
and where appropriate, recommends
to the Board for approval corporate governance
principles, including the
Bank’s Code of Conduct and Ethics, aimed at
fostering a healthy governance culture at
the Bank, and also acts as the conduct review
committee for the Bank and
certain subsidiaries of the Bank that are federally
regulated financial institutions, including providing
oversight of conduct risk. In addition, the
Committee has
oversight of the Bank’s strategy,
performance and reporting on corporate
responsibility for sustainability matters,
the establishment and maintenance of policies
in
respect of the Bank’s compliance with the consumer
protection provisions of the Financial
Consumer Protection Framework, and regularly
assesses Board
succession planning considerations.
The Remediation Committee
The Board approved the establishment of a
Remediation Committee effective December
5, 2024, with a mandate to provide oversight
of the Bank’s compliance
with certain regulatory enforcement-related
orders and agreements. The Committee
oversees and challenges, through regular
reports from management across
all
three lines of defence, the timely progress,
implementation and sustainability of required
remediation activities, including oversight
of the sustainable
implementation of transformation initiatives
and improvements in each applicable business
and corporate segment.
Chief Executive Officer and Senior Executive
Team
The CEO and the SET develop and recommend
to the Board the Bank’s long-term strategic direction
and also develop and recommend for Board
approval TD’s
RAS. The SET members set the “tone at the
top” and manage risk in accordance with
the Bank’s RAS while considering the impact
of current and emerging risks
on the Bank’s strategy and risk profile. This accountability
includes identifying, understanding and
communicating significant
risks to the Risk Committee.
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Executive Committees
The CEO, in consultation with the CRO establishes
the Bank’s executive committee structure.
These committees are chaired by SET members
and meet regularly
to oversee governance, risk, and control activities
and to review and monitor risk strategies
and associated risk activities and practices.
The ERMC, chaired by the CEO, oversees
the management of major enterprise governance,
risk, and control activities and promotes an
integrated and effective
risk management culture. The following executive
committees have been established to
manage specific major risks based on the nature
of the risk and related
business activity:
●
ALCO – chaired by the Chief Financial Officer
(CFO), the ALCO oversees directly and
through its standing subcommittees (the
Enterprise Capital
Committee and Global Liquidity and Funding
(GLF) Committee) the management
of the Bank’s consolidated non-trading market risk
and each of its
consolidated liquidity, funding, investments, and capital positions.
●
OROC – chaired by the CRO, the OROC oversees
the identification, monitoring, and control
of key risks within the Bank’s operational risk
profile.
●
DC – chaired by the CFO, the DC oversees that appropriate
controls and procedures are in place and operating
to permit timely, accurate, balanced,
and compliant disclosure to regulators
with respect to public disclosure, shareholders,
and the market.
●
ERRC – chaired by the CRO, the ERRC
oversees the management of reputational
risk within the Bank’s risk appetite, provides a
forum for discussion,
review, and escalation for non-traditional risks, and acts as a
decisioning body in cases where urgent
risk assessment and decisions are required
for
select high-risk cross-segment/enterprise
changes and where decision rights run across
more than one group.
●
Remediation Subcommittee – chaired by the
CRO, this subcommittee provides dedicated
senior executive oversight, direction, and guidance
on risk
transformation activities to address specific
regulatory remediation, maturity initiatives,
and provide Enterprise oversight of enforcement
actions under
the U.S. Remediation Office.
Risk Management
The Risk Management function, headed
by the CRO, provides independent oversight
of enterprise-wide risk management, risk governance,
and control, including
the setting of risk strategy and policy to
manage risk in alignment with the Bank’s risk
appetite and business strategy. Risk Management’s primary
objective is to
support a comprehensive and proactive approach
to risk management that promotes a strong
risk culture. Risk Management works with
the segments and other
oversight functions to establish policies, standards,
and limits that align with the Bank’s risk
appetite and monitors and reports on current
and emerging risks and
compliance with the Bank’s risk appetite. The
CRO leads and directs a diverse team of risk
management professionals, including regulatory
compliance and
financial crime risk management (including
anti-money laundering), organized to oversee
risks arising from each of the Bank’s major risk
categories. There is an
established process in place for the identification
and assessment of top and emerging
risks, including tail risk i.e., low probability
events that can result in large or
unquantifiable losses, material intervention
or action from regulators, and/or significant
harm to the TD brand. In addition, the Bank
has clear procedures governing
when and how risk events and issues are
communicated to senior management and
the Risk Committee.
Business and Corporate Segments
Each business and corporate segment has
a dedicated risk management function that
reports directly to a senior risk executive
who, in turn, reports to the CRO.
This structure supports an appropriate level
of independent oversight while emphasizing
accountability for risk within the segment.
Business and corporate
management is responsible for setting
the segment-level risk appetite and measures,
which are reviewed and challenged by
Risk Management, endorsed by the
ERMC, and approved by the CEO, to align
with the Bank’s RAS and manage risk within approved
risk limits.
The corporate segment includes service
and control groups (e.g., Platforms and
Technology; Transformation, Enablement and Customer Experience; HR and
Finance) that, like business segments, are
responsible for assessing risk, designing
and implementing controls and monitoring and
reporting their ongoing
effectiveness.
Internal Audit
The Bank’s Internal Audit function provides independent
and objective assurance to the Board
regarding the reliability and effectiveness of
key elements of the
Bank’s risk management, internal control, and
governance processes.
TD Compliance Department (Compliance)
Compliance is an independent regulatory
compliance risk and oversight function
for business conduct and market conduct laws,
rules and regulations (LRRs).
Compliance is also responsible for the design
and oversight of the Bank’s Regulatory Compliance
Management (RCM) program in accordance with
the Enterprise
RCM Framework and related standards
and supports the provision of the Chief
Compliance Officer’s opinion to the Audit
Committee as to whether the RCM
controls are sufficiently robust to achieve
compliance with applicable laws, rules and
regulatory requirements enterprise-wide.
Financial Crime Risk Management (FCRM)
FCRM, previously Global Anti-Money Laundering,
is responsible for the oversight of TD’s regulatory
compliance regarding AML, Anti-Terrorist Financing,
Economic Sanctions, and Anti-Bribery/Anti-Corruption
(collectively, “Financial Crime Risk” or “FCR”) and assesses
the adequacy of, adherence to and
effectiveness of the Bank’s day-to-day controls of
the FCR Programs, using a risk-based
approach. FCRM is also responsible
for regulatory compliance and
broader prudential risk management
across the Bank in alignment with enterprise
AML, Sanctions and Anti-Bribery/Anti-Corruption
policies so that money
laundering, terrorist financing, economic
sanctions, and bribery and corruption risks
are appropriately identified and mitigated.
FCRM reports to the Audit
Committee and ERMC on the overall adequacy
and effectiveness of the FCR Programs including
AML, program design and operations.
As described in the “Update on the Remediation
of the U.S. Bank Secrecy Act/Anti-Money
Laundering Program and Enterprise AML
Program”
section, a
remediation plan is in place to address
U.S. BSA/AML regulatory requirements
and deliver on enhancements to strengthen
the AML program across the Global
Bank, with the goal of enabling the Bank’s compliance
with regulatory expectations including
how we identify, measure, monitor and mitigate AML related risks.
Both the U.S. and the Global programs have
established risk mitigation and enhancement
programs to help ensure that any interim
risks are appropriately
identified and managed according to established
Risk Management standards during the period
that the full multi-year remediation and
enhancement activities are
delivered. The scope of the risk mitigation program
extends beyond FCRM specific risks
and is focused on helping to ensure that additional
risks arising from the
Bank undertaking this type and scale of change
are appropriately managed, including Model
Risk, Technology and Data Risk, Third Party Risk and Operational
Risk.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
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Three Lines of Defence
In order to further the understanding of responsibilities
for risk management, the Bank employs
the following “three lines of defence” model
that describes the
respective accountabilities of each line of
defence in managing risk across the Bank.
THREE LINES OF DEFENCE
FIRST LINE
RISK OWNER
IDENTIFY AND
CONTROL
●
Own, identify, manage, measure, and monitor current and emerging
risks in day-to-day activities, operations,
products, and
services.
●
Understand the risks, including tail risks, across
relevant risk categories (what could go
wrong and the potential impact to the
Bank’s customers, colleagues, and the Bank itself).
●
Identify and understand the applicable LRRs,
including LRRs specific to the business.
●
Promote ongoing initiatives to raise the profile
of risk considerations and understand
key risks impacting the business.
●
Implement governance and control processes
to promote risk awareness, clear risk ownership
within the business, and
personal accountability.
●
Design, implement, and maintain appropriate
mitigating controls, and assess the design
and operating effectiveness of those
controls.
●
Understand and monitor control gaps and
proactively self-identify and remediate issues.
●
Conduct continuous monitoring of risk exposures,
and any internal or external developments
that may impact those risks. This
includes monitoring and reporting on risk profile
so that activities are within TD’s risk appetite
and policies.
●
Implement risk-based approval processes
for all new products, activities, processes,
and systems.
●
Escalate risk issues and develop and implement
action plans in a timely manner.
●
Develop and deliver training, tools, and advice
to support its accountabilities.
●
Promote a strong risk culture.
SECOND LINE
RISK OVERSIGHT
SET STANDARDS
AND CHALLENGE
●
Establish and communicate enterprise governance,
risk, and control strategies, frameworks,
and policies.
●
Provide oversight and independent challenge
to the first line through an effective objective assessment,
that is evidenced and,
where significant, documented, including:
-
Challenge the quality and sufficiency of the first line’s risk
activities;
-
Identify and assess current and emerging risks
and controls, using a risk-based approach,
as appropriate;
-
Monitor the adequacy and effectiveness of internal
control activities;
-
Review and discuss assumptions, material
risk decisions and outcomes;
-
Aggregate and share results across business
lines and control areas to identify similar
events, patterns, or broad trends;
and
-
Monitor the execution of the Bank’s remediation activities.
●
Identify and assess, and communicate relevant
regulatory changes for the applicable LRRs.
●
Develop and implement risk measurement
tools so that activities are within TD’s RAS.
●
Monitor and report on compliance with the
Bank’s RAS and policies.
●
Escalate risk issues in a timely manner, with a focus on maintaining
transparency to key stakeholders.
●
Report on the risks of the Bank on an enterprise-wide
and disaggregated level to the Board and/or
senior management,
independently of the business lines or operational
management.
●
Provide training, tools, and advice to support
the first line in carrying out its accountabilities.
●
Promote a strong risk culture.
●
Where the second line of defence is a risk
owner, roles and responsibilities defined under 1st line of defence
apply
THIRD LINE
INTERNAL AUDIT
INDEPENDENT
ASSURANCE
●
Verify independently that TD’s ERF is designed and operating
effectively.
●
Validate the effectiveness of the first and second lines of defence in
fulfilling their mandates and managing risk.
APPROACH TO RISK MANAGEMENT PROCESSES
The Bank’s comprehensive and proactive approach
to risk management is comprised of four processes:
risk identification and assessment, measurement,
control,
and monitoring and reporting.
Risk Identification and Assessment
Risk identification and assessment is focused
on recognizing and understanding existing
risks, risks that may arise from new or
evolving business initiatives,
aggregate risks, tail risks, and emerging risks
from the changing environment. The Bank’s
objective is to establish and maintain integrated
risk identification and
assessment processes that enhance the understanding
of risk interdependencies, consider how risk
types intersect, and support the identification
of emerging
risks.
To
that end, the Bank’s Enterprise-Wide Stress Testing (EWST) program enables
senior management, the Board, and its committees
to identify and
articulate enterprise-wide risks and understand
potential vulnerabilities for the Bank.
Risk Measurement
The ability to quantify risks is a key component
of the Bank’s risk management process. The Bank’s risk
measurement process aligns with regulatory
requirements
such as capital adequacy, leverage ratios, liquidity measures, stress
testing, and maximum credit exposure guidelines
established by its regulators. Additionally,
the Bank has a process in place to quantify
risks to provide accurate and timely measurements
of the risks it assumes.
In quantifying risk, the Bank uses various
risk measurement methodologies, including
Value-at-Risk (VaR) analysis, scenario analysis, stress testing, and limits.
Other examples of risk measurements include
credit exposures, PCL, peer comparisons,
trending analysis, liquidity coverage, leverage
ratios, capital adequacy
metrics, and operational risk event notification
metrics. The Bank also requires segments and
oversight functions to assess key risks and internal
controls through
a structured Risk and Control Self-Assessment
program. Internal and external risk events
are monitored to assess whether the Bank’s internal
controls are
effective. This allows the Bank to identify, escalate, and monitor significant
risk issues as needed.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 71
Risk Control
The Bank’s risk control processes are established
and communicated through the Risk Committee
and management approved policies, and
associated
management approved procedures, control limits,
and delegated authorities which reflect
its risk appetite and risk tolerances.
The Bank’s approach to risk control also includes risk
and capital assessments to appropriately
capture key risks in its measurement and
management of capital
adequacy. This involves the review, challenge, and endorsement by senior management
committees of the Bank’s ICAAP and related
economic capital practices.
The Bank’s performance is measured based on
the allocation of risk-based capital to businesses
and the cost charged against that capital.
Risk Monitoring and Reporting
The Bank monitors and reports on risk levels
on a regular basis against its risk appetite
and Risk Management reports on its
risk monitoring activities to senior
management, the Board and its Committees,
and appropriate executive and management
committees. Complementing regular risk
monitoring and reporting,
ad hoc risk reporting is provided to senior
management, the Risk Committee, and the
Board, as appropriate, for new and emerging
risks or any significant changes
to the Bank’s risk profile. The Bank is developing
methodologies and approaches for climate
scenario analysis through participation in
industry-wide working
groups and the OSFI led Standardized
Climate Scenario Exercise, and is working
to embed the assessment of climate-related risks
and opportunities into relevant
Bank processes.
Stress Testing
Stress testing is an integral component of
the Bank’s risk management framework and
serves as a key component of the Bank’s capital,
strategic and financial
planning processes. Stress testing at the
Bank comprises an annual enterprise-wide
stress test featuring a range of scenarios,
prescribed regulatory stress tests in
multiple jurisdictions, and various ongoing
and ad hoc stress tests and analysis.
The results of these stress tests and analysis enable
management to assess the
impact of geopolitical events and changes
to economic and other market factors on the
Bank’s financial condition and assist in the determination
of capital and
liquidity adequacy and targets, risk appetite
and other limits. These exercises
enable the identification and quantification of
vulnerabilities, the monitoring of
changes in risk profile relative to risk appetite
limits, and evaluation of business plans.
The Bank utilizes a combination of quantitative
modelling and qualitative approaches to assess
the impact of changes in the macroeconomic
environment on the
Bank’s income statement, balance sheet, and
capital and liquidity position under hypothetical
stress situations. Stress testing engages
senior management across
the lines of business, Finance, TBSM, Economics,
and Risk Management. Stress test
results are reviewed, challenged and approved
by senior management and
executive oversight committees. The Bank’s
Risk Committee also reviews, challenges,
and discusses the results. The results
are submitted, disclosed, or shared
with regulators as required or requested.
Enterprise-Wide Stress Testing
The Bank conducts an annual EWST as part
of a comprehensive capital and liquidity planning,
strategic, and financial exercise that is a key
component of the
Bank’s ICAAP framework. The EWST results are
considered in establishing the Bank’s capital
targets and stress related risk appetite limits,
evaluating the Bank’s
strategies and business plan, and identifying
actions that senior management could
take to manage the impact of stress events. In
addition, the Bank conducts ad
hoc stress tests and analysis for assessing
the impact of events deemed to be potentially
material or of concern in support of senior
management’s assessment of
vulnerabilities and operational readiness
to an uncertain or rapidly changing operating
environment.
The program is subject to a well-defined
governance framework that facilitates executive
oversight and engagement throughout the
organization. EWST
methodologies and results are reviewed and
challenged by executives and subject
matter experts from the line of business, finance
and risk teams. Stress testing
results are further reviewed by ERMC and
are also shared with the Board and regulators.
The Bank’s EWST program involves the development,
execution and
assessment of stress scenarios with varying
features and degrees of severity on the balance
sheet, income statement, capital, liquidity, and leverage. It enables
management to identify and assess enterprise-wide
risks and understand potential vulnerabilities,
and changes to the risk profile of the Bank.
The stress scenarios
are developed with consideration of the Bank’s
key business activities, exposures, concentrations
and vulnerabilities. The scenarios are designed
to be consistent
with regulatory stress testing frameworks
and cover a wide variety of risk factors
meaningful to the Bank’s risk profiles in North America
and globally including
changes to unemployment, gross domestic product,
home prices, inflation and interest rates.
For the 2025 EWST program, the Bank developed
and assessed a number of scenarios using
validated approaches that explored emerging risks
such as inflation,
various interest rate environments, U.S.
trade policy and tariffs, and elevated regulatory
risks. The stress testing scenarios included
a plausible typical recession
calibrated to historical recessions in Canada
and the U.S., a low probability and highly
severe scenario related to geopolitical uncertainty
accompanied with high
inflation and interest rate environment, and
an alternative scenario where concerns
around federal deficits lead to increases
in treasury yields and reduced
economic activity. Supplemental analysis performed during 2025
explored strategic risks and other events
including insider fraud, cybersecurity breach
and
sanctions violation to support senior management
in assessing key risks and vulnerabilities.
Other Stress Tests and Analysis
Ongoing stress testing and scenario analyses
within specific risk types supplement and
support our enterprise-wide analysis. Results
from these risk-specific
programs are used in a variety of decision-making
processes including risk limit setting, portfolio
composition evaluation, risk appetite articulation
and business
strategy implementation. In addition,
the Bank conducts ad hoc stress tests
and analysis for the enterprise as well as
for targeted portfolios, to evaluate potential
vulnerabilities and operational readiness
to specific changes in economic and
market conditions including those related
to evolving geopolitical risk events. During
the year the Bank undertook stress analysis
of various geopolitical scenarios related
to trade policy to support management’s assessment
of associated key risks,
vulnerabilities, and operational readiness.
Refer to the Environmental and Social
Risk (including Climate-Related Risk) section
for a discussion of our climate
program.
Stress tests are also conducted on certain legal
entities and jurisdictions, in line with
prescribed regulatory requirements.
The Bank’s U.S. holding company and
operating bank subsidiaries’ capital planning
process including execution of stress tests
are conducted in accordance with the
U.S. Dodd-Frank Act stress testing
(DFAST) requirements. In addition, certain Bank subsidiaries
in Singapore, Ireland, and the United
Kingdom conduct stress testing exercises as
part of their
respective ICAAP. The Bank undertakes other internal and regulatory based
stress tests including liquidity and market risk,
which are detailed in the respective
sections.
The Bank also conducts scenario and sensitivity
analysis as part of the Recovery and
Resolution Planning program to assess potential
mitigating actions and
contingency planning strategies, as required.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 72
Strategic Risk
Strategic risk is the risk of sub-optimal outcomes
(including financial losses or reputational
damage) arising from the Bank’s strategic
choices, execution of our
strategies, responses to disruption (e.g.,
technological advancements or unforeseen
competitive shifts) and regulatory shifts, or
tail risk exposures (i.e., low
probability events that can result in large or
unquantifiable losses, material intervention
or action from regulators, and/or significant
harm to the TD brand).
Strategic choices may span ongoing business
operations and inorganic (Mergers & Acquisitions
and strategic partnerships) activities.
WHO MANAGES STRATEGIC RISK
The CEO manages Strategic Risk, supported
by members of the SET and the ERMC.
The CEO, together with the SET, defines the overall strategy, in consultation
with, and subject to approval by the Board.
The Enterprise Strategy group, under the leadership
of the CFO, is charged with developing
the Bank’s long-term
strategy and shorter-term strategic objectives
and priorities with input and support from
senior executives across the Bank.
Each member of the SET is responsible
for establishing and managing short-and
medium-term strategic priorities for their areas
of responsibility (business
segment or corporate function), and ensuring
such strategies are aligned with the Bank’s short-and
medium-term objectives and priorities, and
are within the
Bank’s risk appetite. Each member of the SET is
also accountable to the CEO for identifying,
assessing, measuring, controlling, monitoring,
and reporting on the
effectiveness and risks of their business segment
or corporate function’s strategies.
The CEO, members of the SET, and other senior executives report to the Board
on the implementation of the Bank’s strategies, identifying
related risks and
explaining how they are managed.
The ERMC oversees the identification and
monitoring of significant and emerging risks
related to the Bank’s strategies so that
mitigating actions are taken where
appropriate.
HOW TD MANAGES STRATEGIC RISK
The Bank’s enterprise-wide strategies and operating
performance, and those of significant business
segments and corporate functions, are assessed
regularly by
the CEO and members of the SET through
an integrated financial and strategic planning
process, as well as operating results reviews.
The Bank’s RAS establishes strategic risk limits at
the enterprise and business segment
levels. Limits include qualitative and quantitative
assessments and are
established to monitor and control business
concentrations, strategic disruption, and
E&S risks.
The Bank’s annual integrated planning process establishes
plans at the enterprise and segment levels.
The plans incorporate market trends, TD’s relative
performance, short-and medium-term strategies,
target metrics, key risks / mitigants, and
alignment with the Bank’s enterprise strategy
and risk appetite.
Operating results are reviewed periodically during
the year to monitor segment / function
performance against the integrated financial
and strategic plan. These
reviews include an evaluation of short-and
medium-term strategy and short-term
strategic priorities, including the operating
environment, relative performance and
competitive positioning assessments, initiative
execution status, and key risks / mitigants.
The frequency of operating results reviews
depends on the risk profile
and size of the business segment or corporate
function.
The Bank’s strategic risk and adherence to its
risk appetite is reviewed by the ERMC in
the normal course, as well as by the Board.
Additionally, material
acquisitions are assessed for their fit with
the Bank’s strategy and risk appetite in accordance
with the Bank’s Due Diligence Policy. This assessment is reviewed
by the SET and Board as part of the decision
process.
The shaded areas of this MD&A represent
a discussion on risk management policies
and procedures relating to credit, market,
and liquidity risks as required under
IFRS 7,
Financial Instruments: Disclosures
(IFRS 7), which permits these specific
disclosures to be included in the MD&A.
Therefore, the shaded areas which
include Credit Risk, Market Risk, and Liquidity
Risk, form an integral part of the audited
Consolidated Financial Statements for
the years ended October 31, 2025
and October 31, 2024.
The Basel Framework
The objective of the Basel Framework is to improve the
consistency of capital requirements internationally
and establish minimum regulatory capital
standards
which adequately capture risks. The
Basel Framework sets different risk-sensitive
approaches for calculating credit, market,
and operational RWA.
Credit Risk
Credit risk is the risk of loss if a borrower or
counterparty in a transaction fails to meet
its agreed payment obligations.
Credit risk is one of the most significant and
pervasive risks in banking. Every loan,
extension of credit, or transaction that involves
the transfer of payments
between the Bank and other parties or financial
institutions exposes the Bank to some
degree of credit risk.
The Bank’s primary objective is to be methodical
in its credit risk assessment so that
the Bank can understand, select, and manage
its exposures to reduce
significant fluctuations in earnings.
The Bank’s strategy is to include central oversight
of credit risk in each business, and reinforce
a culture of transparency, accountability, independence, and
balance.
WHO MANAGES CREDIT RISK
The responsibility for credit risk management
is enterprise-wide.
To
reinforce ownership of credit risk, credit risk
control functions are integrated into each
business, but also report to Risk Management.
Each business segment’s credit risk control unit is
responsible for its credit decisions and
must comply with established policies, exposure
guidelines, credit
approval limits, and policy/limit exception procedures.
It must also adhere to established enterprise-wide
standards of credit assessment and obtain
Risk
Management’s approval for credit decisions beyond its
discretionary authority.
Risk Management is accountable for oversight
of credit risk by developing policies that
govern and control portfolio risks, and approval
of product-specific
policies, as required.
The Risk Committee of the Board oversees
the management of credit risk and annually
approves certain significant credit risk policies.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 73
HOW TD MANAGES CREDIT RISK
The Bank’s Credit Risk Management Framework
outlines the internal risk and control
structure to manage credit risk and includes
risk appetite, policies,
processes, limits and governance. The Credit
Risk Management Framework is maintained by
Risk Management and supports alignment
with the Bank’s risk
appetite for credit risk.
Credit risk policies and credit decision-making
strategies, as well as the discretionary limits
of officers throughout the Bank for extending lines
of credit are
approved by Risk Management, and the Board
where applicable.
Limits are established to monitor and control
country, industry, product, geographic, and group exposure risks in the portfolios in accordance
with enterprise-
wide policies.
In the Bank’s Retail businesses, the Bank uses established
underwriting guidelines (which include
collateral and loan-to-value requirements)
along with
approved scoring techniques and standards
in extending, monitoring, and reporting
personal credit. Credit scores and decision
strategies are used in the
origination and ongoing management of new
and existing retail credit exposures. Scoring
models and decision strategies utilize a
combination of borrower
attributes, including, but not limited to, income,
employment status, existing loan exposure
and performance, and size of total bank
relationship, as well as external
data such as credit bureau information, to determine
the amount of credit the Bank is prepared to extend
to retail customers and to estimate future
credit
performance. Established policies and procedures
are in place to govern the use, and
monitor and assess the performance of scoring
models and decision
strategies to align with expected performance
results. Retail credit exposures approved
within the credit underwriting centres are subject
to ongoing Retail Risk
Management review to assess the effectiveness of
credit decisions and risk controls, as well as
to identify emerging or systemic issues and
trends. Material policy
exceptions are tracked and reported and larger
dollar exposures and material exceptions
to policy are escalated to Retail Risk Management.
The Bank’s Commercial Banking and Wholesale Banking
businesses use credit risk models and policies
to establish borrower and facility risk
ratings (BRR and
FRR), quantify and monitor the level of risk,
and to aid in the Bank’s effective management of risk.
Risk ratings are also used to determine
the amount of credit
exposure the Bank is willing to extend
to a particular borrower. Management processes are used
to monitor country, industry, and borrower or counterparty risk
ratings, which include daily, monthly, quarterly, and annual review requirements for credit exposures. The key
parameters used in the Bank’s credit risk models
are
monitored on an ongoing basis.
Unanticipated economic or political changes
in a foreign country could affect cross-border payments
for goods and services, loans, dividends,
and trade related
finance, as well as repatriation of the Bank’s capital
in that country. The Bank currently has credit exposure in
a number of countries, with the majority of the
exposure in North America. The Bank measures
country risk using approved risk rating models
and qualitative factors that are also used
to establish country
exposure limits covering all aspects of credit
exposure across all businesses. Country risk
ratings are managed on an ongoing
basis and are subject to a detailed
review at least annually.
As part of the Bank’s credit risk strategy, the Bank sets limits on the
amount of credit it is prepared to extend
to specific industry sectors. The Bank
monitors its
concentration to any given industry to provide
for a diversified loan portfolio and to reduce
the risk of undue concentration. The Bank
manages this risk using limits
based on an internal risk rating methodology
that considers relevant factors. The Bank
assigns a maximum exposure limit or a
concentration limit to each major
industry segment which is a percentage of its
total wholesale and commercial private sector
exposure.
The Bank may also set limits on the amount
of credit it is prepared to extend to a particular
entity or group of entities, also referred
to as “entity risk”. All entity
risk is approved by the appropriate decision-making
authority using limits based on the entity’s BRR.
This exposure is monitored on a regular basis.
To
determine the potential loss that could be incurred
under a range of adverse scenarios, the
Bank subjects its credit portfolios to stress
tests. Stress tests
assess vulnerability of the portfolios to
the effects of severe but plausible situations, such as
an economic downturn or a material market
disruption.
Credit Risk and the Basel Framework
The Bank uses the Basel IRB to calculate
credit risk RWA for all material portfolios. Based on exposure
class, in accordance with the OSFI CAR
guidelines, either
a foundation approach (Foundation Internal
Ratings-Based (FIRB)) or advanced
approach (Advanced Internal Ratings-Based
(AIRB)) is applied.
The following risk parameters are used in
credit risk RWA calculations and may be subject to prescribed
floors in some cases:
●
Probability of default (PD) – the likelihood
that the borrower will not be able to meet
its scheduled repayments within a one-year
time horizon.
●
Loss given default (LGD) – the amount
of loss the Bank would likely incur when a
borrower defaults on a loan, which is
expressed as a percentage of exposure
at default (EAD).
●
EAD – the total amount of the Bank’s exposure at
the time of default, including certain off-balance
sheet items.
The FIRB approach primarily uses internally
derived PD, while other components such
as LGD and EAD are prescribed. The
AIRB approach uses internally
derived PD, LGD, and EAD.
To
continue to qualify to use the IRB approaches
for credit risk, the Bank must meet the ongoing
conditions and requirements established by OSFI
and the Basel
Framework. The Bank regularly assesses its
compliance with these requirements.
Credit Risk Exposures Subject to the
IRB Approaches
Banks that adopt the IRB approaches to
credit risk must report credit risk exposures by
counterparty type, each having different underlying
risk characteristics.
These counterparty types may differ from the
presentation in the Bank’s 2025 Consolidated
Financial Statements. The Bank’s credit risk exposures
are divided into
two main portfolios, retail and non-retail.
Retail Exposures
In the retail portfolio, including individuals and
small businesses, the Bank manages exposures
on a pooled basis, using predictive credit
scoring techniques. There
are three sub-types of retail exposures: residential
secured (for example, mortgages and
HELOCs), qualifying revolving retail (for example,
credit cards, unsecured
lines of credit, and overdraft protection products),
and other retail (for example, personal loans,
including secured automobile loans, student
lines of credit, and
small business banking credit products).
The Bank calculates RWA for its retail exposures using the
AIRB approach. All retail PD, LGD, and
EAD parameter models are based on the
internal default
and loss performance history for each of
the three retail exposure sub-types. These
parameters are also used in the calculation
of regulatory capital, economic
capital, and allowance for credit losses.
Account-level PD, LGD, and EAD models
are built for each product portfolio and
calibrated based on the observed account-level
default and loss performance
for the portfolio.
Consistent with the AIRB approach, the Bank
defines default for exposures as delinquency
of 90 days or more for the majority
of retail credit portfolios. LGD
estimates used in the RWA calculations reflect economic losses,
such as direct and indirect costs as well as
any appropriate discount to account
for time between
default and ultimate recovery. EAD estimates reflect the historically
observed utilization of credit limits at default.
PD, LGD, and EAD models are calibrated
using
established statistical methods, such as logistic
and linear regression techniques. Predictive
attributes in the models may include account
attributes, such as loan
size, interest rate, and collateral, where
applicable; an account’s previous history and
current status; an account’s age on book; a customer’s
credit bureau
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 74
attributes; a customer’s other holdings
with the Bank; and macroeconomic inputs,
such as unemployment rate. For secured
products such as residential
mortgages, property characteristics, loan
to value ratios, and a customer’s
equity in the property, play a significant role in PD as well as in LGD
models.
All risk parameter estimates are updated
on a quarterly basis based on the refreshed
model inputs. Parameter estimation is fully automated
based on approved
formulas and is not subject to manual overrides.
Exposures are then assigned to pre-defined
PD segments based on their estimated long-run
average one-year PD.
The predictive power of the Bank’s retail credit
models is assessed against the most recently
available one-year default and loss performance
on a quarterly
basis. All models are also subject to a
comprehensive independent validation as
outlined in the “Model Risk Management”
section of this disclosure.
Long-run PD estimates are generated by
including key economic indicators, such as
interest rates and unemployment rates, and
using their long-run average
over the credit cycle to estimate PD.
LGD estimates are required to reflect a downturn
scenario. Downturn LGD estimates are generated
by using macroeconomic inputs, such
as changes in
housing prices and unemployment rates
expected in an appropriately severe downturn
scenario.
For unsecured products, downturn LGD estimates
reflect the observed lower recoveries
for exposures defaulted during the 2008
to 2009 recession. For
products secured by residential real estate,
such as mortgages and HELOCs, downturn LGD
reflects the potential impact of a severe housing
downturn. EAD
estimates similarly reflect a downturn scenario.
The following table maps PD ranges
to risk levels:
Risk assessment
PD Segment
PD Range
Low Risk
1
0.00
to
0.15
%
Normal Risk
2
0.16
to
0.41
3
0.42
to
1.10
Medium Risk
4
1.11
to
2.93
5
2.94
to
4.74
High Risk
6
4.75
to
7.59
7
7.60
to
18.24
8
18.25
to
99.99
Default
9
100.00
Non-Retail Exposures
In the non-retail portfolio, the Bank manages
exposures on an individual borrower basis, using
industry and sector-specific credit risk
models, and expert judgment.
The Bank has categorized non-retail credit risk
exposures according to the following
Basel counterparty types: corporate, including
wholesale and commercial
customers, sovereign, and bank. Under the
IRB approaches, CMHC-insured mortgages
are considered sovereign risk and are
therefore classified as non-retail.
The Bank evaluates credit risk for non-retail
exposures by using both a BRR and
FRR. The Bank uses this system for all corporate,
sovereign, and bank
exposures. The Bank determines the risk
ratings using industry and sector-specific
credit risk models that are based on
internal historical data. In Canada, for both
the wholesale and commercial lending portfolios,
credit risk models are calibrated based on internal
data beginning in 1994. In the U.S.,
credit risk models are
calibrated based on internal data beginning in
2007. All borrowers and facilities are assigned
an internal risk rating that must be reviewed
at least once each year.
External data such as rating agency default rates
or loss databases are used to benchmark
the parameters.
Internal risk ratings (BRR and FRR) are key
to portfolio monitoring and management,
and are used to set exposure limits and loan
pricing. Internal risk ratings
are also used in the calculation of regulatory
capital, economic capital, and allowance
for credit losses.
Borrower Risk Rating and PD
Each borrower is assigned a BRR that
reflects the PD of the borrower using proprietary
models and expert judgment. In assessing
borrower risk, the Bank reviews
the borrower’s competitive position,
financial performance, economic, and industry
trends, management quality, and access to funds. Under the IRB
approaches,
borrowers are grouped into BRR grades
where a PD is calibrated for each BRR grade.
Use of projections for model implied risk ratings
is not permitted and BRRs
may not incorporate a projected reversal,
stabilization of negative trends, or the acceleration
of existing positive trends. Historic financial results
can however be
sensitized to account for events that have occurred,
or are about to occur, such as additional debt incurred
by a borrower since the date of the last
set of financial
statements. In conducting an assessment
of the BRR, all relevant and material information
must be taken into account and the information
being used must be
current. Quantitative rating models are used
to rank the expected through-the-cycle PD, and
these models are segmented into categories
based on industry and
borrower size. The quantitative model output
can be modified in some cases by expert judgment,
as prescribed within the Bank’s credit policies.
To
calibrate PDs for each BRR band, the Bank
computes yearly transition matrices based
on annual cohorts and then estimates the average
annual PD for each
BRR. The PD is set at the average estimation
level plus an appropriate adjustment to
cover statistical and model uncertainty. The calibration process
for PD is a
through-the-cycle approach.
TD’s 21-point BRR scale broadly aligns to external
ratings as follows:
Description
Rating Category
Standard & Poor’s
Moody’s Investor Services
Investment grade
0 to 1C
AAA to AA-
Aaa to Aa3
2A to 2C
A+ to A-
A1 to A3
3A to 3C
BBB+ to BBB-
Baa1 to Baa3
Non-investment grade
4A to 4C
BB+ to BB-
Ba1 to Ba3
5A to 5C
B+ to B-
B1 to B3
Watch and classified
6 to 8
CCC+ to CC and below
Caa1 to Ca and below
Impaired/default
9A to 9B
Default
Default
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 75
Facility Risk Rating and LGD
The FRR maps to LGD, with different models
used based on industry and obligor size, and
takes into account facility-specific characteristics
such as collateral,
seniority ranking of debt, loan structure,
and borrower enterprise value.
Average LGD and the statistical uncertainty of LGD
are estimated for each FRR grade. In some
FRR models, the scarcity of historical default
events requires the
model to output a rank-ordering which is
then mapped through expert judgment
to the quantitative LGD scale.
Under the FIRB approach, LGDs are prescribed
whereas the AIRB approach stipulates the use
of downturn LGD, where the downturn period,
as determined by
internal and/or external experience, suggests
higher than average loss rates or lower
than average recovery. To reflect this, calibrated LGDs take into account
both the statistical estimation uncertainty and
the higher than average LGDs experienced
during downturn periods.
Exposure at Default
The Bank calculates non-retail EAD by first
measuring the drawn amount of a facility and
then adding a potential increased utilization
at default from the undrawn
portion, if any. Usage Given Default (UGD) is measured as the percentage
of undrawn exposure that would be expected
to be drawn by a borrower defaulting in
the next year, in addition to the amount that already has been drawn
by the borrower. In the absence of credit mitigation
effects or other details, the EAD is set at
the drawn amount plus (estimated UGD
x undrawn) for AIRB exposure, or (prescribed
UGD x undrawn) for FIRB exposures.
BRR and drawn ratio up to one-year prior
to default are predictors for UGD under the AIRB
approach. Consequently, the UGD estimates are calibrated by
BRR
and drawn ratio, the latter representing
the ratio of the drawn to authorized amounts.
Historical UGD experience is studied for any
downturn impacts, similar to the LGD downturn
analysis. The Bank has not found downturn
UGD to be significantly
different from average UGD, therefore the
UGDs under AIRB are set at the average
calibrated level, by drawn ratio and/or
BRR, plus an appropriate adjustment for
statistical and model uncertainty.
UGDs under the FIRB approach are prescribed
for relevant exposure classes.
Credit Risk Exposures Subject to the Standardized
Approach (SA)
Currently the SA to credit risk is used
for new portfolios, which are in the process of
transitioning to IRB approaches, or exempted
portfolios which are either
immaterial or expected to wind down. The
Bank primarily applies SA to certain segments
within both the Retail and Non-retail portfolios.
Under the SA, the
exposure amounts are multiplied by risk
weights prescribed by OSFI, based on the
OSFI Capital Adequacy Requirements
(CAR) guidelines, to determine RWA.
These risk weights are assigned according
to certain factors including counterparty type,
product type, and the nature/extent of
credit risk mitigation. The Bank
uses external credit ratings, including Moody’s and S&P
to determine the appropriate risk weight
for its exposures to sovereigns and central
banks, public sector
entities (PSEs), multilateral development banks
(MDBs), banks (securities firms and other
financial institutions), and corporates. The
Bank applies SA to certain
retail portfolios, including Real Estate Secured
Lending (RESL), where the assigned risk
weight is primarily based on the exposure’s Loan-to-Value ratio
and
whether the exposure is categorized as income
producing or general.
Lower risk weights apply where approved
credit risk mitigants exist. For off-balance
sheet exposures, specified credit conversion
factors are used to convert the
notional amount of the exposure into a credit
equivalent amount.
Derivative Exposures
Credit risk on derivative financial instruments,
also known as counterparty credit risk,
is the risk of a financial loss occurring as a result
of the failure of a
counterparty to meet its obligation to the Bank.
Derivative-related credit risks are subject to
the same credit approval standards that
the Bank uses for assessing
loans. These standards include evaluating
the creditworthiness of counterparties,
measuring and monitoring exposures, including
wrong-way risk exposures, and
managing the size, diversification, and
maturity structure of the portfolios.
The Bank uses various qualitative and quantitative
methods to measure and manage counterparty
credit risk. These include statistical methods
to measure the
current and future potential risk, as well as
ongoing stress testing to identify and quantify
exposure under a range of adverse scenarios.
The Bank establishes
various limits to manage business volumes
and concentrations. Risk Management
independently measures and monitors
counterparty credit risk relative to
established credit policies and limits. As
part of the credit risk monitoring process,
management periodically reviews all exposures,
including exposures resulting
from derivative financial instruments to higher
risk counterparties, and to assess the
valuation of underlying financial instruments and
the impact evolving market
conditions may have on the Bank.
There are two types of wrong-way risk exposures,
namely general and specific. General
wrong-way risk arises when the PD of the
counterparties moves in the
same direction as a given market risk factor. Specific wrong-way
risk arises when the exposure to a particular
counterparty moves in the same direction as
the PD
of the counterparty due to the nature of
the transactions entered into with that counterparty. These exposures
require specific approval within the credit approval
process. The Bank measures and manages
specific wrong-way risk exposures in the
same manner as direct loan obligations
and controls them by way of
approved credit facility limits.
The Bank uses the standardized approach
for counterparty credit risk to calculate
the EAD amount, which is defined by OSFI as
a multiple of the summation of
replacement cost and potential future exposure,
to estimate the risk and determine regulatory
capital requirements for derivative exposures.
Credit Valuation Adjustment Risk
The Bank maintains policies and procedures
that govern the valuation and hedging of
Credit Valuation Adjustment (CVA) risk. These policies, procedures and
associated results are regularly reviewed and
approved by senior management. While
CVA risk, capital and hedging is managed and owned by a
dedicated
business function, the independent Risk
Management function oversees the process,
including the effectiveness of hedges, reporting
and monitoring for
compliance to policies and frameworks and
adherence to risk appetite. Quantitative
models used for CVA risk and CVA capital comply with TD’s Model Risk
Management Framework.
Validation of the Credit Risk Rating System
Credit risk rating systems and methodologies
are independently validated on a regular
basis to verify that they remain accurate predictors
of risk. The validation
process includes the following considerations:
●
Risk parameter estimates – PDs, LGDs, and
EADs are reviewed and updated against actual
loss experience to verify that estimates
continue to be reasonable
predictors of potential loss.
●
Model performance – Estimates continue
to be discriminatory, stable, and predictive.
●
Data quality – Data used in the risk rating
system is accurate, appropriate, and sufficient.
●
Assumptions – Key assumptions underlying
the development of the model remain
valid for the current portfolio and environment.
Risk Management verifies that the credit
risk rating system complies with the Bank’s
Model Risk Policy. At least annually, the Risk Committee is informed of the
performance of the credit risk rating system.
The Risk Committee must approve any material
changes to the Bank’s credit risk rating system.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 76
Credit Risk Mitigation
The techniques the Bank uses to reduce or
mitigate credit risk include written policies
and procedures to value and manage financial
and non-financial security
(collateral) and to review and negotiate netting
agreements. The amount and type of
collateral, and other credit risk mitigation
techniques required, are based on
the Bank’s own assessment of the borrower’s
or counterparty’s credit quality and capacity
to pay.
In the Retail and Commercial banking businesses,
security for loans is primarily non-financial
and includes residential real estate, real
estate under
development, commercial real estate, automobiles,
and other business assets, such as accounts
receivable, inventory, and fixed assets. In the Wholesale Banking
business, a large portion of loans are
to investment grade borrowers where no security
is pledged. Non-investment grade borrowers
typically pledge business
assets in the same manner as commercial
borrowers. Common standards across the Bank
are used to value collateral, determine
frequency of recalculation, and
to document, register, perfect, and monitor collateral.
The Bank mitigates derivative counterparty
exposure using mitigation strategies
that include master netting agreements,
collateral pledging, and central clearing
houses. Master netting agreements allow
the Bank to offset and arrive at a net obligation
amount, whereas collateral agreements allow
the Bank to secure the
Bank’s exposure. Security for derivative exposures
is primarily financial and includes
cash and negotiable securities issued by highly
rated governments and
investment grade issuers. Central clearing houses
further reduce bilateral credit risk by taking
the opposite position to each trade.
In all but exceptional situations, the Bank
secures collateral by taking possession and
controlling it in a jurisdiction where it can legally
enforce its collateral
rights. In exceptional situations and when demanded
by the Bank’s counterparty, the Bank holds or pledges collateral
with an acceptable third-party custodian.
The
Bank documents all such third party arrangements
with industry standard agreements.
Occasionally, the Bank may take guarantees to reduce the risk in
credit exposures. For credit risk exposures
subject to the IRB approaches, the Bank only
recognizes irrevocable guarantees for
Commercial Banking and Wholesale Banking
credit exposures that are provided by entities
with a better risk rating than that
of the borrower or counterparty to the
transaction.
The Bank makes use of credit derivatives
to mitigate credit risk. The credit, legal, and
other risks associated with these transactions
are controlled through well-
established procedures. The Bank’s policy is
to enter into these transactions with investment
grade financial institutions and transact
predominantly on a
collateralized basis. Credit risk to these counterparties
is managed through the same approval,
limit, and monitoring processes the Bank
uses for all counterparties
for which it has credit exposure.
The Bank uses appraisals as well as valuations
via automated valuation models (AVMs) to support property values
when adjudicating loans collateralized by
residential property. AVMs are computer-based tools used to estimate or validate the
market value of residential property and uses
market comparables and price
trends for local market areas. The primary
risk associated with the use of these tools
is that the value of an individual property
may vary significantly from the
average for the market area. The Bank has
specific risk management guidelines addressing
the circumstances when they may be used,
and processes to
periodically validate AVMs including obtaining third-party appraisals.
Gross Credit Risk Exposure
Gross credit risk exposure, also referred
to as EAD, is the total amount the Bank is
exposed to at the time of default of a loan
and is measured before
counterparty-specific provisions or write-offs. Gross
credit risk exposure does not reflect the effects
of credit risk mitigation and includes both
on balance sheet and
off-balance sheet exposures. On-balance sheet exposures
consist primarily of outstanding loans, non-trading
securities, derivatives, and certain other repo-style
transactions. Off-balance sheet exposures
consist primarily of undrawn commitments,
guarantees, and certain other repo style
transactions.
Gross credit risk exposures for the two approaches
the Bank uses to measure credit risk are
included in the following table.
TABLE 42: GROSS CREDIT RISK EXPOSURES
– Standardized and Internal Ratings-Based
(IRB) Approaches
1
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Standardized
IRB
Total
Standardized
IRB
Total
Retail
Residential secured
$
5,141
$
552,249
$
557,390
$
4,163
$
537,075
$
541,238
Qualifying revolving retail
871
177,970
178,841
866
172,203
173,069
Other retail
3,660
110,316
113,976
3,391
104,253
107,644
Total retail
9,672
840,535
850,207
8,420
813,531
821,951
Non-retail
Corporate
2,402
758,573
760,975
2,346
721,156
723,502
Sovereign
175
552,954
553,129
205
588,498
588,703
Bank
7,121
180,614
187,735
4,541
171,250
175,791
Total non-retail
9,698
1,492,141
1,501,839
7,092
1,480,904
1,487,996
Gross credit risk exposures
$
19,370
$
2,332,676
$
2,352,046
$
15,512
$
2,294,435
$
2,309,947
1
Gross credit risk exposures represent EAD and are before the effects of credit risk mitigation. This table
excludes securitization, equity, and other credit
RWA.
Other Credit Risk Exposures
Non-trading Equity Exposures
The Bank applies the standardized approach
to calculate RWA on non-trading equity exposures.
Under the standardized approach, a
250
% risk weight is applied
to equity holdings with the exception of speculative
unlisted equities that receive a
400
% risk weight. Equity exposures to
sovereigns and holdings made under
legislated programs continue to follow the
OSFI prescribed risk weights of
0
%,
20
% or
100
%.
Securitization Exposures
The Bank applies risk weights to all securitization
exposures under the revised securitization
framework published by OSFI. The revised
securitization framework
includes a hierarchy of approaches to determine
capital treatment, and transactions that
meet the simple, transparent, and comparable
requirements that are
eligible for preferential capital treatment.
The Bank uses Internal Ratings-Based Approach
(SEC-IRBA) for qualified exposures.
Under SEC-IRBA, risk weights are determined
using a loss coverage
model that quantifies and monitors the level
of risk. The SEC-IRBA also considers
credit enhancements available for loss protection.
For externally rated exposures that do not
qualify for SEC-IRBA, the Bank uses an
External Ratings-Based Approach (SEC-ERBA).
Risk weights are assigned
to exposures using external ratings by external
rating agencies, including Moody’s and S&P. The SEC-ERBA also takes into account
additional factors, including
the type of the rating (long-term or short-term),
maturity, and the seniority of the position.
For exposures that do not qualify for SEC-IRBA
or SEC-ERBA, and are held by an ABCP
issuing conduit, the Bank uses the
Internal Assessment Approach
(IAA).
Under the IAA, the Bank considers all relevant
risk factors in assessing the credit quality
of these exposures, including those published
by the Moody’s and S&P
rating agencies. The Bank also uses loss
coverage models and policies to quantify
and monitor the level of risk, and facilitate
its management. The Bank’s IAA
process includes an assessment of the extent
by which the enhancement available for loss
protection provides coverage of expected
losses. The levels of
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 77
stressed coverage the Bank requires for each
internal risk rating are consistent with the
rating agencies’ published stressed factor
requirements for their equivalent
external ratings by asset class. Under the
IAA, exposures are multiplied by OSFI prescribed
risk weights to calculate RWA for capital purposes.
For exposures that do not qualify for SEC-IRBA,
SEC-ERBA or the IAA, the Bank
uses the SA (SEC-SA). Under SEC-SA,
the primary factors that determine the
risk weights include the asset class of the underlying
loans, the seniority of the position, the level
of credit enhancements, and historical
delinquency rates.
Irrespective of the approach being used to
determine the risk weights, all exposures are
assigned an internal risk rating-based
on the Bank’s assessment, which
must be reviewed at least annually. The ratings scale TD uses corresponds
to the long-term ratings scales used by
the rating agencies.
The Bank’s internal rating process is subject
to all of the key elements and principles of
the Bank’s risk governance structure, and is managed
in the same way
as outlined in this “Credit Risk” section.
The Bank uses the results of the internal rating
in all aspects of its credit risk management,
including performance tracking, control mechanisms,
and
management reporting.
Market Risk
Trading Market Risk is the risk of loss from financial instruments
held in trading portfolios due to adverse
movements in market factors. These market
factors
include interest rates, foreign exchange rates,
equity prices, commodity prices, credit
spreads, and their respective volatilities.
Structural (Non-Trading) Market Risk is the risk of loss
on the balance sheet or volatility in earnings
from traditional banking activities, such as personal
and
commercial banking products (loans and
deposits), as well as related funding, investments
and high-quality liquid assets (HQLA),
due to adverse movements in
market factors. These market factors are primarily
interest rates, and foreign exchange rates.
The Bank is exposed to market risk in its
trading and investment portfolios, as well
as through its non-trading activities. The
Bank is an active participant in the
market through its trading and investment
portfolios, seeking to realize returns
for the Bank through careful management of its
positions and inventories. In the
Bank’s non trading activities, it is exposed to
market risk through the everyday banking transactions
that the Bank executes with its customers.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 78
MARKET RISK LINKAGE TO THE BALANCE SHEET
The following table provides a breakdown of
the Bank’s balance sheet into assets and liabilities
exposed to trading and non-trading market
risks. Market risk of
assets and liabilities included in the calculation
of VaR and other metrics used for regulatory market risk capital purposes
is classified as trading market risk.
TABLE 43: MARKET RISK LINKAGE TO THE
BALANCE SHEET
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Non-trading market
Balance
Trading
Non-trading
Balance
Trading
Non-trading
risk – primary risk
sheet
market risk
market risk
Other
sheet
market risk
market risk
Other
sensitivity
Assets subject to market risk
Interest-bearing deposits with banks
$
109,417
$
940
$
108,477
$
–
$
169,930
$
1,601
$
168,329
$
–
Interest rate
Trading loans, securities, and other
220,136
213,151
6,985
–
175,770
174,232
1,538
–
Interest rate
Non-trading financial assets at
fair value through profit or loss
7,395
–
7,395
–
5,869
–
5,869
–
Equity,
foreign exchange,
interest rate
Derivatives
82,972
72,906
10,066
–
78,061
70,636
7,425
–
Equity,
foreign exchange,
interest rate
Financial assets designated at
fair value through profit or loss
6,986
–
6,986
–
6,417
–
6,417
–
Interest rate
Financial assets at fair value through
other comprehensive income
126,369
–
126,369
–
93,897
–
93,897
–
Equity,
foreign exchange,
interest rate
Debt securities at amortized cost,
net of allowance for credit losses
240,439
–
240,439
–
271,615
–
271,615
–
Foreign exchange,
interest rate
Securities purchased under
reverse repurchase agreements
247,078
7,574
239,504
–
208,217
10,488
197,729
–
Interest rate
Loans, net of allowance for
loan losses
953,012
–
953,012
–
949,549
–
949,549
–
Interest rate
Investment in Schwab
–
–
–
–
9,024
–
9,024
–
Equity
Other assets
1
2,047
–
2,047
–
2,230
–
2,230
–
Interest rate
Assets not exposed to
market risk
98,707
–
–
98,707
91,172
–
–
91,172
Total Assets
$
2,094,558
$
294,571
$
1,701,280
$
98,707
$
2,061,751
$
256,957
$
1,713,622
$
91,172
Liabilities subject to market risk
Trading deposits
$
37,882
$
28,955
$
8,927
$
–
$
30,412
$
26,827
$
3,585
$
–
Equity, interest rate
Derivatives
79,356
74,790
4,566
–
68,368
66,976
1,392
–
Equity,
foreign exchange,
interest rate
Securitization liabilities at fair value
25,283
25,283
–
–
20,319
20,319
–
–
Interest rate
Financial liabilities designated at
fair value through profit or loss
197,635
3
197,632
–
207,914
2
207,912
–
Interest rate
Deposits
1,267,104
–
1,267,104
–
1,268,680
–
1,268,680
–
Interest rate,
foreign exchange
Obligations related to securities
sold short
43,795
42,475
1,320
–
39,515
37,812
1,703
–
Interest rate
Obligations related to securities sold
under repurchase agreements
221,150
13,922
207,228
–
201,900
13,540
188,360
–
Interest rate
Securitization liabilities at amortized
cost
14,841
–
14,841
–
12,365
–
12,365
–
Interest rate
Subordinated notes and debentures
10,733
–
10,733
–
11,473
–
11,473
–
Interest rate
Other liabilities
1
16,934
–
16,934
–
34,066
–
34,066
–
Equity, interest rate
Liabilities and Equity not
exposed to market risk
179,845
–
–
179,845
166,739
–
–
166,739
Total Liabilities and Equity
$
2,094,558
$
185,428
$
1,729,285
$
179,845
$
2,061,751
$
165,476
$
1,729,536
$
166,739
1
Relates to retirement benefits, insurance, and structured entity liabilities.
MARKET RISK IN TRADING ACTIVITIES
The overall objective of the Bank’s trading businesses
is to provide wholesale banking services,
including facilitation and liquidity, to clients of the Bank. The Bank
must take on risk in order to provide effective
service in markets where its clients trade.
In particular, the Bank needs to hold inventory, act as principal to facilitate
client transactions, and underwrite new issues.
The Bank also trades in order to have in-depth
knowledge of market conditions to provide
the most efficient and
effective pricing and service to clients, while balancing
the risks inherent in its dealing activities.
WHO MANAGES MARKET RISK IN TRADING
ACTIVITIES
Primary responsibility for managing market
risk in trading activities lies with Wholesale
Banking, with oversight from the Market
Risk function within Risk
Management. The Global Market Risk
Council meets regularly to review the
market risk profile and trading results
of the Bank’s trading businesses. The
committee is chaired by the Vice President,
Head of Market Risk, and includes Wholesale
Banking senior management.
HOW TD MANAGES MARKET RISK IN TRADING
ACTIVITIES
Market risk plays a key part in the assessment
of trading business strategies. The
process for the Bank to launch new trading initiatives,
or expand existing ones,
involves an assessment of risk with respect
to the Bank’s risk appetite and business expertise
and an assessment of the appropriate infrastructure
required to
monitor, control, and manage the risk. The Trading Market Risk Framework
outlines the management of trading market
risk and incorporates risk appetite, risk
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 79
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
11/1/2024
11/12/2024
11/21/2024
12/2/2024
12/11/2024
12/20/2024
1/2/2025
1/13/2025
1/22/2025
1/31/2025
2/11/2025
2/20/2025
3/3/2025
3/12/2025
3/21/2025
4/1/2025
4/10/2025
4/21/2025
4/30/2025
5/9/2025
5/20/2025
5/29/2025
6/9/2025
6/18/2025
6/27/2025
7/8/2025
7/17/2025
7/28/2025
8/6/2025
8/15/2025
8/26/2025
9/4/2025
9/15/2025
9/24/2025
10/3/2025
10/14/2025
10/23/2025
TOTAL VALUE-AT-RISK
AND TRADING NET REVENUE
(millions of Canadian dollars)
Trading net revenue
Value-at-Risk
governance structures, risk identification,
risk measurement, and risk control.
The Trading Market Risk Framework is maintained by
Risk Management and
supports alignment with the Bank’s risk appetite
for trading market risk.
Processes are in place to classify positions
as either trading book or banking book for
the purpose of calculating regulatory capital, per
OSFI CAR Guidelines.
Policies define the governance and monitoring
requirements of internal risk transfers.
Trading Limits
The Bank sets trading limits that are
consistent with the approved business strategy
for each business and its tolerance for the
associated market risk, aligned to
its market risk appetite. In setting limits, the
Bank takes into account market volatility, market liquidity, organizational experience,
and business strategy. Limits are
prescribed at the Wholesale Banking level
in aggregate, as well as at more granular
levels.
The core market risk limits are based on
the key risk drivers in the business and includes
notional, credit spread, yield curve shift,
price, and volatility limits.
Another primary measure of trading limits
is VaR, which the Bank uses to monitor and control overall
risk levels. VaR measures the adverse impact that potential
changes in market rates and prices could
have on the value of a portfolio over a
specified period of time.
At the end of each day, risk positions are compared with risk limits,
and any excesses are reported in accordance
with established market risk policies and
procedures.
Calculating VaR
The Bank computes total VaR on a daily basis by combining the General
Market Risk (GMR) and Idiosyncratic Debt
Specific Risk (IDSR) associated with the
Bank’s trading positions.
GMR is determined by creating a distribution
of potential changes to the market value
of the current portfolio using historical simulation.
The Bank values the
current portfolio using the market price and rate
changes of the most recent
259
trading days for equity, interest rate, foreign exchange, credit, and
commodity
products. GMR is computed as the threshold
level that portfolio losses are not expected
to exceed more than
one
out of every
100
trading days. A
one-day
holding
period is used for GMR calculation.
IDSR measures idiosyncratic (single-name) credit
spread risk for credit exposures in the trading
portfolio using Monte Carlo simulation.
The IDSR model is
based on the historical behaviour of five-year idiosyncratic
credit spreads. Similar to GMR, IDSR is
computed as the threshold level that portfolio
losses are not
expected to exceed more than one out of every
100
trading days. IDSR is measured for a
ten-day
holding period.
The following graph discloses daily one-day
VaR usage and trading net revenue, reported on a TEB,
within Wholesale Banking. Trading net revenue includes
trading income and net interest income related
to positions within the Bank’s market risk capital
trading books. For the year ending October 31,
2025, there
were
18
days of trading losses and trading net
revenue was positive for
93
% of the trading days, reflecting normal
trading activity. Losses in the year did not
exceed VaR on any trading day.
VaR is a valuable risk measure but it should be used in the
context of its limitations, for example:
●
VaR uses historical data to estimate future events, which limits
its forecasting abilities;
●
it does not provide information on losses beyond
the selected confidence level; and
●
it assumes that all positions can be liquidated
during the holding period used for VaR calculation.
The Bank continuously improves its VaR methodologies and incorporates
new risk measures in line with market
conventions, industry practices, and regulatory
requirements.
To mitigate some of the shortcomings of VaR, the Bank uses additional metrics designed for risk
management.
This include Stress Testing as well as
sensitivities to various market risk factors.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 80
The following table presents the end of year, average, high,
and low usage of TD’s portfolio metrics.
TABLE 44: PORTFOLIO MARKET RISK
MEASURES
(millions of Canadian dollars)
2025
2024
As at
Average
High
Low
As at
Average
High
Low
Interest rate risk
$
10.3
$
10.5
$
21.1
$
1.6
$
8.4
$
16.8
$
27.7
$
5.1
Credit spread risk
15.8
19.3
27.4
13.7
25.1
30.0
40.5
18.9
Equity risk
14.1
11.0
29.3
6.6
7.7
7.8
12.0
5.2
Foreign exchange risk
4.6
4.1
10.2
1.2
5.2
2.9
7.8
1.2
Commodity risk
37.6
24.6
46.0
3.8
6.0
4.5
11.5
2.2
Idiosyncratic debt specific risk
13.1
19.8
28.0
13.1
18.2
20.3
29.7
13.8
Diversification effect
1
(41.7)
(52.7)
n/m
2
n/m
(45.0)
(50.8)
n/m
n/m
Total Value-at-Risk (one-day)
53.8
36.6
58.9
20.9
25.6
31.5
44.9
21.8
1
The aggregate VaR is less than the sum of the VaR
of the different risk types due to risk offsets resulting from portfolio diversification.
2
Not meaningful. It is not meaningful to compute a diversification effect because the high and low may
occur on different days for different risk types.
Markets experienced volatility across all
asset classes in 2025 due to concerns
surrounding ongoing U.S. tariffs and other geopolitical
concerns. Key factors
impacting VaR models during the period were new scenario shocks
incorporating market volatility rolling
into the most recent 259-day trading window. As a result
of these factors, average VaR has increased year-over-year.
Validation of VaR Model
The Bank uses a back-testing process
to compare the actual profits and losses
to VaR to review their consistency with the statistical results of
the VaR model.
Stress Testing
The Bank’s trading business is subject to an overall
global stress test limit. In addition, global
businesses have stress test limits, and each
broad risk class has an
overall stress test threshold. Stress scenarios
are designed to model extreme economic events,
replicate worst-case historical experiences,
or introduce severe,
but plausible, hypothetical changes in
key market risk factors. The stress testing
program includes scenarios developed using
actual historical market data during
periods of market disruption, in addition
to hypothetical scenarios developed by
Risk Management. Stress tests are produced
and reviewed regularly. The events
the Bank has modelled include the 1987 equity
market crash, the 1998 Russian debt default
crisis, the aftermath of September 11, 2001, the 2007 ABCP crisis,
the credit crisis of Fall 2008, the Brexit referendum
of June 2016, and the COVID-19 pandemic
of 2020.
WHO MANAGES STRUCTURAL (NON-TRADING)
MARKET RISK
The TBSM group manages the market risks
of traditional non-trading banking activities,
while the Wholesale Banking business
manages non-trading market risks
within that segment,
all subject to oversight from the Asset
Liability and Capital Committee (ALCO).
The Treasury CRO / Non-Trading Market Risk function within
Risk Management provides independent oversight,
governance, and control of these market
risks. The Risk Committee reviews and approves
key non-trading
market risk policies and monitors the Bank’s
positions and compliance with these policies
through regular reporting and updates from
senior management.
HOW TD MANAGES STRUCTURAL (NON-TRADING)
MARKET RISK
Non-trading interest rate risk, if not managed,
has the potential to increase earnings
volatility and generate losses without contributing
long-term expected value.
To
manage this risk, the Bank’s non-trading asset and
liability profile is managed in accordance
with a target and series of limits to control
the impact of interest
rate changes on the Bank’s NII, while maintaining
the Bank’s economic value sensitivity within risk
appetite.
Managing Structural Interest Rate Risk
Interest rate risk is the impact that changes
in interest rates could have on the Bank’s
margins, earnings, and economic value. Interest
rate risk management is
designed to generate a predictable, high-quality
NII stream over time. The Bank has adopted
a disciplined hedging approach to manage
the net interest income
from its asset and liability positions. Key aspects
of this approach are:
•
Evaluating and managing the impact of rising
or falling interest rates on net interest income
and economic value, and developing strategies
to manage overall
sensitivity to rates across varying interest
rate scenarios;
•
Modelling the expected impact of customer
behaviour on TD’s products (e.g., how actively
customers exercise embedded options,
such as prepaying a loan or
redeeming a deposit before its maturity date);
•
Assigning target-modelled maturity profiles
for non-maturity assets, liabilities, and equity;
•
Measuring the margins of TD’s banking products
on a fully-hedged basis, including the impact
of financial options that are granted
to customers; and
•
Developing and implementing strategies
to stabilize net interest income from all retail and
commercial banking products.
The Bank is exposed to the interest rate risk
from “mismatched positions” which occur
when asset and liability principal and interest
cash flows have different
repricing or maturity dates. The Bank measures
this risk based on an assessment of:
contractual cash flows, product-embedded
optionality, customer behaviour
expectations and the modelled maturity
profiles for non-maturity products. To manage this risk, the Bank primarily
uses financial derivatives, wholesale
investments and funding transactions.
The Bank also measures its exposure
to non-maturity liabilities, such as core deposits,
by assessing interest rate elasticity and
balance permanence using
historical data and business judgment. Fluctuations
of non-maturity deposits can occur due
to factors such as interest rate and equity
market movements, and
changes to customer liquidity preferences.
Banking product optionality, whether from freestanding options
such as mortgage rate commitments or options
embedded within loans and deposits, expose
the
Bank to significant financial risk. To manage these exposures, the Bank uses
a dynamic hedging approach designed
to replicate the payoff of a purchased option.
•
Rate Commitments
: The Bank measures its exposure from
freestanding mortgage rate commitment
options using an expected funding profile based
on
historical experience. Customers’ propensity
to fund, and their preference for fixed or
floating rate mortgage products, is influenced
by factors such as market
mortgage rates, client characteristics, and
seasonality.
•
Asset Prepayment and other Embedded
Options
: The Bank models its exposure to options
embedded in some of its products based on
analyses of
customer behaviour. Examples of modeled options are
the right to prepay residential mortgage
loans, and the right to early redeem some
term deposit products.
For mortgages, econometric models are
used to model prepayments and the effects of
prepayment behaviour to the Bank. In general,
mortgage prepayments
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 81
are also affected by factors such as rate incentive
along with mortgage age, home prices,
gross domestic product (GDP) growth,
etc. A combined impact is also
assessed to determine a core liquidation
speed that is independent of market incentives.
A similar analysis is undertaken for other products
with embedded
optionality.
Structural Interest Rate Risk Measures
The primary measures for this risk are Economic
Value of Shareholders’ Equity (EVE) Sensitivity and Net Interest
Income Sensitivity (NIIS).
EVE Sensitivity measures the impact of a
specified interest rate shock to the net present
value of the Bank’s banking book assets, liabilities,
and certain off-
balance sheet items. It reflects a measurement
of the potential present value impact on
shareholders’ equity without an assumed term
profile for the management
of the Bank’s own equity and excludes product
margins.
NIIS measures the change in NII over a
twelve-month horizon resulting from resetting
interest rates on banking book assets,
liabilities and certain off-balance
sheet items under a specified interest rate
shock scenario.
The Bank’s Market Risk policy sets overall limits
on structural interest rate risk measures.
These limits are periodically reviewed and approved
by the Risk
Committee. In addition to the Board policy limits,
book-level risk limits for the Bank’s management
of non-trading interest rate risk are set by
Risk Management.
Exposures against these limits are routinely
monitored and reported, and breaches of the
Board limits, if any, are escalated to both the ALCO and the Risk
Committee.
TABLE 45: STRUCTURAL INTEREST
RATE SENSITIVITY MEASURES
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
EVE
NII
1,2
EVE
1
NII
1
Sensitivity
1,2
Sensitivity
1,2,3
Sensitivity
1
Sensitivity
1,3
Canadian
U.S.
Total
Canadian
U.S.
Total
Total
Total
dollar
4
dollar
dollar
4
dollar
Before-tax impact of
100 bps increase in rates
$
(957)
$
(1,558)
$
(2,515)
$
400
$
390
$
790
$
(2,489)
$
720
100 bps decrease in rates
865
1,227
2,092
(441)
(419)
(860)
1,914
(983)
1
Does not include exposures from Wholesale Banking.
2
Effective July 31, 2025, the sensitivity measures are reported by currency to better differentiate
NIIS to movements in underlying rates.
3
Represents the twelve-month NII exposure to an immediate and sustained shock in rates, and may include adjustments
for non-recurring items.
4
Includes other currency exposures.
As at October 31, 2025, an immediate and
sustained 100 bps increase in interest rates
would have a negative impact to the Bank’s EVE
of $
2,515
million, an
increase of $
26
million from last year, and a positive impact to the Bank’s NII of
$
790
million, an increase of $
70
million from last year. An immediate and sustained
100 bps decrease in interest rates would
have a positive impact to the Bank’s EVE of $
2,092
million, an increase of $
178
million from last year, and a negative
impact to the Bank’s NII of $
860
million, a decrease of $
123
million from last year. The year-over-year increase in EVE
Sensitivity is primarily attributed to an
increase in net fixed rate assets held, commensurate
with growth in book capital. Year-over-year changes in NII Sensitivity
are largely related to Treasury hedging
alongside marginal changes in product mix. As
at October 31, 2025, reported EVE
and NII Sensitivities remain within the Bank’s risk
appetite and established
Board limits.
Managing Non-trading Foreign Exchange
Risk
Foreign exchange risk refers to losses that
could result from changes in foreign-currency
exchange rates. Assets and liabilities that
are denominated in foreign
currencies create foreign exchange risk.
The Bank is exposed to non-trading foreign exchange
risk primarily from its investments in foreign
operations. When the Bank’s foreign currency
assets are
greater or less than its liabilities in that
currency, they create a foreign currency open position. An adverse
change in foreign exchange rates can impact
the Bank’s
reported net income and shareholders’ equity, and its capital ratios.
To
minimize the impact of an adverse foreign exchange
rate change on certain capital ratios, the
Bank’s net investments in foreign operations are
hedged so
that changes in certain capital ratios fall
within risk appetite, in response to movement
in foreign exchange rates. The Bank
does not generally hedge the earnings
of foreign subsidiaries which results in
changes to the Bank’s consolidated earnings when relevant
foreign exchange rates change.
Other Non-trading Market Risks
Other structural market risks monitored on a regular
basis include:
●
Basis Risk
– The Bank is exposed to risks related to
the difference in various market indices.
●
Equity Risk
–
The Bank is exposed to non-trading equity
risk from investment securities designated
at FVOCI, equity-linked guaranteed investment
certificate
product offerings and share-based compensation plans
where certain employees are awarded
share units equivalent to the Bank’s common
shares as
compensation for services provided to
the Bank. These share units are recorded
as a liability over the vesting period and revalued
at each reporting period
until settled in cash, and changes in the Bank’s
share price can impact non-interest expenses.
The Bank uses equity derivative instruments
to manage its non-
trading equity risk.
Managing Investment Portfolios
The Bank manages a securities portfolio
that is integrated into the overall asset and
liability management process for traditional
banking activities. The securities
portfolio is comprised of high-quality, low-risk securities and
managed in a manner appropriate to the attainment
of the following goals: (1) to generate a
targeted
credit of funds to deposit balances that are in
excess of loan balances; (2) to provide
a sufficient pool of liquid assets to meet deposit and
loan fluctuations and
overall liquidity management objectives; (3)
to provide eligible securities to meet collateral
and cash management requirements; and
(4) to manage the target
interest rate risk profile of the balance sheet.
The Risk Committee reviews and approves
the Enterprise Investment Policy that sets out
limits for the Bank’s
investment portfolio. In addition, the Wholesale
Banking and Insurance businesses also hold
investments that are managed separately.
WHY NET INTEREST MARGIN FLUCTUATES OVER TIME
As previously noted, the Bank’s approach to structural
(non-trading) market risk is designed
to generate stable and predictable earnings
over time, regardless of
cash flow mismatches and the exercise of
options granted to customers. This approach
also creates margin certainty on loan and
deposit profitability as they are
booked. Despite this approach however, the Bank’s NIM is subject
to change over time for the following reasons
(among others):
●
Differences in margins earned on new and renewing
products relative to the margin previously
earned on matured products;
●
Weighted-average margin impact from changes in
business and product mix;
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 82
●
Changes in the basis between certain market
indices;
●
Potential lags in changing product prices
in response to changes in market interest rates,
including rate-sensitive deposit pricing;
●
Changes from the repricing of hedging strategies
to manage the investment profile of the
Bank’s non-rate sensitive deposits; and
●
Margin changes from the portion of the Bank’s deposits
that are non-rate sensitive but not expected
to be longer term in nature, resulting in a
shorter term
investment profile and higher sensitivity
to short-term rates.
The general level of interest rates will affect the return
the Bank generates on its modelled
maturity profile for core non-rate sensitive deposits
and the investment
profile for its net equity position as it evolves
over time. The general level of market interest
rate volatility is also a key driver of
some modelled option exposures,
and will affect the cost of hedging such exposures.
The Bank’s approach to managing these factors
tends to moderate their impact over time,
resulting in a more
predictable NII stream over time.
Operational
Risk
Operational risk is the risk of loss resulting
from inadequate or failed internal processes,
people and systems or from external events
and also includes losses
related to legal risk events and regulatory
fines.
Operational risk is inherent in all of the Bank’s business
activities, including the practices and controls
used to manage other risks such as credit,
market, and
liquidity risk. Failure to manage operational
risk can result in financial loss (direct or
indirect), reputational harm, or regulatory
censure and penalties.
The Bank seeks to actively identify, mitigate and manage operational
risk in order to create and sustain shareholder
value, successfully execute the Bank’s
business strategies, operate efficiently, and provide reliable, secure and
convenient access to financial services.
The Bank maintains a formal enterprise-wide
operational risk management framework
that emphasizes a strong risk management
and internal control culture throughout
TD to help support operational
resilience and the Bank’s ability to withstand disruptions.
WHO MANAGES OPERATIONAL RISK
Operational Risk Management is an independent
function that owns and maintains the Bank’s
Operational Risk Framework. This framework
sets out the
enterprise-wide governance processes, policies,
and practices to identify, assess, measure, control, monitor, escalate, report,
and communicate on operational
risk. Operational Risk Management is designed
to provide appropriate monitoring and reporting
of the Bank’s operational risk profile and exposures
to senior
management through the Operational
Risk Oversight Committee (OROC),
the Enterprise Risk Management Committee
(ERMC), and the Risk Committee of
the
Board.
In addition to the framework, Operational
Risk Management owns and maintains, or has
oversight of, the Bank’s operational risk policies including
those that
govern business continuity and crisis
management, process & execution risk, third-party
risk management, data risk management,
fraud risk management, change
governance, operational resilience, technology
and cybersecurity risk management, people
risk management and insider risk management.
Senior management of individual business
segments and corporate functions are responsible
for the day-to-day management of operational
risk following the
Bank’s established operational risk framework, policies
and the three lines of defence model. An
independent risk management oversight
function supports each
business segment and corporate function
to monitor and challenge the implementation
and use of the operational risk management
programs according to the
nature and scope of the operational risks inherent
in their area. Senior executives in each
business segment and corporate area participate
in a Risk Management
Committee that oversees operational risk
issues and initiatives.
Ultimately, every employee has a role to play in managing operational
risk. In addition to policies and procedures
guiding employee activities, training is
available
to all employees regarding specific types of operational
risks and their role in helping to protect
the Bank.
HOW TD MANAGES OPERATIONAL RISK
The Operational Risk Framework aligns
with the Bank’s Enterprise Risk Framework and
risk appetite. The Framework outlines
the internal risk and control
environment to manage operational risk and
includes the operational risk appetite, governance
processes, and policies. The framework
incorporates sound
industry practices and is designed to
meet regulatory requirements. Key components
of the framework include:
Governance and Organization
Operational risk governance emphasizes
and balances strong independent oversight
with clear ownership for risk and control
within each business segment and
corporate function. Management reporting
and organizational structures emphasize
accountability, ownership, and effective oversight of each business segment’s
and each corporate function’s operational risk exposures.
In addition, the expectations of the Risk Committee
and senior management for managing operational
risk are set out by enterprise-wide policies and
practices.
Risk and Control Self-Assessment
Internal controls are one of the primary
methods of safeguarding the Bank’s employees, customers,
assets, and information, and in preventing
and detecting errors
and fraud. Management undertakes comprehensive
assessments of key risk exposures and
the internal controls in place to reduce or offset these
risks. Senior
management reviews the results of these assessments
to assess whether management of the risk
and internal controls are effective, appropriate,
and compliant
with the Bank’s policies.
Operational Risk Event Monitoring
To
reduce the Bank’s exposure to future loss, the Bank
must remain aware of and respond to its
own and industry operational risks. The Bank’s
policies and
processes require that operational risk events
be identified, tracked, and reported to the appropriate
level of management to facilitate the Bank’s analysis
and
management of its risks and inform the assessment
of suitable corrective and preventative
action. The Bank also reviews, analyzes,
and benchmarks itself against
operational risk losses that have occurred at other
institutions using information acquired
through recognized industry data providers.
Scenario Analysis
Scenario Analysis is a systematic and repeatable
process of obtaining expert business and
risk opinion to derive assessments of
the likelihood and potential loss
estimates of high impact operational events
that are unexpected and outside the normal
course of business. The Bank applies this practice
to meet risk
measurement and risk management objectives.
The process includes the use of relevant
external operational loss event data along
with the Bank’s internal loss
data and risk outlook that is assessed considering
the Bank’s operational risk profile and control
structure. The program is designed to raise awareness
and
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 83
educate business segments and corporate
functions regarding existing and emerging risks,
which may result in the identification and assessment
of new
hypothetical scenarios and risk mitigation action
plans to minimize tail risks.
Risk Reporting
Risk Management regularly monitors risk-related
measures and the risk profile throughout
the Bank to report to senior management and
the Risk Committee.
Operational risk measures are systematically
tracked, assessed, and reported to promote
management accountability and direct
the appropriate level of attention
to current and emerging issues.
Insurance
TD’s Corporate Insurance team, with oversight from
Risk Management, utilizes insurance and
other risk transfer arrangements to mitigate
and reduce potential
future losses related to operational risk.
Risk Management includes oversight of the effective
use of insurance aligned with the Bank’s risk
management strategy
and risk appetite. Insurance terms and provisions,
including types and amounts of coverage,
are regularly assessed so that the Bank’s tolerance
for risk and,
where applicable, statutory requirements are
satisfied. The management process includes
conducting regular in-depth risk and financial
analysis and identifying
opportunities to transfer elements of the Bank’s risk
to third parties where appropriate.
The Bank transacts with external insurers that
satisfy its minimum financial
strength rating requirements.
Technology and Cybersecurity
The Bank leverages technology to support
its operations including new markets, competitive
products, delivery channels, as well as other
opportunities.
The Bank manages technology and cybersecurity
risks to support day-to-day operations; and
protect against unauthorized access to the
Bank’s technology,
infrastructure, systems, information, and
data.
To
enable this, the Bank monitors, manages,
and continues to enhance its ability to
mitigate these risks through
enterprise-wide programs and the implementation
of industry-accepted technology risk and
cyber threat management practices to help
support rapid detection and
response.
The Bank’s Platforms and Technology Risk Oversight Committee provides senior
executive oversight, direction and
guidance regarding management of risks
relating to technology and cybersecurity, including cyber threats,
cyber resiliency, cyber terrorism/activism, cyber fraud, cyber extortion,
identity theft and data
theft. This Committee endorses actions and
makes recommendations to the CEO and the
ERMC as appropriate, including in
some instances, supporting onward
recommendations to the Risk Committee and
the Board of Directors. Together with the Bank’s Operational Risk Framework, technology
and cybersecurity
programs also include resiliency planning
and testing, as well as disciplined technology
operations practices.
Data Management
The Bank manages data risk through
the Data Risk Management Framework
which describes the governance, policies, and
processes that TD’s business and
corporate segments, including oversight functions
employ to help manage and govern data
risk within the Bank’s risk appetite.
The Bank’s data assets are governed and managed
with a view to preserve value and support
business objectives. Inconsistent or inadequate
data governance
and management practices may compromise
the Bank’s data and information assets which
could result in financial, regulatory or reputational
impacts. The Bank’s
Enterprise Data Management Office develops
and implements enterprise-wide standards and
practices that describe how data and
information assets should be
created, used, or maintained on behalf of
the Bank.
Business Continuity and Crisis Management
The Bank maintains an Enterprise Business
Continuity and Crisis Management (EBCCM) program
that supports management’s ability to operate the Bank’s
businesses and operations (including providing
customers access to products and services) in
the event of a crisis or business disruption.
Ongoing threat
assessments, business impact analysis, planning,
exercises, and testing are leveraged
to achieve a target level of operational resiliency
within the Bank’s risk
appetite. The program also includes establishing
appropriate crisis and incident management
governance structures and protocols, including
an escalation path to
decision-makers, coordinated actions, and internal
and external communications, to enable
TD to respond effectively to significant business
disruptions.
Third-Party Management
A Third-Party Business Arrangement refers
to any type of strategic or business arrangement
between TD Bank and an entity(ies) or individuals,
by contract or
otherwise, save for engagements with
the Bank’s customers and employment contracts.
While these relationships bring benefits
to the Bank’s businesses and
customers, the Bank also needs to manage
and minimize any risks related to the
activity. The Bank does this through an enterprise Third-Party
Risk Management
program that is designed to manage third-party
risks throughout the lifecycle of a relationship
with a third-party. This process also provides risk management
and
senior management oversight of these arrangements
that management considers appropriate
based on the risk and criticality of the arrangement.
Operational Resilience
Operational resilience is the ability of the
Bank to continue to deliver, and rapidly recover, critical services through
business disruption events, whether internal
or
external.
The Bank’s Operational Resilience program assesses
the end-to-end availability of the Bank’s most
essential business and shared services, across
critical, single
points of failure, such as technology, third-parties, people, premises,
and data, to assess whether the
service can be delivered through disruptive
events, and
without causing intolerable harm to customers
and financial markets.
Change and Delivery
The Bank has established an enterprise-wide
standard for identifying and assessing the
risks of proposed changes that affect Products/Services,
Process/Operations and Technology, and formal methodologies for delivering the changes (i.e., Project
Delivery Lifecycle, TD Agile and TD Scaled Agile).
This
approach involves senior management governance
and oversight of the Bank’s change portfolio and
leverages the use of a standardized
change risk assessment,
change delivery methodologies, defined
accountabilities and capabilities, and portfolio
reporting and management tools
to help support successful delivery.
Fraud Management
The Bank develops and implements enterprise-wide
fraud management strategies, policies,
and practices that are designed to minimize
the number, size and
scope of external fraudulent activities perpetrated
against it. The Bank employs prevention,
detection and monitoring capabilities across
the enterprise that are
designed to help protect customers, shareholders,
and employees from increasingly sophisticated
external fraud risk. External Fraud risk is
managed by
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 84
communicating appropriate policies,
procedures, employee education in external
fraud risks, and monitoring activity to help
maintain adherence to the Fraud Risk
Management Framework. The Fraud Risk
Management Framework describes the governance,
policies, and processes that the Bank’s businesses
employ to
proactively manage and govern external fraud
risk within the Bank’s risk appetite which is embedded
in the Bank’s day to day operations and
culture.
Operational Risk Capital Measurement
The Bank’s operational risk capital is determined
using the Basel III Standardized Approach
(SA) for operational risk, and is a product of
a Business Indicator
Component (BIC) and an Internal Loss Multiplier
(ILM). BIC is a financial-statement-based proxy
for operational risk and is derived using
financial information over
the previous three years. ILM is derived using
operational risk losses, net of recoveries,
over the previous ten years, and the BIC.
People Risk Management
People risk is the risk associated with inadequacies
in the Bank’s organizational capacity, capability, and resources to support its business
goals, objectives and
strategies, human resource policies, processes,
and practices to hire, develop and retain resources
with appropriate capabilities and requisite
domain expertise to
operate and grow the business in a manner
consistent with employment laws, and
regulatory expectations.
This includes the risk associated with
misalignment
between the Bank’s stated desired culture and
its actual culture.
HR sets policies for key people and talent
programs that business lines implement
within their
daily operations. HR is an oversight function
and has central oversight for TD’s culture and people
risk for the Bank including compensation,
performance
management, conduct (in partnership with
Risk Management), appreciation and recognition
and talent. The Bank undertakes a Talent Review and Succession
Management program, which focuses on
the assessment, development and succession
planning for senior and key roles within
the organization. In addition, a
Critical Roles program exists to strengthen our
practices to assess capabilities and aims to enhance
the management of talent in roles most critical
to the Bank’s
success. Risk Management provides oversight
and independent challenge to HR through
an effective objective assessment of their activities
and programs.
Insider Risk Management
Insider Risk exposure is inherent in the normal
course of operating TD’s businesses and insider
risk continues to evolve, leading to new
or emerging threats. The
Bank has developed and implemented enterprise-wide
insider risk management strategies, policies
and practices that are designed to identify, prevent, and
mitigate unauthorized insider activities.
The Enterprise Insider Risk Framework describes
governance, roles and responsibilities,
and processes that the Bank’s
businesses and corporate functions employ
to proactively manage and govern insider
risk within the Bank’s risk appetite.
Conduct Risk
Conduct risk is an overarching risk category
that correlates with various enterprise risks,
including but not limited to, consumer
protection, market integrity, financial
crimes, and operational risks. Conduct risk
encompasses the potential for actions or
behaviours by an organization or its employees
that may lead to legal,
regulatory compliance, reputational, and financial
impact that can adversely affect customers,
the market, employees, and the organization.
TD has prioritized
conduct risk management and has policies in
place to protect, to maintain trust, and
to foster a culture of integrity and accountability
with our customers, the
market, our employees, and the organization.
This involves fostering a culture of ethical behavior, implementing
robust governance frameworks, and ensuring
employees understand and adhere to the organization’s
Code of Conduct and Ethics.
Conduct Risk and Insider Risk intersect
when the inappropriate or unethical behavior
of employees manifest in conduct incidents
that harm customers, violate
regulatory compliance, or compromise ethical
standards of the organization. While Conduct
Risk encompasses a broader category of ethical
and compliance
issues, Insider Risk is more specifically focused
on threats from within the organization.
Regulatory Compliance Risk
Regulatory compliance risk arises from potential
non-compliance with applicable laws, regulations,
rules, regulatory guidance, voluntary codes
and public
commitments, or standards and codes set by
self-regulatory organizations. The Bank
faces regulatory compliance risk in nearly all of
its operations and manages
this risk mainly through the Enterprise RCM
Framework. The TD Compliance Department
owns and maintains the Enterprise RCM
Framework, which provides an
overview of the Bank’s risk-based RCM program
and guidance for the Bank’s businesses and
corporate functions.
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Page 85
Model Risk
Model risk is the potential for adverse consequences
arising from decisions based on incorrect
or misused models and their outputs. It
can lead to financial loss,
reputational risk, or incorrect business and
strategic decisions.
WHO MANAGES MODEL RISK
Primary accountability for the management
of model risk resides with the senior
management of individual businesses
with respect to the models they use. The
Operational Risk Oversight Committee provides
oversight of model governance, risk, and
control matters. Model Risk Management
monitors and reports on
existing and emerging model risks, and provides
periodic assessments to senior management,
Risk Management, the Risk Committee,
and regulators on the state
of model risk at TD and alignment with the
Bank’s Model risk appetite. The Risk Committee
approves the Bank’s Model Risk Management Framework
and Model
Risk Policy.
HOW TD MANAGES MODEL RISK
The Bank manages model risk in accordance
with management approved model risk policies
and supervisory guidance which encompass
the life cycle of a model,
including proof of concept, development,
validation and approval, implementation, usage,
and ongoing model monitoring. The Bank’s
Model Risk Management
Framework also captures models that may be
partially or wholly qualitative or based on
expert judgment.
Segments identify the need for a new model
and are responsible for model development
and documentation according to the Bank’s
policies and standards.
During model development, controls with
respect to code generation, acceptance
testing, and usage are established and documented
to a level of detail and
comprehensiveness commensurate with
their model risk rating. Once models are implemented,
model owners are responsible for ongoing
monitoring and usage in
accordance with the Bank’s Model Risk Policy. In cases where a model is
deemed obsolete or unsuitable for its
originally intended purposes, it is decommissioned
in accordance with the Bank’s policies.
Model Risk Management provides oversight,
including maintaining a centralized inventory of
all models as defined in the Bank’s Model Risk
Policy, independent
validation before each initial use, annual model
review, and ongoing validation on a pre-determined schedule
depending on the model risk rating.
Model Risk
Management sets model monitoring and
model implementation standards, and provides
training to all stakeholders. The validation
process varies in rigour,
depending on the model risk rating, but at a
minimum contains a detailed determination
of:
●
the conceptual soundness of model methodologies
and underlying quantitative and qualitative
assumptions;
●
the risk associated with a model based on intrinsic
risk, materiality and criticality;
●
the sensitivity of a model to assumptions
within the model and changes in data inputs
including stress testing; and
●
the limitations of a model and the compensating
risk mitigation mechanisms in place to address
the limitations.
As with traditional model approaches,
AI models (including machine learning and
Generative AI models) are also subject
to the same standards and risk
management practices.
At the conclusion of the validation process,
a model will either be approved for use
or will be rejected and require redevelopment
or other courses of action.
Models identified as obsolete or no longer
appropriate for use, due to changes in industry
practice, the business environment or Bank
strategies, are
decommissioned.
The Bank has policies and procedures in
place designed to discern models from
non-models, and the level of independent
challenge and oversight is
commensurate with the risk rating of the
model. Non-models are subject to governance
requirements such as End User Computing
Standards.
Artificial Intelligence Risk
Artificial Intelligence (AI) risk is the potential harm
to people, organizations, or systems resulting
from the development, deployment and use
of AI models. These
risks can stem from various sources, including
the data used to train the AI, the AI model
itself, the way the model is used, and its
interaction with people,
organizations and systems.
Primary accountability for the management
of AI risk resides with the senior management
of individual businesses with respect to
the AI that they use. In addition,
various Risk and Control functions have oversight
of AI risks, including but not limited
to Compliance, Data Risk Management,
Model Risk Management,
Technology and Cybersecurity Risk Management, Privacy and Third-Party
Risk Management.
All models, including AI models, are managed
through TD’s model lifecycle management process
which employs a “three lines of defense”
approach to AI risk
management that emphasizes and balances
strong independent oversight involving
multiple oversight functions with clear accountabilities
for, and ownership of,
risks related to the deployment of models (including
AI systems). The Model Risk Management
Framework and Global Compliance
Model Oversight Policy are
examples of our comprehensive risk management
process, including with respect to
safety, fairness, monitoring and validation.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 86
Insurance
Risk
Insurance risk is the risk of financial loss due
to actual experience emerging differently
from expectations in insurance product pricing
and/or design, underwriting,
reinsurance protection, and claims or reserving
either at the inception of an insurance or reinsurance
contract, during the lifecycle of the claim or at
the valuation
date. Unfavourable experience could emerge
due to adverse fluctuations in timing, actual
size, frequency of claims (for example, driven
by non-life premium risk,
non-life reserving risk, catastrophic risk, mortality
risk, morbidity risk, and longevity risk),
policyholder behaviour, or associated expenses.
Insurance contracts provide financial protection
by transferring insured risks to the issuer
in exchange for premiums. The Bank is
engaged in insurance businesses
relating to property and casualty insurance, life
and health insurance, and reinsurance, through
various subsidiaries; it is through these businesses
that the Bank is
exposed to insurance risk.
WHO MANAGES INSURANCE RISK
Senior management within the insurance business
units has primary responsibility for
managing insurance risk with oversight by
the CRO for Insurance, who
reports into the Bank’s Risk Management Group.
The Bank’s Audit Committee and the Bank’s Corporate
Governance Committee respectively act
as the Audit and
Conduct review committees for the Canadian
insurance company subsidiaries. The insurance
company subsidiaries also have their own
boards of directors who
provide additional risk management oversight.
HOW TD MANAGES INSURANCE RISK
The Bank’s risk governance practices are designed
to support independent oversight and
control of risk within the insurance business.
The TD Insurance Risk
Committee and its subcommittees provide
critical oversight of the risk management
activities within the insurance business
and monitor compliance with insurance
risk policies. The Bank’s Insurance Risk Management
Framework and Insurance Risk Policy collectively
outline the internal risk and control structure
to manage
insurance risk and include risk appetite, policies,
processes, as well as limits and governance.
These documents are maintained by Risk Management
and support
alignment with the Bank’s risk appetite for insurance
risk.
The assessment of insurance contract liabilities
(remaining coverage and incurred claims)
is central to the insurance operation.
TD Insurance establishes reserves
to cover estimated future payments (including
loss adjustment expenses) on all claims
or terminations/surrenders of premium arising
from insurance contracts
underwritten. The reserves cannot be established
with complete certainty and represent
management’s best estimate for future payments.
As such, TD Insurance
regularly monitors estimates against actual
and emerging experience and adjusts reserves
as appropriate if experience emerges
differently than anticipated.
Liabilities for incurred claims and liabilities
for remaining coverage are governed
by the Bank’s general insurance and life and health
reserving risk policies.
Sound product design is an essential element
of managing risk. In addition, TD’s insurance
products are priced considering required
capital levels, with targeted
returns set by management. The Bank’s exposure
to insurance risk is mostly short-term in nature
as the principal underwriting risk relates to personal
automobile
and home insurance and small commercial insurance.
Insurance market cycles, as well as changes
in insurance legislation, the regulatory
environment, judicial environment, trends
in court awards, climate patterns,
pandemics or other applicable public health emergencies,
and the economic environment may impact
the performance of the insurance business.
We maintain
premium, pricing and underwriting policies or
standards to help manage these inherent risks.
There is also exposure to concentration risk
associated with general insurance and
life and health insurance coverage. Exposure
to insurance risk concentration is
managed with an Accumulation Management
Policy and through established underwriting
guidelines, limits, and authorization levels
that govern the acceptance of
risk. Concentration of insurance risk is also
mitigated through the purchase of reinsurance.
The insurance business’ reinsurance programs
are governed by
catastrophe and reinsurance risk management
policies.
Strategies are in place to help manage the risk
to the Bank’s reinsurance business. Underwriting
risk on business assumed is managed
through a policy that limits
exposure to certain types of business and countries.
The vast majority of reinsurance treaties
are annually renewable, which minimizes long-term
risk. Pandemic
exposure is reviewed and estimated annually
within the reinsurance business to manage
concentration risk.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 87
Liquidity Risk
The risk of having insufficient cash or collateral
to meet financial obligations and an inability
to, in a timely manner, raise funding or monetize assets at
a non-
distressed price. Financial obligations can arise
from deposit withdrawals, debt maturities,
commitments to provide credit or liquidity
support or the need to pledge
additional collateral.
TD’S LIQUIDITY RISK APPETITE
TD follows a disciplined liquidity management
program, which is subject to risk governance
and oversight, and is designed to maintain
sufficient liquidity to permit
the Bank to operate through a significant
liquidity event without relying on extraordinary
central bank assistance. The Bank maintains
access to a stable and
diversified funding base and aligns its funding
profile with that of the assets and contingent
obligations it supports.
WHO MANAGES LIQUIDITY RISK
The Risk Committee, the ALCO and
the Treasurer are accountable for the identification,
assessment, control, monitoring and oversight
of liquidity risk.
•
The Risk Committee regularly reviews the
Bank’s liquidity position and approves the Bank’s
Liquidity Risk Management Framework
biennially and related
policies annually.
•
The Bank’s ALCO is responsible for establishing
effective management structures and practices
to ensure appropriate measurement, management,
and
governance of liquidity risk.
•
The Global Liquidity & Funding (GLF)
Committee, a subcommittee of the ALCO
comprised of senior management from
Treasury, Wholesale Banking and Risk
Management, identifies and monitors the Bank’s liquidity
risks.
In addition to our committee oversight framework,
liquidity risk management activities
are subject to the three lines of defence governance
model. Treasury, the
first line of defence for the management of liquidity
risk, is subject to independent second line
challenge and oversight by Risk Management.
TD’s Internal Audit is
the third line of defence. The three lines of
defence are independent of the business
whose activities generate liquidity risks.
HOW TD MANAGES LIQUIDITY RISK
The Bank manages the liquidity profile of
its businesses in accordance with its defined
liquidity risk appetite.
The Bank’s strategies, plans and governance
practices underpin an integrated liquidity risk
management program that is designed to reduce
exposure to liquidity risk and maintain
compliance with regulatory
requirements. A combination of quantitative and
qualitative measures is used to control liquidity
risk with the objective of maintaining sufficient liquidity
to satisfy
the Bank’s operational needs and client commitments
in both normal and stress conditions.
The Bank targets a 90-day survival horizon
under a combined bank-
specific and market-wide stress scenario,
and surpluses over regulatory requirements,
including those prescribed by OSFI’s Liquidity
Adequacy Requirements
(LAR) guideline. The Bank’s funding program emphasizes
a stable, diversified deposit base as
a core source of funding and maintains ready
access to wholesale
funding markets to diversify across terms,
funding types, and currencies. This approach
helps lower exposure to sudden contractions
of wholesale funding
capacity and minimizes structural liquidity
gaps. The Bank also maintains a contingency
funding plan (CFP) to enhance preparedness
to address potential liquidity
stress events.
The Bank’s internal stress testing informs the
management of liquidity risk. Among scenarios
considered is a severe combined stress event
resulting in elevated
liquidity requirements and a loss of confidence
in the Bank’s ability to meet obligations as
they come due. In addition to this bank-specific
event, this scenario
incorporates a market-wide liquidity
stress that materially reduces the availability
of funding for all institutions and decreases
the marketability of assets. The
Bank’s liquidity risk management policies stipulate
that the Bank must maintain a sufficient level of
liquid assets to support business growth,
and to cover stressed
liquidity requirements under the stress scenario
for a period of up to 90 days. Key elements
of the scenario include:
●
loss of access to wholesale funding including
repayment of maturing debt in the next 90
days;
●
accelerated deposit attrition or “run-off”;
●
increased utilization of available credit and liquidity
facilities; and
●
increased collateral requirements associated
with downgrades in the Bank’s credit ratings.
Internal measures and limits complement regulatory
liquidity requirements, such as the Liquidity
Coverage Ratio (LCR), the Net Stable Funding
Ratio (NSFR), and
the Net Cumulative Cash Flow (NCCF)
monitoring tool prescribed in OSFI’s LAR guidance.
The Bank’s liquidity is managed to the higher of its internal
liquidity
requirements and target buffers over the regulatory
minimums.
The Bank also considers regional regulatory
metrics as well as potential restrictions
on liquidity transferability in the calculation
of enterprise liquidity positions.
Accordingly, surplus liquidity domiciled in regulated subsidiaries
may be excluded from consolidated liquidity
positions as appropriate.
The Bank’s Funds Transfer Pricing process considers liquidity
risk as a key determinant of the cost
or credit of funds to businesses.
LIQUID ASSETS
The Bank’s unencumbered liquid assets could be
used to help address potential funding needs
arising from stress events. Liquid asset eligibility
considers
estimated stressed market values and
trading market depth, as well as operational,
legal, or other impediments to sale, rehypothecation
or pledging.
Assets held by the Bank to meet liquidity
requirements are summarized in the following
tables. The tables do not include assets held
within the Bank’s insurance
businesses as these are used to support insurance-specific
liabilities and capital requirements.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 88
TABLE 46: SUMMARY OF LIQUID
ASSETS BY TYPE AND CURRENCY
(millions of Canadian dollars, except as noted)
As at
Securities
received as
collateral from
securities
financing and
Bank-owned
derivative
Total
Encumbered
Unencumbered
liquid assets
transactions
liquid assets
liquid assets
liquid assets
1
October 31, 2025
Cash and central bank reserves
$
17,966
$
–
$
17,966
$
1,130
$
16,836
Obligations of government, federal agencies, public sector
entities,
and multilateral development banks
2
112,902
117,718
230,620
95,245
135,375
Equities
18,403
4,111
22,514
19,146
3,368
Other debt securities
6,229
6,219
12,448
9,213
3,235
Other securities
–
–
–
–
–
Total Canadian dollar-denominated
155,500
128,048
283,548
124,734
158,814
Cash and central bank reserves
89,425
–
89,425
185
89,240
Obligations of government, federal agencies, public sector
entities,
and multilateral development banks
215,537
160,502
376,039
179,623
196,416
Equities
65,295
42,664
107,959
62,020
45,939
Other debt securities
77,703
17,744
95,447
29,212
66,235
Other securities
31,647
2,937
34,584
8,161
26,423
Total non-Canadian dollar-denominated
479,607
223,847
703,454
279,201
424,253
Total
$
635,107
$
351,895
$
987,002
$
403,935
$
583,067
October 31, 2024
Total Canadian dollar-denominated
163,269
117,083
280,352
110,064
170,288
Total non-Canadian dollar-denominated
482,052
179,665
661,717
247,478
414,239
Total
$
645,321
$
296,748
$
942,069
$
357,542
$
584,527
1
Unencumbered liquid assets include on-balance sheet assets, assets borrowed or purchased under resale agreements,
and other off-balance sheet collateral received less encumbered
liquid assets.
2
Includes National Housing Act Mortgage-Backed Securities (NHA MBS).
Unencumbered liquid assets held in The
Toronto-Dominion Bank, its domestic and foreign subsidiaries, and branches
are summarized in the following
table.
TABLE 47: SUMMARY OF UNENCUMBERED
LIQUID ASSETS BY BANK,
SUBSIDIARIES, AND BRANCHES
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
The Toronto-Dominion Bank (Parent)
$
257,722
$
237,005
Bank subsidiaries
306,961
314,306
Foreign branches
18,384
33,216
Total
$
583,067
$
584,527
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 89
The Bank’s monthly average liquid assets for the
years ended October 31, 2025, and October
31, 2024, are summarized in the following
table.
TABLE 48: SUMMARY OF
AVERAGE LIQUID ASSETS BY
TYPE AND CURRENCY
(millions of Canadian dollars, except as noted)
Average for the years ended
Securities
received as
collateral from
securities
financing and
Total
Bank-owned
derivative
liquid
Encumbered
Unencumbered
liquid assets
transactions
assets
liquid assets
liquid assets
1
October 31, 2025
Cash and central bank reserves
$
25,713
$
–
$
25,713
$
1,062
$
24,651
Obligations of government, federal agencies, public sector
entities and multilateral development banks
2
112,447
109,050
221,497
92,535
128,962
Equities
15,946
4,607
20,553
16,422
4,131
Other debt securities
5,317
6,315
11,632
7,790
3,842
Other securities
–
–
–
–
–
Total Canadian dollar-denominated
159,423
119,972
279,395
117,809
161,586
Cash and central bank reserves
98,817
–
98,817
211
98,606
Obligations of government, federal agencies, public sector
entities and multilateral development banks
223,041
147,932
370,973
163,352
207,621
Equities
60,733
42,275
103,008
59,742
43,266
Other debt securities
73,912
16,474
90,386
28,863
61,523
Other securities
22,523
4,100
26,623
8,076
18,547
Total non-Canadian dollar-denominated
479,026
210,781
689,807
260,244
429,563
Total
$
638,449
$
330,753
$
969,202
$
378,053
$
591,149
October 31, 2024
Total Canadian dollar-denominated
157,333
117,603
274,936
108,068
166,868
Total non-Canadian dollar-denominated
423,522
168,349
591,871
221,582
370,289
Total
$
580,855
$
285,952
$
866,807
$
329,650
$
537,157
1
Unencumbered liquid assets include on-balance sheet assets, assets borrowed or purchased under resale agreements,
and other off-balance sheet collateral received less encumbered
liquid assets.
2
Includes NHA MBS.
Average unencumbered liquid assets held in
The Toronto-Dominion Bank, its domestic and foreign subsidiaries, and branches
are summarized in the following
table.
TABLE 49: SUMMARY OF
AVERAGE UNENCUMBERED LIQUID
ASSETS BY BANK, SUBSIDIARIES,
AND BRANCHES
(millions of Canadian dollars)
Average for the years ended
October 31, 2025
October 31, 2024
The Toronto-Dominion Bank (Parent)
$
250,006
$
219,007
Bank subsidiaries
315,518
290,536
Foreign branches
25,625
27,614
Total
$
591,149
$
537,157
ASSET ENCUMBRANCE
In the course of the Bank’s daily operations, assets
are pledged to obtain funding, support
trading and brokerage businesses, and participate
in clearing and/or
settlement systems. TD has pledging policies
in place that govern the amount of assets
we encumber, ensuring sufficient assets are available to meet liquidity
requirements. A summary of on- and off-balance
sheet encumbered and unencumbered assets
is presented as follows.
TABLE 50: ENCUMBERED
AND UNENCUMBERED ASSETS
(millions of Canadian dollars)
As at
Total Assets
Encumbered
Unencumbered
Total
Pledged as
Available as
Assets
Collateral
1
Other
2
Collateral
3
Other
4
October 31, 2025
Cash and due from banks
$
7,512
$
–
$
–
$
–
$
7,512
Interest-bearing deposits with banks
109,417
5,700
–
99,510
4,207
Securities, trading loans, and other
1,042,834
478,953
25,714
502,937
35,230
Derivatives
82,972
–
–
–
82,972
Loans, net of allowance for loan losses
929,408
40,472
101,568
69,890
717,478
Other assets
5
93,242
262
–
–
92,980
Total assets
$
2,265,385
$
525,387
$
127,282
$
672,337
$
940,379
October 31, 2024
Total assets
$
2,202,763
$
509,319
$
113,528
$
635,491
$
944,425
1
Pledged collateral refers to the portion of assets that are pledged through encumbering activities, such as repurchase
agreements, securities lending, derivative contracts, and
requirements associated with participation in clearing houses and payment systems.
2
Includes assets supporting TD’s long-term funding activities such as asset securitization and issuance
of covered bonds.
3
Represents assets that are readily available for use as collateral to generate funding or support collateral requirements.
This category includes unencumbered loans backed by real estate
that qualify as eligible collateral at the FHLB system.
4
Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral but
would not be considered immediately available.
5
Other assets include goodwill, other intangibles, land, buildings, equipment, other depreciable assets and right-of-use
assets, deferred tax assets, amounts receivable from brokers,
dealers, and clients, and other assets on the balance sheet not reported in the above categories.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 90
LIQUIDITY STRESS TESTING AND CONTINGENCY
FUNDING PLANS
In addition to the Bank’s internal liquidity stress
metric, the Bank performs liquidity
stress testing on multiple alternate scenarios.
These scenarios consist of a mix
of TD-specific and market-wide stress
events designed to evaluate the potential
impact of risk factors material to the
Bank’s risk profile. Liquidity risk assessments
are also part of the Bank’s EWST program.
The Bank maintains CFPs for the enterprise
and material subsidiaries operating
in foreign jurisdictions. As they provide
a playbook for managing stressed
liquidity conditions, these plans are an integral
component of the Bank’s overall liquidity risk
management framework. The CFPs outline
different contingency
levels based on the severity and duration of
the liquidity event and identify recovery
actions appropriate for each level. To support operational readiness, CFPs
provide key steps required to implement
each recovery action. Regional CFPs identify
recovery actions to address region-specific
stress events. The actions and
governance structure outlined in the Bank’s
CFP are aligned with the Bank’s Crisis Management
Recovery Plan.
CREDIT RATINGS
Credit ratings may affect the Bank’s access to, and
cost of, raising funding and its ability
to engage in certain business activities on a
cost-effective basis. Credit
ratings and outlooks provided by rating agencies
reflect their views and methodologies and
are subject to change based on several
factors including the Bank’s
financial strength, competitive position,
and liquidity, as well as factors not entirely within the Bank’s control,
including conditions affecting the overall financial
services industry.
TABLE 51: CREDIT RATINGS
1
As at
October 31, 2025
Moody’s
S&P
Fitch
DBRS
Deposits/Counterparty
2
Aa1
A+
AA
AA
Legacy Senior Debt
3
Aa2
A+
AA
AA
Senior Debt
4
A2
A-
AA-
AA (low)
Covered Bonds
Aaa
–
AAA
AAA
Legacy Subordinated Debt – non-NVCC
A3
A-
A
A (high)
Tier 2 Subordinated Debt – NVCC
A3 (hyb)
BBB+
A
A (low)
AT1 Perpetual Debt – NVCC
Baa2 (hyb)
BBB-
BBB+
–
Limited Recourse Capital Notes – NVCC
Baa2 (hyb)
BBB-
BBB+
BBB (high)
Preferred Shares – NVCC
Baa2 (hyb)
BBB-
BBB+
Pfd-2
Short-Term Debt (Deposits)
P-1
A-1
F1+
R-1 (high)
Outlook
Stable
Stable
Negative
Stable
1
The above ratings are for The Toronto-Dominion
Bank legal entity. Subsidiaries’ ratings are available
on the Bank’s website at http://www.td.com/investor/credit.jsp. Credit
ratings are not
recommendations to purchase, sell, or hold a financial obligation in as much as they do not comment on market
price or suitability for a particular investor. Ratings are subject
to revision
or withdrawal at any time by the rating organization.
2
Represents Moody’s Long-Term
Deposits Ratings and Counterparty Risk Rating, S&P’s Issuer Credit Rating, Fitch’s
Long-Term Deposits Rating and DBRS
’
Long-Term Issuer Rating.
3
Includes (a) Senior debt issued prior to September 23, 2018; and (b) Senior debt issued on or after September
23, 2018 which is excluded from the bank recapitalization “bail-in” regime.
4
Subject to conversion under the bank recapitalization “bail-in”
regime.
The Bank regularly reviews the level
of increased collateral its trading counterparties
would require in the event of a downgrade of
TD’s credit rating. The following
table presents the additional collateral that
could have been contractually required to be
posted to over-the-counter (OTC) derivative
counterparties as of the
reporting date in the event of one, two, and three-notch
downgrades of the Bank’s credit ratings.
TABLE 52: ADDITIONAL COLLATERAL
REQUIREMENTS FOR RATING DOWNGRADES
1
(millions of Canadian dollars)
Average for the years ended
October 31, 2025
October 31, 2024
One-notch downgrade
$
968
$
127
Two-notch downgrade
1,435
287
Three-notch downgrade
2,506
1,014
1
These collateral requirements are based on each OTC trading counterparty’s Credit Support Annex
and the Bank’s credit rating across applicable rating agencies.
LIQUIDITY COVERAGE RATIO
The LCR is a Basel III standard designed to ensure
that banks have an adequate stock of unencumbered
HQLA, consisting of cash or assets that
can be
converted into cash, to meet their liquidity
needs for a 30-calendar day liquidity stress
scenario.
In accordance with OSFI’s LAR, the Bank
must maintain a minimum LCR of 100%,
except during periods of financial stress
when institutions are permitted to
use their stock of HQLA. The Bank’s LCR is
calculated according to the scenario
parameters in the LAR guideline, including
prescribed HQLA eligibility criteria and
haircuts, deposit run-off and, other outflow and
inflow rates. LCR-eligible HQLA consist
primarily of central bank reserves, sovereign-issued
or sovereign-
guaranteed securities, and high-quality
securities issued by non-financial entities.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 91
59
The following table summarizes the Bank’s average
daily LCR as of the relevant dates.
TABLE 53: AVERAGE LIQUIDITY
COVERAGE RATIO
1
(millions of Canadian dollars, except
as noted)
Average for the three months ended
October 31, 2025
Total unweighted
Total weighted
value (average)
2
value (average)
3
High-quality liquid assets
Total high-quality liquid assets
$
n/a
4
$
346,383
Cash outflows
Retail deposits and deposits from small business
customers, of which:
$
509,076
$
32,890
Stable deposits
270,781
8,123
Less stable deposits
238,295
24,767
Unsecured wholesale funding, of which:
396,154
194,365
Operational deposits (all counterparties)
and deposits in networks of cooperative banks
144,433
34,275
Non-operational deposits (all counterparties)
225,836
134,205
Unsecured debt
25,885
25,885
Secured wholesale funding
n/a
52,452
Additional requirements, of which:
353,824
110,125
Outflows related to derivative exposures and
other collateral requirements
53,113
46,624
Outflows related to loss of funding on debt products
12,058
12,058
Credit and liquidity facilities
288,653
51,443
Other contractual funding obligations
20,715
10,842
Other contingent funding obligations
842,403
13,118
Total cash outflows
$
n/a
$
413,792
Cash inflows
Secured lending
$
276,164
$
48,573
Inflows from fully performing exposures
36,025
12,167
Other cash inflows
87,208
87,208
Total cash inflows
$
399,397
$
147,948
Average for the three months ended
October 31, 2025
July 31, 2025
Total weighted
Total weighted
value
value
Total high-quality liquid assets
$
346,383
$
361,014
Total net cash outflows
265,844
261,288
Liquidity coverage ratio
130
%
138
%
1
The LCR is calculated in accordance with OSFI’s LAR guideline, which is reflective of liquidity-related
requirements published by the BCBS. The LCR for the quarter ended
October 31, 2025, is calculated as an average of the 62 daily data points in the quarter.
2
Unweighted inflow and outflow values are outstanding balances maturing or callable within 30 days.
3
Weighted values are calculated after the application of respective HQLA haircuts, or inflow and outflow
rates, and caps as prescribed by the OSFI LAR guideline.
4
Not applicable as per the LCR common disclosure template.
The Bank’s average LCR was 130%
for the quarter ended October 31, 2025
and continues to meet regulatory requirements.
The Bank holds a variety of liquid assets
commensurate with its liquidity needs. Most of
these liquid assets also qualify as HQLA
under the OSFI LAR guideline.
The LCR trended lower throughout the quarter
as the bank continued to focus on deploying
elevated surpluses from the sale of its equity
investment in Schwab,
this has reduced the LCR to a more sustainable
level
.
The Bank’s Level 1 assets for the quarter ended
October 31, 2025, as calculated according
to OSFI LAR
and the BCBS LCR requirements, represent
86%
of total HQLA (July 31, 2025 – 86%). In
accordance with the OSFI LAR guideline,
the Bank’s reported HQLA
excludes excess HQLA from U.S. Retail operations
to reflect liquidity transfer considerations
between U.S. Retail and affiliates as a result
of the U.S. Federal
Reserve Board’s regulations. By excluding excess
HQLA, the U.S. Retail LCR is effectively capped
at 100% prior to total Bank consolidation.
NET STABLE
FUNDING RATIO
The NSFR is a Basel III metric calculated as
the ratio of total Available Stable Funding (ASF)
to total Required Stable Funding (RSF).
The Bank must maintain an
NSFR ratio equal to or above 100% in accordance
with the LAR guideline. The Bank’s ASF comprises
the Bank’s liability and capital instruments (including
deposits and wholesale funding). The assets
that require stable funding are a function
of the Bank’s on and off-balance sheet activities,
their liquidity
characteristics, and OSFI’s LAR guideline requirements.
59
The Bank’s expectations regarding liquidity levels are based on the Bank’s assumptions
regarding certain factors, including product growth, strategic plans, pace of share repurchases
under the Bank’s normal course issuer bid (which is subject to financial forecasts and capital requirements).
The Bank’s assumptions are subject to inherent uncertainties and may vary
based on factors both within and outside the Bank’s control, including general market conditions, economic
outlooks and geopolitical matters. 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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 92
TABLE 54: NET STABLE FUNDING RATIO
1
(millions of Canadian dollars, except
as noted)
As at
October 31, 2025
Unweighted value by residual maturity
6 months to
No
Less than
less than
More than
Weighted
maturity
2
6 months
1 year
1 year
value
3
Available Stable Funding Item
Capital
$
123,903
$
n/a
$
n/a
$
7,298
$
131,201
Regulatory capital
123,903
n/a
n/a
7,298
131,201
Other capital instruments
n/a
n/a
n/a
–
–
Retail deposits and deposits from small business
customers:
470,047
77,963
31,984
29,816
566,493
Stable deposits
260,797
30,528
13,738
14,385
304,196
Less stable deposits
209,250
47,435
18,246
15,431
262,297
Wholesale funding:
277,611
413,129
83,843
242,848
468,169
Operational deposits
121,012
2,494
–
–
61,753
Other wholesale funding
156,599
410,635
83,843
242,848
406,416
Liabilities with matching interdependent assets
4
–
2,100
2,184
35,293
–
Other liabilities:
56,372
100,455
8,261
NSFR derivative liabilities
n/a
7,130
n/a
All other liabilities and equity not included
in the above categories
56,372
84,006
2,116
7,203
8,261
Total Available Stable Funding
$
1,174,124
Required Stable Funding Item
Total NSFR high-quality liquid assets
$
n/a
$
n/a
$
n/a
$
n/a
$
58,247
Deposits held at other financial institutions for
operational purposes
–
–
–
–
–
Performing loans and securities:
130,084
283,945
145,572
664,550
788,062
Performing loans to financial institutions
secured by Level 1 HQLA
–
85,880
7,854
10
10,823
Performing loans to financial institutions
secured by non-Level 1
HQLA and unsecured performing
loans to financial institutions
–
76,604
11,047
14,305
27,942
Performing loans to non-financial corporate
clients, loans to retail
and small business customers, and loans
to sovereigns, central
banks and PSEs, of which:
41,424
63,444
49,312
295,335
346,858
With a risk weight of less than or equal
to 35% under the Basel II
standardized approach for credit risk
n/a
–
–
–
–
Performing residential mortgages, of which:
36,947
53,704
74,431
280,717
291,115
With a risk weight of less than or equal
to 35% under the Basel II
standardized approach for credit risk
36,947
53,704
74,431
280,717
291,115
Securities that are not in default and do not
qualify as HQLA,
including exchange-traded equities
51,712
4,313
2,928
74,183
111,324
Assets with matching interdependent liabilities
4
–
2,526
3,638
33,412
–
Other assets:
90,168
146,980
126,170
Physical traded commodities, including gold
31,479
n/a
n/a
n/a
27,131
Assets posted as initial margin for derivative
contracts and
contributions to default funds of CCPs
–
–
–
21,565
18,330
NSFR derivative assets
n/a
–
–
11,764
4,634
NSFR derivative liabilities before deduction
of variation margin
posted
n/a
21,995
1,100
All other assets not included in the above
categories
58,689
82,963
1,120
7,573
74,975
Off-balance sheet items
n/a
861,123
31,045
Total Required Stable Funding
$
1,003,524
Net Stable Funding Ratio
117
%
As at
October 31, 2024
Total Available Stable Funding
$
1,154,060
Total Required Stable Funding
994,567
Net Stable Funding Ratio
116
%
1
The NSFR is calculated in accordance with OSFI’s LAR guideline, which is reflective of liquidity-related
requirements published by the BCBS.
2
Items in the “no maturity” time bucket do not have a stated maturity. These
may include, but are not limited to, items such as capital with perpetual maturity,
non-maturity deposits, short
positions, open maturity positions, non-HQLA equities, and physical traded commodities.
3
Weighted values are calculated after the application of respective NSFR weights, as prescribed by the
OSFI LAR guideline.
4
Interdependent asset and liability items are deemed by OSFI to be interdependent and have RSF and ASF risk factors
adjusted to zero. Interdependent liabilities cannot fall due while the
asset is still on balance sheet, cannot be used to fund any other assets and principal payments from the asset cannot
be used for anything other than repaying the liability.
As such, the
only interdependent assets and liabilities that qualify for this treatment at the Bank are the liabilities arising from the
Canada Mortgage Bonds Program and their corresponding
encumbered assets.
The Bank’s NSFR for the quarter ended October
31, 2025 is 117%
(October 31, 2024
– 116%), representing a surplus of $171 billion, adhering to regulatory
requirements.
FUNDING
The Bank has access to a variety of unsecured
and secured funding sources. The Bank’s
funding activities are conducted in accordance
with liquidity risk
management policies that require assets be
funded to the appropriate term and to a prudent
diversification profile.
The Bank’s primary approach to funding is
to maximize the use of deposits raised through
its personal, wealth and business banking
channels. The deposits
raised from these sources were approximately
64
% (October 31, 2024 –
63
%) of the Bank’s total funding. Non-personal
deposit funding as reflected below does
not include the Bank’s Wholesale Banking deposits
(including Corporate & Investment Banking).
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 93
TABLE 55: SUMMARY OF DEPOSIT
FUNDING
1
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Personal
$
650,396
$
641,667
Non-personal
316,319
310,422
Total
$
966,715
$
952,089
1
The calculation methodology has been changed to reflect deposit funding from personal, wealth and business
banking channels.
WHOLESALE FUNDING
The Bank maintains various registered external
wholesale term (greater than 1 year) funding
programs to provide access to diversified
funding sources, including
asset securitization, covered bonds, and
unsecured wholesale debt. The Bank raises
term funding through Senior Notes, NHA MBS,
and notes backed by credit
card receivables (Evergreen Credit Card
Trust) and home equity lines of credit (Genesis Trust II). The Bank’s wholesale
funding is diversified by geography,
currency, and funding types. The Bank raises short-term (1 year
or less) funding using certificates of deposit
and commercial paper.
The following table summarizes the registered
term funding and capital programs by geography, with the related program
size as at October 31, 2025.
Canada
United States
Europe
Capital Securities Program ($20 billion)
Canadian Senior Medium-Term Linked Notes
Program ($5 billion)
HELOC ABS Program (Genesis Trust II) ($7
billion)
U.S. SEC (F-3) Registered Capital and
Debt
Program (US$75 billion)
U.K. Financial Conduct Authority (FCA)
Registered
Legislative Covered Bond Program ($100 billion)
FCA Registered Global Medium-Term Note
Program (US$40 billion)
Non-Registered Structured Global Medium-Term
Linked Notes Program (US$20 billion)
The following table presents a breakdown of
the Bank’s term debt by currency and funding
type. Term funding as at October 31, 2025, was $192.0 billion
(October 31, 2024
– $184.5 billion).
Note that Table 56: Long-Term Funding and Table
57: Wholesale Funding do not include
any funding accessed via repurchase transactions
or securities financing.
TABLE 56: LONG-TERM FUNDING
1
As at
Long-term funding by currency
October 31, 2025
October 31, 2024
Canadian dollar
26
%
25
%
U.S. dollar
33
31
Euro
32
33
British pound
4
5
Other
5
6
Total
100
%
100
%
Long-term funding by type
Senior unsecured medium-term notes
53
%
51
%
Covered bonds
37
40
Mortgage securitization
2
8
7
Term asset backed securities
2
2
Total
100
%
100
%
1
The table includes secured and unsecured, senior and subordinated notes – excluding structured notes and commercial
paper – issued to external investors with an original term-to-
maturity of greater than one year.
2
Mortgage securitization excludes the residential mortgage trading business.
The Bank maintains depositor concentration
limits in respect of short-term wholesale
deposits so that it is not overly reliant
on individual depositors for funding.
The Bank further limits short-term wholesale
funding maturity concentration in an effort
to mitigate refinancing risk during a
stress event.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 94
TABLE 57: WHOLESALE FUNDING
(millions of Canadian dollars)
As at
October 31
October 31
2025
2024
Less than
1 to 3
3 to 6
6 months
Up to 1
Over 1 to
Over
1 month
months
months
to 1 year
year
2 years
2 years
Total
Total
Deposits from banks
1
$
1,763
$
195
$
316
$
464
$
2,738
$
–
$
–
$
2,738
$
1,856
Bearer deposit notes
646
2,179
2,652
255
5,732
–
–
5,732
787
Certificates of deposit
9,957
17,974
32,695
29,592
90,218
295
–
90,513
101,168
Commercial paper
7,373
15,625
19,777
10,544
53,319
440
–
53,759
60,339
Covered bonds
–
140
9,958
8,876
18,974
24,335
27,249
70,558
75,399
Mortgage securitization
2
–
1,814
752
2,742
5,308
3,851
30,965
40,124
32,684
Legacy senior unsecured medium-term
notes
3
–
–
114
1,341
1,455
–
–
1,455
88
Senior unsecured medium-term notes
4
–
6,051
2,754
8,867
17,672
25,187
57,822
100,681
93,157
Subordinated notes and debentures
5
–
–
–
–
–
–
10,733
10,733
11,473
Term asset backed securitization
1,154
3,606
3,822
4,270
12,852
1,351
1,499
15,702
9,604
Other
6
35,181
4,494
962
1,975
42,612
1,375
3,833
47,820
70,951
Total
$
56,074
$
52,078
$
73,802
$
68,926
$
250,880
$
56,834
$
132,101
$
439,815
$
457,506
Of which:
Secured
$
1,155
$
5,560
$
14,532
$
15,888
$
37,135
$
29,538
$
59,715
$
126,388
$
153,855
Unsecured
54,919
46,518
59,270
53,038
213,745
27,296
72,386
313,427
303,651
Total
$
56,074
$
52,078
$
73,802
$
68,926
$
250,880
$
56,834
$
132,101
$
439,815
$
457,506
1
Only includes fixed-term commercial bank deposits.
2
Includes mortgaged backed securities (MBS) issued to external investors and Wholesale Banking residential mortgage
trading business.
3
Includes a) senior debt issued prior to September 23, 2018; and b) senior debt issued on or after September 23,
2018 which is excluded from the bank recapitalization “bail-in” regime,
including debt with an original term-to-maturity of less than 400 days.
4
Comprised of senior debt subject to conversion under the bank recapitalization “bail-in”
regime. Excludes $3.3 billion of structured notes subject to conversion under the “bail-in”
regime (October 31, 2024 – $4.4 billion).
5
Subordinated notes and debentures are not considered wholesale funding as they may be raised primarily for capital
management purposes.
6
Includes fixed-term deposits from non-bank institutions (unsecured) of $26.9 billion (October 31, 2024 – $17.3
billion) and the remaining are non-term deposits.
Excluding the Wholesale Banking residential
mortgage trading business, the Bank’s total 2025
mortgage-backed securities issued to external
investors was
$4.6 billion (2024
– $2.3 billion) and other asset-backed
securities issued was $1.4 billion (2024
– $2.6 billion). The Bank also issued
$28.2 billion of unsecured
medium-term notes (2024
– $13.6 billion) and $4.8 billion of
covered bonds (2024 – $27.1 billion) during
the year ended October 31, 2025.
MATURITY ANALYSIS OF ASSETS, LIABILITIES, AND OFF-BALANCE SHEET COMMITMENTS
The following table summarizes on-balance
sheet and off-balance sheet categories by remaining
contractual maturity. The values of credit instruments reported in
the following table represent the maximum amount
of additional credit that the Bank could
be obligated to extend should such instruments
be fully drawn or
utilized. Since a significant portion of guarantees
and commitments are expected to expire
without being drawn upon, the total of the contractual
amounts is not
representative of expected future liquidity requirements.
These contractual obligations have an impact
on the Bank’s short-term and long-term liquidity
and capital
resource needs.
The maturity analysis presented does not depict
the degree of the Bank’s maturity transformation or
the Bank’s exposure to interest rate and liquidity risk.
The
Bank’s objective is to fund its assets appropriately
to protect against borrowing cost volatility
and potential reductions to funding market availability. The Bank
utilizes stable non-maturity deposits (chequing
and savings accounts) and term deposits
as the primary source of long-term funding
for the Bank’s non-trading
assets including personal and business
term loans and the stable balance of revolving
lines of credit. Additionally, the Bank issues long-term funding in
respect of
such non-trading assets and raises short-term
funding primarily to finance trading assets.
The liquidity of trading assets under stressed
market conditions is
considered when determining the appropriate
term of the funding.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 95
TABLE 58: REMAINING CONTRACTUAL
MATURITY
(millions of Canadian dollars)
As at
October 31, 2025
No
Less than
1 to 3
3 to 6
6 to 9
9 months
Over 1 to
Over 2 to
Over
specific
1 month
months
months
months
to 1 year
2 years
5 years
5 years
maturity
Total
Assets
Cash and due from banks
$
7,512
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
7,512
Interest-bearing deposits with banks
106,857
724
39
–
–
–
–
–
1,797
109,417
Trading loans, securities, and other
1
4,243
5,867
5,219
3,647
4,107
10,100
33,372
31,052
122,529
220,136
Non-trading financial assets at fair value through
profit or loss
–
–
–
74
–
332
2,939
1,873
2,177
7,395
Derivatives
10,478
12,594
7,269
4,638
5,006
11,761
17,913
13,313
–
82,972
Financial assets designated at fair value through
profit or loss
271
226
543
649
251
1,396
2,715
935
–
6,986
Financial assets at fair value through other comprehensive
income
1,959
4,006
3,698
3,802
6,061
6,002
48,054
49,739
3,048
126,369
Debt securities at amortized cost, net of allowance
for credit losses
4,850
3,768
5,670
7,152
3,992
28,954
70,952
115,102
(1)
240,439
Securities purchased under reverse repurchase
agreements
2
164,872
40,541
28,394
6,906
4,840
786
739
–
–
247,078
Loans
Residential mortgages
3,463
7,240
16,334
25,284
23,462
78,900
112,140
48,240
–
315,063
Consumer instalment and other personal
1,115
2,652
6,373
9,240
7,052
31,673
96,668
37,975
66,285
259,033
Credit card
–
–
–
–
–
–
–
–
41,662
41,662
Business and government
59,741
12,360
13,577
17,631
17,491
44,950
89,699
56,975
33,519
345,943
Total loans
64,319
22,252
36,284
52,155
48,005
155,523
298,507
143,190
141,466
961,701
Allowance for loan losses
–
–
–
–
–
–
–
–
(8,689)
(8,689)
Loans, net of allowance for loan losses
64,319
22,252
36,284
52,155
48,005
155,523
298,507
143,190
132,777
953,012
Goodwill
3
–
–
–
–
–
–
–
–
18,980
18,980
Other intangibles
3
–
–
–
–
–
–
–
–
3,409
3,409
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
3
–
3
2
4
10
86
679
3,333
6,015
10,132
Deferred tax assets
–
–
–
–
–
–
–
–
5,388
5,388
Amounts receivable from brokers, dealers, and clients
27,345
–
–
–
–
–
–
–
–
27,345
Other assets
5,207
2,630
3,076
521
485
199
412
507
14,951
27,988
Total assets
$
397,913
$
92,611
$
90,194
$
79,548
$
72,757
$
215,139
$
476,282
$
359,044
$
311,070
$
2,094,558
Liabilities
Trading deposits
$
3,346
$
4,147
$
5,288
$
2,790
$
4,967
$
6,314
$
7,931
$
3,099
$
–
$
37,882
Derivatives
10,690
13,350
8,930
7,039
4,359
8,034
15,169
11,785
–
79,356
Securitization liabilities at fair value
–
1,096
570
1,069
739
2,248
13,667
5,894
–
25,283
Financial liabilities designated at
fair value through profit or loss
48,996
46,231
57,600
26,665
17,192
652
3
–
296
197,635
Deposits
4,5
Personal
15,300
30,652
24,351
17,289
19,285
17,296
12,784
2
513,437
650,396
Banks
15,232
96
56
–
49
2
2
–
11,796
27,233
Business and government
18,548
20,498
19,236
15,276
10,272
51,067
56,791
32,004
365,783
589,475
Total deposits
49,080
51,246
43,643
32,565
29,606
68,365
69,577
32,006
891,016
1,267,104
Obligations related to securities sold short
1
2,677
575
1,304
1,647
1,245
6,351
14,346
12,879
2,771
43,795
Obligations related to securities sold under repurchase
agreements
2
196,625
20,970
3,017
237
114
164
23
–
–
221,150
Securitization liabilities at amortized cost
–
719
182
367
567
1,602
5,104
6,300
–
14,841
Amounts payable to brokers, dealers, and clients
27,434
–
–
–
–
–
–
–
–
27,434
Insurance-related liabilities
215
405
607
608
641
1,137
1,508
1,288
869
7,278
Other liabilities
5,198
6,600
2,535
1,628
922
2,380
2,024
5,944
7,009
34,240
Subordinated notes and debentures
–
–
–
–
–
–
–
10,733
–
10,733
Equity
–
–
–
–
–
–
–
–
127,827
127,827
Total liabilities and equity
$
344,261
$
145,339
$
123,676
$
74,615
$
60,352
$
97,247
$
129,352
$
89,928
$
1,029,788
$
2,094,558
Off-balance sheet commitments
Credit and liquidity commitments
6,7
$
16,424
$
45,279
$
31,734
$
23,774
$
23,268
$
49,354
$
174,265
$
3,658
$
1,990
$
369,746
Other commitments
8
131
233
271
325
246
931
2,864
376
12
5,389
Unconsolidated structured entity commitments
1,312
1,004
1,855
3,143
1,787
7,012
2,930
–
–
19,043
Total off-balance sheet commitments
$
17,867
$
46,516
$
33,860
$
27,242
$
25,301
$
57,297
$
180,059
$
4,034
$
2,002
$
394,178
1
Amount has been recorded according to the remaining contractual maturity of the underlying security.
2
Certain contracts considered short-term are presented in ‘less than 1 month’ category.
3
Certain non-financial assets have been recorded as having ‘no specific maturity’.
4
As the timing of demand deposits and notice deposits is non-specific and callable by the depositor,
obligations have been included as having ‘no specific maturity’.
5
Includes $
70
billion of covered bonds with remaining contractual maturities of $
10
billion in ‘over 3 months to 6 months’, $
4
billion in ‘over 6 months to 9 months’, $
5
billion in ‘over 9
months to 1 year’ $
24
billion in ‘over 1 to 2 years’, $
19
billion in ‘over 2 to 5 years’, and $
8
billion in ‘over 5 years’.
6
Includes $
623
million in commitments to extend credit to private equity investments.
7
Commitments to extend credit exclude personal lines of credit and credit card lines, which are unconditionally cancellable
at the Bank’s discretion at any time.
8
Includes various purchase commitments as well as commitments for leases not yet commenced, and lease-related
payments.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 96
TABLE 58: REMAINING CONTRACTUAL
MATURITY
(continued)
(millions of Canadian dollars)
As at
October 31, 2024
No
Less than
1 to 3
3 to 6
6 to 9
9 months
Over 1 to
Over 2 to
Over
specific
1 month
months
months
months
to 1 year
2 years
5 years
5 years
maturity
Total
Assets
Cash and due from banks
$
6,437
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
6,437
Interest-bearing deposits with banks
165,665
23
–
–
–
–
–
–
4,242
169,930
Trading loans, securities, and other
1
3,773
4,852
6,777
4,852
4,729
11,756
28,458
27,484
83,089
175,770
Non-trading financial assets at fair value through
profit or loss
–
2
301
1,431
96
702
810
694
1,833
5,869
Derivatives
11,235
12,059
5,501
4,257
2,587
10,485
17,773
14,164
–
78,061
Financial assets designated at fair value through
profit or loss
367
251
486
613
292
1,144
1,865
1,399
–
6,417
Financial assets at fair value through other comprehensive
income
357
7,284
6,250
6,459
9,367
5,766
19,729
34,270
4,415
93,897
Debt securities at amortized cost, net of allowance
for credit losses
1,620
4,237
4,763
6,367
4,072
30,513
93,429
126,617
(3)
271,615
Securities purchased under reverse repurchase
agreements
2
134,310
35,360
19,897
10,119
5,299
1,722
482
–
1,028
208,217
Loans
Residential mortgages
7,502
11,817
13,066
16,074
4,353
86,112
132,381
60,344
–
331,649
Consumer instalment and other personal
974
1,758
2,509
4,077
6,137
28,498
88,052
35,096
61,281
228,382
Credit card
–
–
–
–
–
–
–
–
40,639
40,639
Business and government
55,591
15,405
10,866
19,340
18,982
47,488
98,362
61,904
29,035
356,973
Total loans
64,067
28,980
26,441
39,491
29,472
162,098
318,795
157,344
130,955
957,643
Allowance for loan losses
–
–
–
–
–
–
–
–
(8,094)
(8,094)
Loans, net of allowance for loan losses
64,067
28,980
26,441
39,491
29,472
162,098
318,795
157,344
122,861
949,549
Investment in Schwab
–
–
–
–
–
–
–
–
9,024
9,024
Goodwill
3
–
–
–
–
–
–
–
–
18,851
18,851
Other intangibles
3
–
–
–
–
–
–
–
–
3,044
3,044
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
3
–
8
1
4
12
81
562
3,130
6,039
9,837
Deferred tax assets
–
–
–
–
–
–
–
–
4,937
4,937
Amounts receivable from brokers, dealers, and clients
22,115
–
–
–
–
–
–
–
–
22,115
Other assets
6,556
2,478
2,989
556
367
373
312
153
14,397
28,181
Total assets
$
416,502
$
95,534
$
73,406
$
74,149
$
56,293
$
224,640
$
482,215
$
365,255
$
273,757
$
2,061,751
Liabilities
Trading deposits
$
4,522
$
2,516
$
2,768
$
2,101
$
3,715
$
5,488
$
7,566
$
1,736
$
–
$
30,412
Derivatives
9,923
11,556
5,740
3,319
2,783
8,800
12,877
13,370
–
68,368
Securitization liabilities at fair value
–
1,004
328
644
97
3,313
9,443
5,490
–
20,319
Financial liabilities designated at
fair value through profit or loss
50,711
25,295
51,967
40,280
37,964
1,477
–
–
220
207,914
Deposits
4,5
Personal
14,229
31,997
30,780
16,971
19,064
15,120
15,590
7
497,909
641,667
Banks
14,714
4,287
2,434
16,343
6,954
–
3
–
12,963
57,698
Business and government
23,536
24,136
11,295
19,038
9,020
37,681
76,667
24,144
343,798
569,315
Total deposits
52,479
60,420
44,509
52,352
35,038
52,801
92,260
24,151
854,670
1,268,680
Obligations related to securities sold short
1
1,431
2,392
750
971
603
8,303
10,989
12,610
1,466
39,515
Obligations related to securities sold under repurchase
agreements
2
173,741
21,172
2,096
1,036
30
1,225
23
–
2,577
201,900
Securitization liabilities at amortized cost
119
589
819
438
144
1,843
4,823
3,590
–
12,365
Amounts payable to brokers, dealers, and clients
26,598
–
–
–
–
–
–
–
–
26,598
Insurance-related liabilities
224
448
671
671
705
1,184
1,656
727
883
7,169
Other liabilities
12,396
14,478
7,279
1,114
876
1,886
1,421
5,608
6,820
51,878
Subordinated notes and debentures
–
–
–
200
–
–
–
11,273
–
11,473
Equity
–
–
–
–
–
–
–
–
115,160
115,160
Total liabilities and equity
$
332,144
$
139,870
$
116,927
$
103,126
$
81,955
$
86,320
$
141,058
$
78,555
$
981,796
$
2,061,751
Off-balance sheet commitments
Credit and liquidity commitments
6,7
$
31,198
$
28,024
$
26,127
$
24,731
$
21,440
$
52,706
$
174,388
$
4,743
$
1,948
$
365,305
Other commitments
8
113
266
270
400
254
1,019
1,591
403
50
4,366
Unconsolidated structured entity commitments
–
–
–
125
766
490
19
–
–
1,400
Total off-balance sheet commitments
$
31,311
$
28,290
$
26,397
$
25,256
$
22,460
$
54,215
$
175,998
$
5,146
$
1,998
$
371,071
1
Amount has been recorded according to the remaining contractual maturity of the underlying security.
2
Certain contracts considered short-term are presented in ‘less than 1 month’ category.
3
Certain non-financial assets have been recorded as having ‘no specific maturity’.
4
As the timing of demand deposits and notice deposits is non-specific and callable by the depositor,
obligations have been included as having ‘no specific maturity’.
5
Includes $
75
billion of covered bonds with remaining contractual maturities of $
2
billion in ‘over 3 months to 6 months’, $
10
billion in ‘over 6 months to 9 months’, $
18
billion in ‘over 1 to
2 years’, $
37
billion in ‘over 2 to 5 years’, and $
8
billion in ‘over 5 years’.
6
Includes $
609
million in commitments to extend credit to private equity investments.
7
Commitments to extend credit exclude personal lines of credit and credit card lines, which are unconditionally cancellable
at the Bank’s discretion at any time.
8
Includes various purchase commitments as well as commitments for leases not yet commenced, and lease-related
payments.
REGULATORY DEVELOPMENTS CONCERNING LIQUIDITY AND FUNDING
In May 2025, OSFI released draft guidelines
for its 2026 proposed amendments to LAR
for public consultation. Proposals introduce
deposit categorizations for
measuring liquidity risks from structured notes
and deposits sourced through non-bank
financial intermediaries and clarify expectations
for instruments with
contingent features and/or uncertain maturity
profiles, particularly in relation to their early
redemption characteristics and associated
liquidity implications. Finalized
proposals post-consultation are expected to be
implemented in spring 2026.
Also in May, OSFI engaged institutions in a public consultation focused
on Pillar 2: the supervisory review process.
The discussion paper seeks views concerning
how the four Basel III principles of Pillar
2 should apply to liquidity adequacy in
Canada. OSFI’s goal is to implement an internal
liquidity adequacy assessment
process (ILAAP) as a codified process for institutions
to regularly assess their overall liquidity
adequacy as part of the supervisory review
process. This discussion
paper is meant to consider the costs
and benefits of implementing an ILAAP in
Canada, and industry consultations are ongoing.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 97
Capital Adequacy Risk
Capital adequacy risk is the risk of insufficient
level and composition of capital being
available in relation to the amount of
capital required to carry out the Bank’s
strategy and/or satisfy regulatory and internal
capital adequacy requirements under normal
and stress conditions.
Capital is held to protect the viability
of the Bank in the event of unexpected
financial losses. Capital represents the loss-absorbing
funding required to provide a
cushion to protect depositors and other
creditors from unexpected losses.
Managing capital levels requires that the Bank
holds sufficient capital, in normal and stress environments,
to avoid the risk of breaching minimum capital
levels
prescribed by regulators and internal limits.
WHO MANAGES CAPITAL ADEQUACY RISK
The Board oversees the Bank’s capital adequacy
and capital management by reviewing adherence
to capital targets and approving the annual
capital plan and the
Capital Adequacy Risk Management Policy. The Risk Committee
reviews and approves the Capital Adequacy
Risk Management Framework. The CRO
and the
CFO oversee that the Bank’s ICAAP is effective in
meeting capital adequacy requirements.
The ALCO recommends and maintains the
Capital Adequacy Risk Management Framework
and the Capital Adequacy Risk Management
Policy, and sets
additional capital targets and minimum requirements,
including the allocation of capital limits
to business segments, to support ongoing
compliance with the Capital
Adequacy Risk Management Policy. The ALCO also reviews the ongoing
adherence to established capital targets in
support of the effective and prudent
management of the Bank’s capital position and
maintenance of adequate capital.
TBSM is responsible for forecasting and
monitoring compliance with capital targets, on
a consolidated basis, with oversight provided
by ALCO. TBSM updates
the capital forecast, including appropriate
changes to capital issuance, repurchase
and redemption. The capital forecast is reviewed
by ALCO. TBSM also leads
the ICAAP and EWST processes. The Bank’s business
segments are responsible for managing to assigned
RWA and leverage exposure limits.
Additionally, regulated subsidiaries of the Bank, including certain insurance
subsidiaries and subsidiaries in the U.S. and other
jurisdictions, manage their capital
adequacy risk in accordance with applicable
regulatory requirements. Capital management
policies and procedures of subsidiaries
are also required to conform
with those of the Bank. U.S. regulated subsidiaries
of the Bank are required to follow several
regulatory guidelines, rules and expectations
related to capital
planning and stress testing including the U.S.
Federal Reserve Board’s Regulation YY establishing
Enhanced Prudential Standards for Foreign
Banking
Organizations, applicable to U.S. Bank Holding
Companies. Refer to the sections on “Future
Regulatory Capital Developments”, “Enterprise-Wide
Stress Testing”,
and “Risk Factors That May Affect Future Results”
for further details.
HOW TD MANAGES CAPITAL ADEQUACY RISK
Capital resources are managed in a manner
designed so that the Bank’s capital position can
support business strategies under both current
and future business
operating environments. The Bank manages
its operations within the capital constraints
defined by both internal and regulatory
capital requirements, so that it
meets the higher of these requirements.
Regulatory capital requirements represent
minimum capital levels. Capital targets are
established to provide a sufficient buffer so that the Bank
is able to
continuously meet these minimum capital requirements.
The purpose of these capital targets is
to reduce the risk of a breach of minimum
capital requirements,
due to unexpected events, allowing management
the opportunity to react to declining capital
levels before minimum capital requirements
are breached.
A periodic monitoring process is undertaken
to plan and forecast capital requirements.
As part of the annual planning process, business
segments are allocated
individual RWA and Leverage exposure limits. Capital generation
and usage are monitored and reported
to the ALCO.
The Bank assesses the sensitivity of its forecast
capital requirements and new capital formations
to various economic conditions through its
EWST process.
The results of the EWST are considered in
the determination of capital targets and
capital risk appetite limits.
The Bank also determines its internal capital
requirements through the ICAAP process
using models to measure the risk-based
capital required based on its
own tolerance for the risk of unexpected
losses. This risk tolerance is calibrated
to the required confidence level so that
the Bank will be able to meet its
obligations, even after absorbing severe
unexpected losses over a one-year period.
In addition, the Bank has a Capital Contingency
Plan that is designed to prepare management
to maintain capital adequacy through periods
of bank-specific or
systemic market stress. The Capital Contingency
Plan outlines the governance and procedures
to be followed if the Bank’s consolidated capital
levels are forecast
to fall below capital targets or when there
are capital concerns from disruptive events
or trends. It also outlines potential
management actions that may be taken to
prevent such a breach from occurring.
Compliance Risk
Compliance risk is the risk associated
with the Bank’s failure to comply (with letter or intent)
with key federal and provincial/state banking,
securities, trust and
insurance laws, regulations, regulatory guidelines,
voluntary codes and public commitments
(collectively referred to as laws, rules and
regulations (LRRs)), and
other TD policies related to TD’s activities and
practices with respect to business conduct
and market conduct as well as regulatory
requirements applicable across
the Bank, which can lead to fines, sanctions, liabilities,
or reputational harm that could be material
to the Bank.
The Bank is exposed to Compliance risk
in virtually all of its activities. Failure to
mitigate Compliance risk and meet regulatory
and legal requirements can impact
the Bank’s ability to meet strategic objectives, poses
a risk of censure or penalty, may lead to litigation, and puts
the Bank’s reputation at risk. Financial penalties,
reputational damage, and other costs associated
with legal proceedings and unfavourable judicial
or regulatory determinations may also adversely
affect the
Bank’s business, results of operations and financial
condition. Compliance risk generally cannot
be effectively mitigated by trying to limit its impact
to any one
business or jurisdiction as realized Compliance
risk may adversely impact unrelated
businesses or jurisdictions. Compliance
risk exposure is inherent in the normal
course of operating the Bank’s businesses. Known
Compliance risks continue to rapidly change
as a result of evolving laws and regulatory
expectations, as well as
new or emerging threats, including geopolitical
and those associated with use of new, emerging and interrelated
technologies and use of, AI, machine learning,
models and decision-making tools.
WHO MANAGES COMPLIANCE RISK
The proactive and effective management of Compliance
risk is complex given the breadth and
pervasiveness of exposure. All the Bank’s businesses
are
accountable for operating their business in
compliance with Compliance requirements
applicable to their jurisdiction and specific
businesses. All the Bank’s
businesses, including corporate functions, are
also accountable for the Compliance risk
that they generate in their operations, including
Compliance risks that may
arise in their dealings with third-party vendors.
These accountabilities involve assessing
the risk, designing and implementing
controls, and monitoring and
reporting on their ongoing effectiveness to
safeguard the businesses from operating outside
of the Bank’s risk appetite. TD Compliance is an
independent
oversight function for Compliance Risk and
provides objective guidance, and oversight
with respect to managing Compliance risk. Legal,
U.S. Regulatory
Relations (USRR)/and Regulatory Risk provide
advice with respect to managing
Compliance risk. Representatives of these
groups interact regularly with senior
executives of the Bank’s businesses. Also,
the senior management of Compliance
have established regular meetings with
and reporting to the Audit Committee,
which oversees the establishment and
maintenance of policies and programs designed
to help achieve and maintain the Bank’s compliance
with the applicable
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 98
LRRs. Senior management of the TD Compliance
Department also report regularly to the Corporate
Governance Committee, which oversees
conduct risk
management in the Bank, the establishment
and maintenance of policies in respect of
the Bank’s compliance with the consumer protection
provisions of the
Canadian Financial Consumer Protection Framework,
and in its capacity as the Bank’s conduct review
committee, related party transactions for the Bank
and
certain of its Canadian subsidiaries that are
federally-regulated financial institutions. In
addition, senior management of Regulatory
Risk has established periodic
reporting to the Board and regular reporting
to the Risk Committee.
HOW TD MANAGES COMPLIANCE RISK
Effective management of Compliance risk is a
result of enterprise-wide collaboration
and requires (a) independent and objective identification
and oversight of
Compliance risk, (b) objective guidance and
advisory services and/or independent
challenge and oversight to identify, assess, control, and monitor
Compliance
risk, and (c) an approved set of frameworks,
policies, procedures, guidelines, and practices.
While each business line and corporate function
is accountable for
owning Compliance risk, Compliance as
an oversight function plays a critical role
in the management of Compliance risk
at the Bank. Depending on the
circumstances, it plays different roles at different times:
‘trusted advisor’, provider of
objective guidance, independent challenge,
and oversight and control
(including ‘gatekeeper’ or approver).
Compliance performs the following functions:
it acts as an independent oversight function
to establish enterprise standards for business
and oversight functions in
managing compliance risk; it fosters a
culture of integrity, ethics and compliance, with accountability understood
and accepted throughout TD to manage
and
mitigate Compliance Risks. In addition
to its responsibilities as an oversight function
for Compliance risk, TD Compliance is also responsible
for the design,
implementation and update of the RCM
program and assesses the adequacy of, adherence
to, and effectiveness of the Bank’s day-to-day
RCM controls; it
proactively manages regulatory change and
maintains a RCM Regulatory Change Standard
for oversight functions to do the same; and it
supports the Chief
Compliance Officer, TDBG in providing an opinion to the Audit
Committee as to whether the RCM controls are
sufficiently robust to achieve compliance with
applicable regulatory requirements.
Compliance has developed methodologies
and processes to measure and aggregate
compliance risks on an ongoing basis as
a baseline to assess whether the
Bank’s internal controls are effective in adequately
identifying and mitigating such risks and determine
whether individual or aggregate business activities
are
conducted within the Bank’s risk appetite.
Legal acts as an independent provider of
legal services and advice and protects
the Bank from unacceptable legal risk. Legal has
also developed methodologies
for measuring litigation risk for adherence
to the Bank’s risk appetite.
Processes employed by Legal and Compliance
(including policies and frameworks, training
and education) support the responsibility of
each business to adhere to
Compliance requirements.
Finally, the Corporate and Public Affairs (CAPA), Regulatory Risk Management and Regulatory
Relationships and Government Affairs (RRGA) departments
also
create and facilitate communication with
elected officials and regulators, monitor legislation
and regulations, support business relationships
with governments,
coordinate regulatory examinations, track and
monitor issues from those examinations,
support regulatory discussions on new or proposed
products or business
initiatives, and advance the public policy objectives
of the Bank.
Financial Crime Risk
Financial Crime Risk is the risk associated
with the Bank failing to sufficiently identify
and manage risks associated with money
laundering, terrorist financing,
bribery/corruption activities and economic
sanctions, or otherwise comply with associated
legal and regulatory requirements for
financial crime. Money Laundering
and Terrorist Financing Risk is the risk that the Bank does not effectively
identify or deter persons engaged in money laundering
or terrorist financing from utilizing
the Bank’s products and services. Sanctions risk is
the risk that the Bank does not effectively
identify and manage exposure associated
with applicable anti-
terrorism, economic, and trade sanctions
and export control laws and regulations
required to fulfill foreign policy and
national security goals of governments in
the
jurisdictions where the Bank operates. Bribery
and Corruption risk is the risk that the
Bank does not effectively identify and manage
bribery or corruption-related
activities and that would contravene applicable
Anti-Bribery and Anti-Corruptions laws,
regulations, and guidelines.
Financial Crime Risk is inherent in all business
activities, including the practices for managing
other risks across the Bank. The Bank
plays a critical role in
safeguarding the economy and protecting
against money laundering and other
financial crime. A strong risk management
culture and comprehensive approach to
preventing, detecting, and reporting financial
crime risk is fundamental to effectively complying
with legal and regulatory obligations. Effective
anti-money
laundering and countering the financing of
terrorism measures are critical to the integrity
of the global financial system. By implementing
such measures, the Bank
can help determine it is not facilitating money laundering
or its predicate offences.
WHO MANAGES FINANCIAL CRIME RISK
Consistent with its overall approach to risk
management, the Bank emphasizes and
balances strong independent oversight
and control of financial crime risk with
clear accountabilities for, and ownership of, Financial Crime
Risk. Effective financial crime risk management
is a result of enterprise-wide collaboration
and
requires objective guidance, independent
challenge, and subject matter expertise provided
by Financial Crime Risk Management (FCRM),
as well as other
oversight functions partnering with Business
Lines to identify, assess, control, test, monitor, and escalate Financial Crime Risk.
The Bank establishes a strong risk management
culture, starting from the Boards of Directors
down through all levels within the organization,
through its clear
articulation of roles and responsibilities, and
its overall infrastructure for governing
the FCRM Program.
Financial Crime Risk Management, the Bank’s dedicated
financial crime risk management function
in the Second Line of Defense, sets
key financial crime
programs and policies that Business
Lines implement within daily operations.
The FCRM Program is responsible for Anti-Money
Laundering and Anti-Terrorist
Financing, Sanctions, and Anti-Bribery and
Anti-Corruption regulatory compliance
and broader prudential risk management
across the Bank and it owns and
oversees the Enterprise-wide programs and
associated policies, standards, and
models. It is the FCRM Program’s responsibility, as a proactive and
trusted
advisor to Businesses and Corporate Office Functions,
to support a consistent, adaptable, and effective
culture across the organization so that Financial
Crime
Risk is appropriately identified and mitigated.
Under the direction of the Global Head of Financial
Crime Risk Management and U.S. Bank Secrecy
Officer, the
FCRM Program sets key policies and operates
within a defined set of internal control processes,
subject to governance and testing mechanisms
designed to
confirm its ongoing effective operation. While the
FCRM Program sets and oversees the requirements
to satisfy regulatory expectations, it is the responsibility
of
all employees across the Enterprise to
meet these requirements and exercise
effective risk management practices.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 99
HOW TD MANAGES FINANCIAL CRIME
RISK
The Financial Crime Risk Management Program
is built around the prevention, detection,
and reporting of Financial Crime Risk. The
Program is designed to
clearly articulate requirements to establish
regulatory compliance and enable effective oversight
from management and the Boards of
Directors. The Bank
achieves this through establishing program
leadership with defined roles and responsibilities,
documenting requirements in policy, and establishing a financial
crime risk appetite that the Bank can review
and assess against.
The effective management of Financial Crime Risk requires:
(1) Independent and objective FCRM
functions engaged in the identification and
oversight of Financial
Crime Risk; (2) Objective guidance and advisement,
and/or independent challenge and oversight
provided by FCRM and other oversight functions
by partnering
themselves with the First Line of Defense
to identify, assess, control, and monitor Financial Crime Risk; (3)
A set of frameworks, polices, procedures, guidelines,
and practices established for the consistent
identification, assessment, monitoring, testing,
and management of Financial Crime
Risk across the Bank; and (4)
Mandated authority to address and, if not
satisfactorily resolved, escalate business activity, including individual
or aggregate transactional, product, service,
change management, corporate business
or general business activity, significant regulatory investigations,
regulatory enforcement actions and internal
investigations, and strategic transaction activity, that is not managed
within the Bank’s risk appetite.
To
satisfy regulatory requirements and effectively
address
Financial Crime Risk, the FCRM Program
follows an operating model with defined
protocols for Program oversight, clear
roles and responsibilities, and established
communication channels. These processes
are supported by the following areas: (1)
People and Talent: (2) Training and Communications; (3) Policies and
Standards; and (4) Risk Assessment. The
Bank’s comprehensive and proactive approach
to financial crime risk management is comprised
of four components:
Risk Identification and Assessment, Measurement,
Control, and Monitoring and Reporting.
Under the remediation of the Bank’s U.S. BSA/AML
Program and Enterprise AML Program,
the Bank is strengthening its U.S. BSA/AML
Program and Enterprise-
wide AML/Anti-Terrorist Financing and Sanctions Programs. The Bank has established
a dedicated program management infrastructure
to monitor execution
against these programs. For the U.S.,
the work is being overseen by the Compliance
Committee of the U.S. subsidiary boards and
is a multi-year endeavour,
involving additional investments. In Canada,
the work is subject to oversight by a Remediation
Office and senior executive governance forums,
including an
Enterprise Risk Management Remediation
Subcommittee, along with regular reporting
to the Remediation Committee of the Board
and the Audit Committee of the
Board.
Reputational Risk
Reputational risk is the potential that stakeholders’
perceptions regarding the Bank’s business
practices, actions or inactions, will or may cause
a significant
decline in TD’s value, brand, or customer base, financial
condition, or require costly measures to address.
Stakeholders include customers, shareholders,
employees, regulators, and the communities
in which we operate.
TD recognizes that its reputation is a valuable
business asset that is essential to optimizing
shareholder value and therefore, is constantly
at risk. Reputational risk
can arise as a consequence of negative perceptions
about the Bank’s business practices involving
any aspect of the Bank’s operations but usually
involves
concerns about business ethics and integrity, competence, or
the quality or suitability of products and
services. As such, reputational risk is not
managed in
isolation from TD’s other major risk categories, as
all risk categories can have an impact on
reputation, which in turn can impact the
Bank’s value, brand, liquidity
or customer base
WHO MANAGES REPUTATIONAL RISK
Effective reputational risk management is achieved
through enterprise-wide collaboration supported
by centralized oversight and coordination
of the Reputational
Risk Management governance and committee
processes. Every employee and representative
of the Bank has a responsibility to contribute
in a positive way to the
Bank’s reputation and the management of reputational
risk. Every Bank employee is expected
and required to follow ethical practices at
all times, including
compliance with applicable policies, legislation,
and regulations, and support positive
interactions with the Bank’s stakeholders. Reputational
risk is most effectively
managed when everyone at TD works
continuously to protect and enhance
the Bank’s reputation. Where an employee is aware
of or suspects any conduct that
violates TD’s Code of Conduct and Ethics, they
have an obligation to immediately report
such conduct.
TD senior management provides governance
and oversight to the management of reputational
risk through an established enterprise-wide
structure of governing
committees and mandates. The ERRC oversees
the management of reputational risk
within the Bank’s risk appetite, including reputational
risks arising from
traditional and non-traditional risk. The Committee
is the final point of senior management discussion
and decision on reputational risks, subject
to escalation to
the Group President and CEO.
HOW TD MANAGES REPUTATIONAL RISK
The Bank’s approach to the management of reputational
risk combines the experience and
knowledge of individual business and
corporate segments, as well as
governance, risk and oversight functions.
It is based on enabling the Bank’s businesses
to understand their risks and developing
the policies, processes, and
controls required to manage these risks appropriately
and in line with the Bank’s strategy and reputational
risk appetite. The Bank’s Reputational Risk
Management Framework provides a comprehensive
overview of its approach to the management
of this risk, and is supported by the Enterprise
Risk Management
Policy. This Policy is approved by the Group Head and CRO and
sets out the requirements that business and
corporate segments must meet to support
TD in
managing reputational risk within its risk appetite,
including reputational risk arising from
traditional and non-traditional risks. These
requirements include
implementing procedures and designating
a business-level committee (where required
by the Policy) to review and assess reputational
risks and escalation to the
ERRC as appropriate.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 100
Environmental and Social Risk
E&S risk is the risk of financial loss or other harm
resulting from the Bank’s inability to manage
and respond to changing environmental or
social factors that impact
or are associated with the Bank’s operations, business
activities, products, clients, or the communities
in which the Bank operates.
Operating a complex financial institution in
multiple jurisdictions exposes the Bank’s businesses
and operations to a broad range of financial
and non-financial
risks. Environmental and social issues, including
climate change, expose the Bank to a set of risks
(collectively, E&S risk) that are transverse, meaning they
can
drive financial and non-financial risks, including
but not limited to credit, strategic, reputational,
legal and regulatory compliance risks.
WHO MANAGES ENVIRONMENTAL AND SOCIAL RISK
ESG Risk Management (ESG RM) establishes
enterprise governance, environmental,
climate, and social risk frameworks, and policies
for business segments and
corporate functions to identify, manage, measure, control and monitor
current and emerging environmental,
climate, and social risks in day-to-day
activities,
operations, products, and services. Internal
polices and procedures require business
segments and corporate functions to consider
the applicability and
assessment of E&S risk in current and new
business activity. Business unit governance and processes
are required to incorporate an assessment
of E&S risk, and
apply an appropriate level of governance and
oversight consistent with their business
procedures. ESG RM also develops enterprise-wide
tools, programs and
training to support identification, measurement,
management, and monitoring of E&S risk.
Senior Management oversight is maintained
through monitoring and reporting to the
OROC, ERRC and Risk Committee of
the Board.
HOW TD MANAGES ENVIRONMENTAL AND SOCIAL RISK
The Bank follows a disciplined approach to
managing financial and non-financial risks,
including E&S risks which may have
a present or future impact on the
Bank’s competitive position, brand or long-term
shareholder value creation. The Bank considers
current and potential E&S risk in our strategies
by enabling
informed decision-making based on internal
capabilities, industry practices, legal and regulatory
obligations, and stakeholder expectations
– including shareholders
and customers – as they continue to evolve.
The Enterprise E&S Risk Framework outlines
how the Bank manages E&S risk, and
this is reinforced by the Enterprise E&S
Risk Policy and other risk-specific
policies.
With respect to lending activities, the Bank
takes a measured, client-focused and risk-based
approach to E&S risks. The Bank conducts
risk assessment and due
diligence that could include the use of tools
such as a Physical Risk Classification Framework,
industry risk ratings, client engagement
and questionnaires,
financed emissions estimation, environmental
site assessments, industry research, and
media scans, as applicable. Risk assessment
and due diligence results
follow the Bank’s risk governance process, which
may include segment level and enterprise-level
reputational risk committee oversight.
Following this process, TD
makes informed decisions to conduct transactions
based on the risks presented and the Bank’s
ability to manage those risks.
The Bank continues to assess the impacts
associated with new and material changes
made to TD products, services, projects, and initiatives
by incorporating E&S
risk assessment into the Bank’s Change Risk
Management process. Additionally, the Bank’s enterprise-wide
Business Continuity and Crisis Management
Program
continue to support management’s ability to operate
the Bank’s businesses and operations in the
event of a business disruption incident, including
the incremental
impact of climate change, while the Third
Party Risk Management program integrates
E&S assessment factors as appropriate,
for our most significant third parties.
The Bank’s E&S metrics, targets and performance
are publicly reported within the annual
sustainability reporting suite. Key performance
measures reported by the
Bank are informed by the Global Reporting
Initiative (GRI), the Sustainability Accounting
Standards Board (SASB) and the
FSB’s Task Force on Climate-Related
Financial Disclosures (TCFD) recommendations,
with select metrics that are independently
assured.
Climate-Related Risk
Climate-related risk is the risk of financial loss
or other harm, including but not limited
to credit, strategic, reputational, legal and regulatory
compliance, resulting
from the physical and transition risks of climate
change to the Bank, its clients or the communities
in which the Bank operates. This includes
physical risks arising
from the consequences of a changing climate, as
well as transition risks arising from the process
of shifting to a low-carbon economy. In its 2024 annual
sustainability reporting suite, the Bank highlighted
its progress to assess and manage
climate-related risk and effectively manage its business
strategies and
continues to capture opportunities in light of
these evolving risks.
The Bank’s Climate Scenario Analysis program helps
the Bank better understand the impacts
of climate-related financial risks. Climate
scenario analysis evaluates
a range of hypothetical outcomes by considering
a variety of alternative plausible future
scenarios under a given set of assumptions
and constraints. While
scenarios are not designed to deliver precise
outcomes or forecasts, they provide a
way for the Bank to consider how the future
might look and how it can prepare.
The Bank continues to develop tools and
capabilities regarding climate data and
climate-related risk modelling to support its understanding
of the transition and
physical risks of climate change, which will
help inform the Bank’s approach to further integrate
climate-related risk management activities
across the enterprise.
The Bank continues to refresh and enhance
the scope of its climate risk heatmap,
supported by an industry risk review process and
Physical Risk Classification
Framework, to support physical and transition
climate-related risk identification and assessment
and to refine its understanding of the industry
sector and
geographical location sensitivities that climate-related
risk may have on the Bank and its assets,
clients, and communities in which it operates.
The Bank continues
to refine and expand the application of the
Physical Climate Risk Classification
Framework across its footprint and business
lines to inform risk assessment
processes and risk mitigation strategies.
The Bank contributes to public consultations
and advocacy initiatives on emerging
climate issues, including disclosure frameworks
proposed by regulators and
standard setters. The Bank also engages
with environmental and community NGOs, industry
associations, rating agencies, Indigenous
communities and
responsible investment organizations.
The Bank also participates in various North
American working groups, and as a member
of the Partnership for Carbon Accounting
Financials, helps develop and
refine calculation methodologies for emerging
climate metrics. The Bank continues its
membership in the Risk Management Association
Climate Risk Consortium,
which focuses on bringing financial institutions
together to advance the awareness of and address
the risks relevant to climate change, by developing
frameworks
and recommendations for governance, disclosure,
and risk management principles.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 101
TD recognizes it faces transition risk from
its own activities, as well as from the
clients we serve. In 2020, the Bank announced
a target to achieve net-zero
greenhouse gas (GHG) emissions associated
with the Bank’s operations and financing activities
by 2050, in alignment with the associated
principles of the Paris
Agreement.
The Bank monitors and assesses legal, policy, regulatory, economic, technological and
stakeholder developments and may adjust
its metrics or targets to reflect
these developments. In addition, methodologies
or standards used by regulators, the financial
sector, industry groups or associations that the Bank
participates in
or belongs to, or that the Bank or its clients
use to measure and report on their GHG emissions
could result in the Bank amending or restating
its baselines,
calculated results or targets, and may result in
the Bank withdrawing from or modifying its
membership in certain groups or associations.
Limitations on the
availability and reliability of data may also
impact the Bank’s ability to assess and evaluate
climate-related risks. The Bank is mindful
of data availability and data
quality limitations impacting risk management
and financed emissions efforts and work continues
through industry forums to address the lack
of standardized
taxonomies and methodologies. These limitations
are expected to improve over time as
the Bank continues to advance its data
capabilities by working with internal
and external subject matter experts.
Regulatory and Standard Setter Developments
Concerning E&S Risk
In March 2025, OSFI released updates to
Guideline B-15 to ensure continued interoperability
with the requirements of the final Canadian Sustainability
Standards
Board (CSSB) standards. Key updates include
postponing the implementation date
for industry-based metrics and Scope
3 GHG emissions disclosures from fiscal
year end 2025 to 2028. The Bank’s 2025 annual
sustainability report suite will incorporate
the phased-in cross-industry metrics requirements,
effective for
October 31, 2025.
In April 2025, the Canadian Securities Administrators
(CSA) announced that it is pausing work
on the development of a new mandatory
climate-related disclosure
rule that is based on the two standards issued
by the CSSB. The CSSB standards were
released in December 2024 and are based
on the international
sustainability standards issued by the International
Sustainability Standards Board (ISSB).
They set out the disclosure requirements for
financially material
information about sustainability and climate-related
risks and opportunities to meet investor
information needs. For these standards
to become mandatory
requirements in Canada, they would need
to be incorporated into a CSA rule. The Bank
continues to assess the impact of adopting these
standards and to monitor
developments from various standard setters
and regulators
Codes of Conduct and Human Rights
The Bank has several policies, including the
Bank’s Code of Conduct and Ethics, which reflect
the Bank’s commitment to manage its business
responsibly and in
compliance with applicable laws. For additional
information on the Code of Conduct and Ethics,
refer to the “Compliance and Legal Risk”
section above. The Bank
publishes a Statement on Human Rights,
which is refreshed periodically and reflects
the corporate responsibility to respect
human rights as set out in the United
Nations Guiding Principles on Business and
Human Rights (UNGP). The Bank and its
applicable subsidiaries also publish reports
pursuant to modern slavery
legislation to which they are subject. The Bank’s
current Human Rights Statement and
Modern Slavery and Human Trafficking Report can be found
here:
https://www.td.com/ca/en/about-td/for-investors/policies-and-references.
TD’s Financial Consumer Protection Framework Policy
aims to promote responsible conduct
within TD and protect its Canadian banking
customers. It also
includes components related to promoting
transparency for customers to help them
make informed decisions and provisions related
to fair and equitable dealing
(e.g., requirements for cancelling agreements,
access to basic banking services and
complaints processes).
In the U.S., TD’s Fair & Responsible Banking Policy
supports the Bank’s commitment to treat all individuals
fairly and equitably in offering and providing banking
products and services: to mitigate risk to
the consumer; to prevent discriminatory practices
and unfair, deceptive or abusive acts or practices (UDAAP);
and to
maintain compliance with applicable federal and
state laws and regulations. TD’s Complaint Policy
establishes requirements for the Bank
to identify and address
customer issues and continue to enhance its
legendary customer experience.
The Bank’s Supplier Code of Conduct also reflects
its commitment to respect human rights.
New or prospective suppliers providing goods
or services through the
Bank’s centralized Procurement Group must register
through an enterprise procurement system
requiring them to represent that they
operate in accordance with
the expectations described in its Supplier
Code of Conduct, including those relating
to the protection of human rights and
fair labour practices.
ACCOUNTING STANDARDS AND
POLICIES
Critical Accounting Policies
and Estimates
ACCOUNTING POLICIES AND ESTIMATES
The Bank’s accounting policies and estimates are
essential to understanding its results of
operations and financial condition. A
summary of the Bank’s material
accounting policies and estimates are presented
in the Notes of the 2025 Consolidated Financial
Statements. The Bank’s material accounting policies
are
reviewed with the Audit Committee on a
periodic basis. Critical accounting policies
that require management’s judgment and
estimates include the classification
and measurement of financial assets, accounting
for impairments of financial assets, accounting
for leases, the determination of fair value
of financial instruments,
accounting for derecognition, the valuation
of goodwill and other intangibles, accounting
for employee benefits, accounting for income
taxes, accounting for
provisions, accounting for insurance, the consolidation
of structured entities,
and accounting for revenue from
contract with customers.
The Bank’s 2025 Consolidated Financial Statements
have been prepared in accordance with
IFRS. For details of the Bank’s accounting policies
under IFRS,
refer to Note 2 of the Bank’s 2025 Consolidated
Financial Statements.
ACCOUNTING JUDGMENTS, ESTIMATES, AND ASSUMPTIONS
The estimates used in the Bank’s accounting policies
are essential to understanding its results
of operations and financial condition. Some
of the Bank’s policies
require subjective, complex judgments and
estimates as they relate to matters
that are inherently uncertain. Changes in these judgments
or estimates and
changes to accounting standards and policies
could have a materially adverse impact
on the Bank’s Consolidated Financial Statements.
The Bank has established
procedures to ensure that accounting policies
are applied consistently and that the processes
for changing methodologies, determining
estimates,
and adopting
new accounting standards are well-controlled
and occur in an appropriate and systematic
manner.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 102
CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS
Business Model Assessment
The Bank determines its business models
based on the objective under which its
portfolios of financial assets are managed.
Refer to Note 2 of the Bank’s
2025 Consolidated Financial Statements
for details on the Bank’s business models.
In determining its business models, the Bank
considers the following:
●
Management’s intent and strategic objectives
and the operation of the stated policies in practice;
●
The primary risks that affect the performance
of the portfolio of assets and how these risks
are managed;
●
How the performance of the portfolio is evaluated
and reported to management; and
●
The frequency and significance of financial
asset sales in prior periods, the reasons
for such sales and the expected future sales activities.
Sales in themselves do not determine the business
model and are not considered in isolation.
Instead, sales provide evidence about
how cash flows are realized.
A held-to-collect business model will be reassessed
by the Bank to determine whether
any sales are consistent with an objective
of collecting contractual cash
flows if the sales are more than insignificant
in value or more than infrequent.
Solely Payments of Principal and Interest
Test
In assessing whether contractual cash flows
represent solely payments of principal
and interest (SPPI), the Bank considers
the contractual terms of the instrument.
This includes assessing whether the
financial asset contains contractual terms that
could change the timing or amount of contractual
cash flows such that they
would not be consistent with a basic lending arrangement.
In making the assessment, the Bank considers
the primary terms as follows and assesses
if the
contractual cash flows of the instrument continue
to meet the SPPI test:
●
Performance-linked features;
●
Terms that limit the Bank’s claim to cash flows
from specified assets (non-recourse terms);
●
Prepayment and extension terms;
●
Leverage features;
●
Features that modify elements of the time
value of money; and
●
Sustainability-linked features.
IMPAIRMENT OF FINANCIAL ASSETS
Significant Increase in Credit Risk
For retail exposures, criteria for assessing
significant increase in credit risk are
defined at the appropriate product or
portfolio level and vary based on the
exposure’s credit risk at origination. The criteria
include relative changes in PD, absolute
PD backstop, and delinquency backstop
when contractual payments are
more than 30 days past due. Significant increase
in credit risk since initial recognition
has occurred when one of the criteria is
met.
For non-retail exposures, BRR is determined
on an individual borrower basis using industry
and sector specific credit risk models that
are based on historical
data. Current and forward-looking information
that is specific to the borrower, industry, and sector is considered based on
expert credit judgment. Criteria for
assessing significant increase in credit risk
are defined at the appropriate segmentation
level and vary based on the BRR of the exposure
at origination. Criteria
include relative changes in BRR, absolute
BRR backstop, and delinquency backstop
when contractual payments are more than 30
days past due. Significant
increase in credit risk since initial recognition
has occurred when one of the criteria is
met.
Measurement of Expected Credit Loss
ECLs are recognized on the initial recognition
of financial assets. Allowance for credit losses
represents management’s unbiased estimate
of the risk of default and
ECLs on the financial assets, including any off-balance
sheet exposures, at the balance sheet date.
For retail exposures, ECLs are calculated as
the product of PD, LGD, and EAD at
each time step over the remaining expected
life of the financial asset and
discounted to the reporting date based on
the EIR. PD estimates represent the forward-looking
PD, updated quarterly based on the Bank’s
historical experience,
current conditions, and relevant forward-looking
expectations over the expected life of
the exposure to determine the lifetime PD
curve. LGD estimates are
determined based on historical charge-off events
and recovery payments, current information
about attributes specific to the borrower, and direct
costs. Expected
cash flows from collateral, guarantees, and
other credit enhancements are incorporated
in LGD if integral to the contractual terms.
Relevant macroeconomic
variables are incorporated in determining
expected LGD. EAD represents the expected
balance at default across the remaining
expected life of the exposure. EAD
incorporates forward-looking expectations
about repayments of drawn balances and
future draws where applicable.
For non-retail exposures, ECLs are calculated
based on the present value of cash shortfalls
determined as the difference between contractual
cash flows and
expected cash flows over the remaining expected
life of the financial instrument. Lifetime
PD is determined by mapping the exposure’s
BRR to forward-looking PD
over the expected life. LGD estimates are
determined by mapping the exposure’s FRR
to expected LGD which takes into account
facility-specific characteristics
such as collateral, seniority ranking of debt,
and loan structure. Relevant macroeconomic
variables are incorporated in determining
expected PD and LGD.
Expected cash flows are determined by applying
the PD and LGD estimates to the contractual
cash flows to calculate cash shortfalls over
the expected life of the
exposure.
Forward-Looking Information
In calculating ECLs, the Bank employs internally
developed models that utilize parameters
for PD, LGD, and EAD. Forward-looking
macroeconomic factors
including at the regional level are incorporated
in the risk parameters as relevant.
Additional risk factors that are industry or
segment specific are also incorporated,
where relevant. Forward-looking macroeconomic
forecasts are generated by TD Economics
as part of the ECL process: A base economic
forecast is accompanied
with upside and downside estimates of realistically
possible economic conditions by considering
the sources of uncertainty around the base
forecast. All
macroeconomic forecasts are updated quarterly
for each variable on a regional basis where
applicable and incorporated as relevant
into the quarterly modelling of
base, upside and downside risk parameters
used in the calculation of ECL scenarios and
probability-weighted ECLs. TD Economics
will apply judgment to
recommend probability weights to each forecast
on a quarterly basis. The proposed
macroeconomic forecasts and probability
weightings are subject to a robust
management review and challenge process
by a cross-functional committee that
includes representation from TD Economics,
Risk, Finance, and Business. ECLs
calculated under each of the three forecasts are
applied against the respective probability
weightings to determine the probability-weighted
ECLs. Refer to Note 8
for further details on the macroeconomic
variables and ECL sensitivity.
Expert Credit Judgment
Management’s expert credit judgment is used
to determine the best estimate for the qualitative
component contributing to ECLs, based on an assessment
of
business and economic conditions, historical
loss experience, loan portfolio composition,
and other relevant indicators and forward-looking
information that are not
fully incorporated into the model calculation.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 103
There remains elevated economic uncertainty,
and management continues to exercise expert
credit judgment in assessing if an exposure
has experienced
significant increase in credit risk since initial recognition
and in determining the amount of ECLs at
each reporting date.
To
the extent that certain effects are not
fully incorporated into the model calculations,
temporary quantitative and qualitative adjustments
have been applied, including for risks related
to elevated
uncertainty associated with policy and trade,
and such adjustments will be updated as appropriate
in future periods.
LEASES
The Bank applies judgment in determining
the appropriate lease term on a lease-by-lease
basis. All facts and circumstances that
create an economic incentive to
exercise a renewal option or not to exercise
a termination option including investments
in major leaseholds, branch performance
and past business practice are
considered. The periods covered by renewal
or termination options are only included
in the lease term if it is reasonably certain
that the Bank will exercise the
options; management considers “reasonably
certain”
to be a high threshold. Changes in the economic
environment or changes in the industry
may impact the
Bank’s assessment of lease term, and any
changes in the Bank’s estimate of lease terms
may have a material impact on the Bank’s
Consolidated Balance Sheet
and Consolidated Statement of Income.
In determining the carrying amount of right-of-use
(ROU) assets and lease liabilities,
the Bank is required to estimate the incremental
borrowing rate specific to
each leased asset or portfolio of leased assets
if the interest rate implicit in the lease
is not readily determinable. The Bank determines
the incremental borrowing
rate of each leased asset or portfolio of leased
assets by incorporating the Bank’s creditworthiness,
the security, term, and value of the ROU asset, and the
economic environment in which the leased
asset operates. The incremental borrowing
rates are subject to change mainly due
to changes in the macroeconomic
environment.
FAIR VALUE MEASUREMENTS
The fair value of financial instruments traded
in active markets at the balance
sheet date is based on their quoted market
prices. For all other financial instruments
not traded in an active market, fair value may
be based on other observable current
market transactions involving the same
or similar instruments, without
modification or repackaging, or is based on
a valuation technique which maximizes
the use of observable market inputs. Observable
market inputs may include
interest rate yield curves, foreign exchange
rates, and option volatilities. Valuation techniques include comparisons
with similar instruments where observable
market prices exist, discounted cash flow
analysis, option pricing models, and
other valuation techniques commonly
used by market participants.
For certain complex or illiquid financial instruments,
fair value is determined using valuation
techniques in which current market transactions
or observable
market inputs are not available. Judgment is used
when determining which valuation techniques
to apply, liquidity considerations, and model inputs such as
volatilities, correlations, spreads, discount rates,
pre-payment rates, and prices of underlying
instruments. Any imprecision in these estimates
can affect the
resulting fair value.
Judgment is also used in recording valuation
adjustments to model fair values to account
for system limitations or measurement uncertainty, such as when
valuing complex and less actively traded
financial instruments. If the market for a
complex financial instrument develops,
the pricing for this instrument may
become more transparent, resulting in refinement
of valuation models.
DERECOGNITION OF FINANCIAL ASSETS
Certain financial assets transferred may
qualify for derecognition from the Bank’s Consolidated
Balance Sheet. To qualify for derecognition, certain key
determinations must be made, including
whether the Bank’s rights to receive cash flows
from the financial assets
have been retained or transferred and
the extent
to which the risks and rewards of ownership
of the financial assets have been retained
or transferred. If the Bank neither transfers nor
retains substantially all of
the risks and rewards of ownership of the
financial assets, a decision must be made as
to whether the Bank has retained control of
the financial assets.
Upon derecognition,
the Bank will record a gain or loss on sale of
those assets which is calculated as the difference
between the carrying amount of the asset
transferred and the sum of any cash proceeds
received, including any financial assets received
or financial liabilities assumed, and any
cumulative gains or losses
allocated to the transferred asset that had been
recognized in AOCI. In determining the
fair value of any financial assets received, the
Bank estimates future cash
flows by relying on estimates of the amount
of interest that will be collected on the
securitized assets, the yield to be paid to investors,
the portion of the securitized
assets that will be prepaid before their
scheduled maturity, ECLs, the cost of servicing the assets, and the
rate at which to discount these expected
future cash
flows. Actual cash flows may differ significantly
from those estimated by the Bank.
Retained interests are financial interests in
transferred assets retained by the Bank.
They are classified as trading securities and
are initially recognized at
relative fair value on the Bank’s Consolidated Balance
Sheet. Subsequently, the fair value of retained interests is
determined by estimating the present value
of
future expected cash flows. Differences between
the actual cash flows and the Bank’s estimated
future cash flows are recognized in trading income
(loss). These
assumptions are subject to periodic reviews
and may change due to significant changes
in the economic environment.
GOODWILL
The recoverable amount of the Bank’s cash-generating
units (CGUs) or groups of CGUs is determined
from internally developed valuation
models that consider
various factors and assumptions such as
forecasted earnings, growth rates, discount
rates, and terminal growth rates.
Management is required to use judgment in
estimating the recoverable amount of the
CGUs or groups of CGUs, and the use of
different assumptions and estimates in the
calculations could influence the
determination of the existence of impairment
and the valuation of goodwill. Management
believes that the assumptions and estimates
used are reasonable and
supportable. Where possible, assumptions
generated internally are compared to relevant
market information. The carrying amounts
of the Bank’s CGUs or groups
of CGUs are determined by management
using risk-based capital models to adjust
net assets and liabilities by CGU. These
models consider various factors
including market risk, credit risk, and operational
risk, including investment capital (comprised
of goodwill and other intangibles). Any
capital not directly attributable
to the CGUs is held within the Corporate
segment. The Bank’s capital oversight committees
provide oversight to the Bank’s capital allocation
methodologies.
EMPLOYEE BENEFITS
The projected benefit obligation and expense
related to the Bank’s pension and post-retirement
defined benefit plans are determined using
multiple assumptions
that may significantly influence the value of
these amounts. Actuarial assumptions including
discount rates, compensation increases,
health care cost trend rates,
and mortality rates are management’s best estimates
and are reviewed annually with the Bank’s actuaries.
The Bank develops each assumption using
relevant
historical experience of the Bank in conjunction
with market-related data and considers
if the market-related data indicates
there is any prolonged or significant
impact on the assumptions. The discount
rate used to value the projected benefit
obligation is determined by reference
to market yields on high-quality corporate
bonds with terms matching the plans’ specific
cash flows. The other assumptions are also long-term
estimates. All assumptions are subject to
a degree of
uncertainty. Differences between actual experiences and the assumptions,
as well as changes in the assumptions
resulting from changes in future expectations,
result in remeasurement gains and losses
which are recognized in other comprehensive
income (OCI)
during the year and also impact expenses
in future periods.
INCOME TAXES
The Bank is subject to taxation in numerous
jurisdictions. There are many transactions
and calculations in the ordinary course of business
for which the ultimate
tax determination is uncertain. The Bank
maintains provisions for uncertain tax positions
that it believes appropriately reflect the risk of
tax positions under
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 104
discussion, audit, dispute, or appeal with
tax authorities, or which are otherwise
considered to involve uncertainty. These provisions are made using
the Bank’s
best estimate of the amount expected to be
paid based on an assessment of all relevant
factors, which are reviewed at the end of each
reporting period. However,
it is possible that at some future date, changes
in these liabilities could result from audits by
the relevant taxing authorities.
Deferred tax assets are recognized only
when it is probable that sufficient taxable profit
will be available in future periods against which
deductible temporary
differences may be utilized. The amount of
the deferred tax asset recognized and considered
realizable could, however, be reduced if projected income is
not
achieved due to various factors, such as
unfavourable business conditions. If projected
income is not expected to be achieved, the
Bank would decrease its
deferred tax assets to the amount that it believes
can be realized. The magnitude of the decrease
is significantly influenced by the Bank’s forecast
of future profit
generation, which determines the extent to
which it will be able to utilize the deferred
tax assets.
PROVISIONS
Provisions arise when there is some uncertainty
in the timing or amount of a loss in the
future. Provisions are based on the Bank’s best estimate
of all
expenditures required to settle its present obligations,
considering all relevant risks and uncertainties,
as well as, when material, the effect of the time
value of
money.
Many of the Bank’s provisions relate to various
legal and regulatory actions that the Bank
is involved in during the ordinary course
of business. Legal and
regulatory provisions require the involvement
of both the Bank’s management and legal counsel
when assessing the probability of a loss and estimating
any
monetary impact. Throughout the life of a provision,
the Bank’s management or legal counsel
may learn of additional information that may impact
its assessments
about the probability of loss or about the estimates
of amounts involved. Changes in these assessments
may lead to changes in the amount recorded
for
provisions. In addition, the actual costs of resolving
these claims may be substantially higher
or lower than the amounts recognized.
The Bank reviews its legal and
regulatory provisions on a case-by-case basis
after considering, among other factors, the
progress of each case, the Bank’s experience,
the experience of others
in similar cases, and the opinions and views of
legal counsel.
Certain of the Bank’s provisions relate to restructuring
initiatives initiated by the Bank. Restructuring
provisions require management’s best estimate,
including
forecasts of economic conditions. Throughout
the life of a provision, the Bank may become
aware of additional information that may impact
the assessment of
amounts to be incurred. Changes in these assessments
may lead to changes in the amount recorded
for restructuring provisions.
INSURANCE
The assumptions used in establishing the Bank’s
insurance contract liabilities are based on best
estimates of possible outcomes.
For property and casualty insurance
contracts, the ultimate cost of LIC is
estimated using a range of standard actuarial
claims projection techniques by the
appointed actuary in accordance with
Canadian accepted actuarial practices. Additional
qualitative judgment is used to assess
the extent to which past trends may
or may not apply in the future, in order to arrive
at the estimated ultimate claims cost
amounts that present the most likely outcome
taking into account all the
uncertainties involved.
For life and health insurance contracts, insurance
contract liabilities consider all future policy
cash flows, including premiums, claims, and
expenses required to
administer the policies. Critical assumptions
used in the measurement of life and health
insurance contract liabilities are determined
by the appointed actuary.
Further information on insurance risk assumptions
is provided in Note 20 of the 2025
Consolidated Financial Statements.
CONSOLIDATION OF STRUCTURED ENTITIES
Management judgment is required when
assessing whether the Bank should consolidate
an entity. For instance, it may not be feasible to determine if the Bank
controls an entity solely through an assessment
of voting rights for certain structured entities.
In these cases, judgment is required
to establish whether the Bank
has decision-making power over the key
relevant activities of the entity and
whether the Bank has the ability to use that power
to absorb significant variable returns
from the entity. If it is determined that the Bank has both decision-making
power and significant variable returns
from the entity, judgment is also used to determine
whether any such power is exercised by
the Bank as principal, on its own behalf,
or as agent, on behalf of another counterparty.
Assessing whether the Bank has decision-making
power includes understanding the purpose
and design of the entity in order to determine
its key economic
activities. In this context, an entity’s key economic
activities are those which predominantly
impact the economic performance of the
entity. When the Bank has the
current ability to direct the entity’s key economic
activities, it is considered to have decision-making
power over the entity.
The Bank also evaluates its exposure
to the variable returns of a structured entity in
order to determine if it absorbs a significant
proportion of the variable
returns the entity is designed to create. As part
of this evaluation, the Bank considers the purpose
and design of the entity in order to determine
whether it absorbs
variable returns from the structured entity
through its contractual holdings, which
may take the form of securities issued by
the entity, derivatives with the entity, or
other arrangements such as guarantees, liquidity
facilities, or lending commitments.
If the Bank has decision-making power over
the entity and absorbs significant variable returns
from the entity, it then determines if it is acting as principal or
agent when exercising its decision-making power. Key factors
considered include the scope of its decision-making
power; the rights of other parties involved
with
the entity, including any rights to remove the Bank as decision-maker
or rights to participate in key decisions;
whether the rights of other parties are exercisable
in
practice; and the variable returns absorbed
by the Bank and by other parties involved
with the entity. When assessing consolidation, a presumption exists
that the
Bank exercises decision-making power as principal
if it is also exposed to significant variable
returns, unless an analysis of the
factors above indicates otherwise.
The decisions above are made with reference
to the specific facts and circumstances relevant
for the structured entity and related transaction(s)
under
consideration.
REVENUE FROM CONTRACTS WITH
CUSTOMERS
The Bank applies judgment to determine
the timing of satisfaction of performance
obligations which affects the timing of revenue recognition,
by evaluating the
pattern in which the Bank transfers control
of services promised to the customer. A performance obligation
is satisfied over time when the customer
simultaneously
receives and consumes the benefits as the
Bank performs the service. For performance
obligations satisfied over time, revenue is generally
recognized using the
time-elapsed method which is based on time
elapsed in proportion to the period over
which the service is provided, for example,
personal deposit account bundle
fees. The time-elapsed method is a faithful
depiction of the transfer of control
for these services as control is transferred
evenly to the customer when the Bank
provides a stand-ready service or effort is expended
evenly by the Bank to provide a service
over the contract period. In contracts
where the Bank has a right to
consideration from a customer in an amount
that corresponds directly with the value to
the customer of the Bank’s performance completed
to date, the Bank
recognizes revenue in the amount to which
it has a right to invoice.
The Bank satisfies a performance obligation
at a point in time if the customer obtains
control of the promised services at that date.
Determining when control is
transferred requires the use of judgment.
For transaction-based services, the Bank determines
that control is transferred to the customer
at a point in time when
the customer obtains substantially all of
the benefits from the service rendered
and the Bank has a present right to payment,
which generally coincides with the
moment the transaction is executed.
The Bank exercises judgment in determining
whether costs incurred in connection with acquiring
new revenue contracts would meet the requirement
to be
capitalized as incremental costs to obtain or
fulfil a contract with customers.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 105
ACCOUNTING STANDARDS AND
POLICIES
C
urrent and Future
Changes in Accounting
Policies
CURRENT CHANGES IN ACCOUNTING
POLICIES
There were no new accounting policies adopted
by the Bank for the fiscal year ended October
31, 2025.
FUTURE CHANGES IN ACCOUNTING
POLICIES
The following standard and amendments
have been issued but are not yet effective
on the date of issuance of the Bank’s Consolidated
Financial Statements.
Presentation and Disclosure in Financial
Statements
In April 2024, the IASB issued IFRS 18,
Presentation and Disclosure in Financial
Statements
(IFRS 18), which replaces the guidance
in IAS 1,
Presentation of
Financial Statements
and sets out requirements for presentation
and disclosure of information, focusing
on providing relevant information to users
of the financial
statements. IFRS 18 introduces changes
to the structure of the statement of profit
or loss, aggregation and disaggregation of
financial information, and
management-defined performance
measures to be disclosed in the notes to
the financial statements. It will be effective for the Bank’s annual
period beginning
November 1, 2027. Early application is permitted.
The standard will be applied retrospectively
with restatement of comparatives.
The Bank is currently assessing
the impact of adopting this standard.
Amendments to the Classification and Measurement
of Financial Instruments
In May 2024, the IASB issued
Amendments to the Classification
and Measurement of Financial Instruments,
which amended IFRS 9 and IFRS 7
.
The
amendments address matters identified during
the post-implementation review of the
classification and measurement requirements
of IFRS 9. The amendments
clarify how to assess the contractual
cash flow characteristics of financial assets
that include environmental, social, and governance
linked features and other
similar contingent features. The amendments
also clarify the treatment of non-recourse
assets and contractually linked instruments.
Furthermore, the amendments
clarify that a financial liability is derecognized
on the settlement date and provide an accounting
policy choice to derecognize a financial liability
settled using an
electronic payment system before the
settlement date if certain conditions are
met. Finally, the amendments introduce additional disclosure requirements
for
financial instruments with contingent
features and equity instruments classified at
FVOCI.
The amendments will be effective for the Bank’s annual
period beginning November 1, 2026. Early
adoption is permitted, with an option to early
adopt the
amendments related to the classification
of financial assets and associated disclosures
only. The Bank is required to apply the amendments retrospectively, but is
not required to restate prior periods. The Bank
is currently assessing the impact of adopting
these amendments.
ACCOUNTING STANDARDS AND
POLICIES
Controls and Procedures
DISCLOSURE CONTROLS AND PROCEDURES
An evaluation was performed under the supervision
and with the participation of the Bank’s
management, including the Chief Executive
Officer and Chief Financial
Officer, of the effectiveness of the Bank’s disclosure controls and procedures,
as defined in the rules of the SEC and
Canadian Securities Administrators, as of
October 31, 2025. Based on that evaluation,
the Bank’s management, including the Chief Executive
Officer and Chief Financial Officer, concluded that the Bank’s
disclosure controls and procedures were effective
as of October 31, 2025.
MANAGEMENT’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING
The Bank’s management is responsible for establishing
and maintaining adequate internal control
over financial reporting for the Bank. The
Bank’s internal control
over financial reporting includes those policies
and procedures that (1) pertain to the
maintenance of records, that, in reasonable
detail, accurately and fairly reflect
the transactions and dispositions of the assets
of the Bank; (2) provide reasonable assurance
that transactions are recorded as necessary
to permit preparation of
financial statements in accordance with
IFRS, and that receipts and expenditures
of the Bank are being made only in accordance
with authorizations of the Bank’s
management and directors; and (3) provide
reasonable assurance regarding prevention
or timely detection of unauthorized acquisition,
use, or disposition of the
Bank’s assets that could have a material effect on the
financial statements.
The Bank’s management has used the criteria established
in the 2013 Internal Control – Integrated
Framework issued by the Committee of
Sponsoring
Organizations of the Treadway Commission to assess,
with the participation of the Chief Executive
Officer and Chief Financial Officer, the effectiveness of the
Bank’s internal control over financial reporting.
Based on this assessment management
has concluded that as at October 31, 2025,
the Bank’s internal control over
financial reporting was effective based on the applicable
criteria. The effectiveness of the Bank’s internal control
over financial reporting has been audited by
the
independent auditors, Ernst & Young LLP, a registered public accounting firm that has also audited the Consolidated
Financial Statements of the Bank as of, and
for the year ended October 31, 2025. Their Report
on Internal Control over Financial Reporting
under Standards of the Public Company
Accounting Oversight
Board (United States),
included in the Report of Independent
Registered Public Accounting Firm – Internal
Control over Financial Reporting,
expresses an
unqualified opinion on the effectiveness of
the Bank’s internal control over financial reporting
as of October 31, 2025.
CHANGES IN INTERNAL CONTROL OVER
FINANCIAL REPORTING
During the year and quarter ended October 31,
2025, there have been no changes in
the Bank’s policies and procedures and other processes
that comprise its
internal control over financial reporting, that
have materially affected, or are reasonably likely
to materially affect, the Bank’s internal control over
financial reporting.
Refer to Note 2 and Note 3 of the Bank’s 2025 Consolidated
Financial Statements for further information
regarding the Bank’s changes to accounting policies,
procedures, and estimates.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 106
Additional Financial Information
Unless otherwise indicated, all amounts are
expressed in Canadian dollars and have
been primarily derived from the Bank’s 2025
Consolidated Financial
Statements,
prepared in accordance with IFRS as issued
by the IASB.
TABLE 59: SELECT ANNUAL
INFORMATION
1
(millions of Canadian dollars, except
as noted)
2025
2024
2023
Total revenue
$
67,777
$
57,223
$
50,690
Net income available to common shareholders
19,973
8,316
10,071
Basic earnings per share
11.57
4.73
5.53
Diluted earnings per share
11.56
4.72
5.52
Dividends declared per common share
4.20
4.08
3.84
Total Assets (billions of Canadian
dollars)
2,094.6
2,061.8
1,955.1
Deposits (billions of Canadian dollars)
1,267.1
1,268.7
1,198.2
1
For the year ended October 31, 2023, certain amounts have been restated for the adoption of IFRS 17,
Insurance Contracts
(IFRS 17).
TABLE 60: INVESTMENT PORTFOLIO
– Securities Maturity Schedule
1,2
(millions of Canadian dollars)
As at
Remaining terms to maturities
3
Over 1
Over 3
Over 5
With no
Within
year to
years to
years to
Over 10
specific
1 year
3 years
5 years
10 years
years
maturity
Total
Total
October 31
October 31
2025
2024
Securities at fair value through other comprehensive income
Government and government-
related securities
Canadian government debt
Federal
Fair value
$
1,878
$
1,619
$
5,108
$
7,175
$
111
$
–
$
15,891
$
18,139
Amortized cost
1,876
1,611
5,109
7,210
150
–
15,956
18,281
Yield
2.36
%
2.16
%
2.65
%
3.16
%
2.81
%
–
%
2.80
%
2.30
%
Provinces
Fair value
1,050
3,253
5,973
10,372
432
–
21,080
21,270
Amortized cost
1,046
3,232
5,928
10,335
430
–
20,971
21,263
Yield
2.61
%
2.60
%
2.24
%
3.18
%
4.09
%
–
%
2.82
%
2.61
%
U.S. federal government debt
Fair value
8,859
1,500
12,997
17,278
–
–
40,634
29,503
Amortized cost
8,852
2,223
14,316
15,007
–
–
40,398
29,553
Yield
3.28
%
3.82
%
4.03
%
4.21
%
–
%
–
%
3.92
%
4.02
%
U.S. states, municipalities, and agencies
Fair value
3,146
1
3,507
4,370
2,834
–
13,858
5,694
Amortized cost
3,146
1
3,504
4,359
2,871
–
13,881
5,818
Yield
3.89
%
4.05
%
4.58
%
4.70
%
4.83
%
–
%
4.51
%
2.17
%
Other OECD government-guaranteed debt
Fair value
273
1,612
5,932
58
–
–
7,875
1,679
Amortized cost
273
1,612
5,921
58
–
–
7,864
1,687
Yield
1.17
%
4.10
%
4.34
%
4.07
%
–
%
–
%
4.18
%
1.80
%
Canadian mortgage-backed securities
Fair value
436
1,460
–
–
–
–
1,896
2,137
Amortized cost
431
1,438
–
–
–
–
1,869
2,125
Yield
2.25
%
3.22
%
–
%
–
%
–
%
–
%
3.00
%
2.43
%
Other debt securities
Asset-backed securities
Fair value
914
274
2,932
1,615
2,974
–
8,709
1,384
Amortized cost
913
273
2,929
1,612
2,986
–
8,713
1,397
Yield
2.84
%
4.41
%
4.46
%
4.58
%
4.94
%
–
%
4.48
%
5.78
%
Non-agency CMO
4
Fair value
–
–
–
–
–
–
–
–
Amortized cost
–
–
–
–
–
–
–
–
Yield
–
%
–
%
–
%
–
%
–
%
–
%
–
%
–
%
Corporate and other debt
Fair value
2,681
3,280
2,212
1,643
3,275
–
13,091
9,446
Amortized cost
2,675
3,257
2,190
1,609
3,279
1
13,011
9,419
Yield
3.26
%
3.35
%
3.91
%
3.98
%
4.38
%
–
%
3.77
%
3.01
%
Equity securities
Common shares
Fair value
–
–
–
–
–
2,536
2,536
3,914
Cost
–
–
–
–
–
2,332
2,332
3,810
Yield
–
%
–
%
–
%
–
%
–
%
3.57
%
3.57
%
5.59
%
Preferred shares
Fair value
–
–
–
–
–
511
511
501
Cost
–
–
–
–
–
523
523
632
Yield
–
%
–
%
–
%
–
%
–
%
5.04
%
5.04
%
3.82
%
Total securities at fair value through other comprehensive
income
Fair value
$
19,237
$
12,999
$
38,661
$
42,511
$
9,626
$
3,047
$
126,081
$
93,667
Amortized cost
19,212
13,647
39,897
40,190
9,716
2,856
125,518
93,985
Yield
3.18
%
3.21
%
3.71
%
3.82
%
4.65
%
3.84
%
3.68
%
3.16
%
1
Yields represent the weighted-average yield of each security owned at the end of the period. The effective yield includes the contractual
interest or stated dividend rate and is adjusted for the amortization of premiums and
discounts; the effect of related hedging activities is excluded.
2
There were securities from two issuers where the book values were greater than 10%
as at October 31, 2025 but none as at October 31, 2024.
3
Represents contractual maturities. Actual maturities may differ due to prepayment privileges in the
applicable contract.
4
Collateralized mortgage
obligation.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 107
TABLE 60: INVESTMENT PORTFOLIO
– Securities Maturity Schedule
(continued)
1,2
(millions of Canadian dollars)
As at
Remaining terms to maturities
3
Over 1
Over 3
Over 5
With no
Within
year to
years to
years to
Over 10
specific
1 year
3 years
5 years
10 years
years
maturity
Total
Total
October 31
October 31
2025
2024
Debt securities at amortized cost
Government and government-related
securities
Canadian government debt
Federal
Fair value
$
12,262
$
12,295
$
2,770
$
9,361
$
1,257
$
–
$
37,945
$
22,825
Amortized cost
12,267
12,206
2,784
9,368
1,293
–
37,918
22,991
Yield
2.22
%
2.99
%
2.54
%
3.09
%
3.73
%
–
%
2.76
%
2.35
%
Provinces
Fair value
931
3,358
7,836
6,417
328
–
18,870
18,514
Amortized cost
934
3,370
7,811
6,395
326
–
18,836
18,614
Yield
1.69
%
2.33
%
2.30
%
3.16
%
3.85
%
–
%
2.59
%
2.67
%
U.S. federal government and agencies debt
Fair value
–
21,273
5,122
–
13,713
–
40,108
49,281
Amortized cost
–
21,692
5,775
91
13,633
–
41,191
51,326
Yield
–
%
1.42
%
1.63
%
3.89
%
2.14
%
–
%
1.69
%
1.40
%
U.S. states, municipalities, and agencies
Fair value
1,922
1,908
5,206
23,713
19,580
–
52,329
70,247
Amortized cost
1,922
1,939
5,286
24,090
20,099
–
53,336
72,773
Yield
2.65
%
1.69
%
2.77
%
1.89
%
4.69
%
–
%
3.05
%
3.48
%
Other OECD government-guaranteed debt
Fair value
7,966
13,945
7,832
3,099
–
–
32,842
40,909
Amortized cost
8,006
13,428
6,882
2,891
–
–
31,207
39,394
Yield
1.15
%
1.70
%
2.35
%
1.99
%
–
%
–
%
1.73
%
1.61
%
Other debt securities
Asset-backed securities
Fair value
10
1,128
4,504
6,008
15,406
–
27,056
29,422
Amortized cost
10
1,140
4,509
5,981
15,407
–
27,047
29,708
Yield
2.79
%
2.95
%
3.81
%
4.66
%
4.99
%
–
%
4.63
%
4.41
%
Non-agency CMO
Fair value
–
–
–
–
13,163
–
13,163
14,874
Amortized cost
–
–
–
–
13,274
–
13,274
15,362
Yield
–
%
–
%
–
%
–
%
3.21
%
–
%
3.21
%
3.02
%
Canadian issuers
Fair value
105
1,052
871
532
10
–
2,570
4,620
Amortized cost
105
1,051
867
532
9
–
2,564
4,722
Yield
2.10
%
2.17
%
2.08
%
3.77
%
4.22
%
–
%
2.48
%
2.10
%
Other issuers
Fair value
2,177
6,572
3,920
1,605
–
–
14,274
15,484
Amortized cost
2,188
6,775
4,392
1,711
–
–
15,066
16,725
Yield
1.40
%
2.55
%
2.94
%
3.06
%
–
%
–
%
2.56
%
2.71
%
Total debt securities at amortized cost
Fair value
$
25,373
$
61,531
$
38,061
$
50,735
$
63,457
$
–
$
239,157
$
266,176
Amortized cost
25,432
61,601
38,306
51,059
64,041
–
240,439
271,615
Yield
1.83
%
2.02
%
2.54
%
2.66
%
3.89
%
–
%
2.72
%
2.67
%
1
Yields represent the weighted-average yield of each security owned at the end of the period. The effective yield includes
the contractual interest or stated dividend rate and is adjusted for the amortization of premiums
and
discounts; the effect of related hedging activities is excluded.
2
There were securities from two issuers where the book values were greater than 10%
as at October 31, 2025 but none as at October 31, 2024.
3
Represents contractual maturities. Actual maturities may differ due to prepayment privileges in the
applicable contract.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 108
TABLE 61: LOAN PORTFOLIO – Maturity Schedule
(millions of Canadian dollars)
As at
Remaining term-to-maturity
Within 1
Over 1 to 5
Over 5 years
Over
year
years
to 15 years
15 years
Total
October 31
October 31
2025
2024
Canada
Residential mortgages
$
75,041
$
190,608
$
1,820
$
–
$
267,469
$
273,069
Consumer instalment and other personal
HELOC
61,934
85,823
170
–
147,927
123,036
Indirect auto
899
15,159
16,036
–
32,094
29,837
Other
19,142
723
1,167
–
21,032
19,885
Credit card
21,867
–
–
–
21,867
20,510
Total personal
178,883
292,313
19,193
–
490,389
466,337
Real estate
Residential
16,590
10,795
1,260
157
28,802
27,874
Non-residential
14,868
10,788
1,813
312
27,781
25,962
Total real estate
31,458
21,583
3,073
469
56,583
53,836
Total business and government
(including real estate)
109,737
48,362
7,942
1,417
167,458
163,958
Total loans – Canada
288,620
340,675
27,135
1,417
657,847
630,295
United States
Residential mortgages
745
443
1,542
44,864
47,594
58,580
Consumer instalment and other personal
HELOC
9,921
75
740
1,745
12,481
11,525
Indirect auto
533
25,550
18,142
–
44,225
42,981
Other
253
972
6
–
1,231
1,099
Credit card
19,789
–
–
–
19,789
20,123
Total personal
31,241
27,040
20,430
46,609
125,320
134,308
Real estate
Residential
3,567
7,992
2,738
330
14,627
13,727
Non-residential
8,109
15,366
3,665
703
27,843
28,152
Total real estate
11,676
23,358
6,403
1,033
42,470
41,879
Total business and government
(including real estate)
43,770
81,743
34,532
7,024
167,069
183,107
Total loans – United States
75,011
108,783
54,962
53,633
292,389
317,415
Other International
Personal
49
–
–
–
49
25
Business and government
7,371
3,902
431
–
11,704
10,138
Total loans – Other international
7,420
3,902
431
–
11,753
10,163
Other loans
Debt securities classified as loans
–
–
–
–
–
–
Acquired credit-impaired loans
–
–
–
–
–
–
Total other loans
–
–
–
–
–
–
Total loans
$
371,051
$
453,360
$
82,528
$
55,050
$
961,989
$
957,873
TABLE 62: LOAN PORTFOLIO – Rate Sensitivity
(millions of Canadian dollars)
As at
October 31, 2025
October 31, 2024
Over 1 to
Over 5 to
Over
Over 1 to
Over 5 to
Over
5 years
15 years
15 years
5 years
15 years
15 years
Fixed rate
$
287,967
$
67,523
$
36,896
$
302,548
$
68,990
$
44,741
Variable rate
165,393
15,005
18,154
168,941
16,419
20,037
Total
$
453,360
$
82,528
$
55,050
$
471,489
$
85,409
$
64,778
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 109
TABLE 63: ALLOWANCE FOR LOAN LOSSES
(millions of Canadian dollars, except as noted)
2025
2024
Allowance for loan losses – Balance at beginning of year
$
8,094
$
7,136
Provision for credit losses
4,505
4,253
Write-offs
Canada
Residential mortgages
7
5
Consumer instalment and other personal
HELOC
4
8
Indirect Auto
531
437
Other
324
281
Credit card
704
587
Total personal
1,570
1,318
Real estate
Residential
2
3
Non-residential
5
4
Total real estate
7
7
Total business and government (including real estate)
417
264
Total Canada
1,987
1,582
United States
Residential mortgages
4
3
Consumer instalment and other personal
HELOC
7
3
Indirect Auto
523
501
Other
209
266
Credit card
1,373
1,293
Total personal
2,116
2,066
Real estate
Residential
57
8
Non-residential
56
100
Total real estate
113
108
Total business and government (including real estate)
540
336
Total United States
2,656
2,402
Other International
Personal
–
–
Business and government
82
–
Total other international
82
–
Other loans
Debt securities classified as loans
–
–
Acquired credit-impaired loans
1,2
–
–
Total other loans
–
–
Total write-offs against portfolio
4,725
3,984
Recoveries
Canada
Residential mortgages
–
–
Consumer instalment and other personal
HELOC
1
1
Indirect Auto
93
77
Other
48
47
Credit card
116
107
Total personal
258
232
Real estate
Residential
–
–
Non-residential
1
–
Total real estate
1
–
Total business and government (including real estate)
24
23
Total Canada
282
255
United States
Residential mortgages
7
1
Consumer instalment and other personal
HELOC
9
3
Indirect Auto
172
163
Other
26
32
Credit card
278
212
Total personal
492
411
Real estate
Residential
1
2
Non-residential
27
14
Total real estate
28
16
Total business and government (including real estate)
57
41
Total United States
549
452
Other International
Personal
–
–
Business and government
1
–
Total other international
1
–
Other loans
Debt securities classified as loans
–
–
Acquired credit-impaired loans
1,2
–
–
Total other loans
–
–
Total recoveries on portfolio
832
707
Net write-offs
(3,893)
(3,277)
Disposals
(22)
(39)
Foreign exchange and other adjustments
14
15
Total allowance for loan losses, including off-balance sheet
positions
8,698
8,088
Less: Change in allowance for off-balance sheet positions
3
9
(6)
Total allowance for loan losses, at end of period
$
8,689
$
8,094
Ratio of net write-offs in the period to average loans outstanding
0.41
%
0.35
%
1
Includes all FDIC covered loans and other ACI loans.
2
Other adjustments are required as a result of the accounting for FDIC covered loans.
3
The allowance for loan losses for off-balance sheet positions is recorded in Other liabilities on the Consolidated
Balance Sheet.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 110
TABLE 64: AVERAGE DEPOSITS
(millions of Canadian dollars, except as noted)
For the years ended
October 31, 2025
October 31, 2024
Total
Total
Average
interest
Average
Average
interest
Average
balance
expense
rate paid
balance
expense
rate paid
Deposits booked in Canada
1
Non-interest-bearing demand deposits
$
19,166
$
–
–
%
$
18,246
$
–
–
%
Interest-bearing demand deposits
98,939
5,006
5.06
87,264
7,291
8.36
Notice deposits
329,475
1,387
0.42
312,014
1,595
0.51
Term deposits
408,341
15,353
3.76
383,720
16,730
4.36
Total deposits booked in Canada
855,921
21,746
2.54
801,244
25,616
3.20
Deposits booked in the United States
Non-interest-bearing demand deposits
11,051
–
–
11,233
–
–
Interest-bearing demand deposits
42,417
1,372
3.23
34,784
1,377
3.96
Notice deposits
366,734
7,764
2.12
363,171
8,780
2.42
Term deposits
144,428
6,075
4.21
131,054
6,985
5.33
Total deposits booked in the United States
564,630
15,211
2.69
540,242
17,142
3.17
Deposits booked in other international
Non-interest-bearing demand deposits
–
–
–
5
–
–
Interest-bearing demand deposits
7,885
254
3.22
1,532
81
5.29
Notice deposits
–
–
–
–
–
–
Term deposits
73,069
2,828
3.87
79,611
4,021
5.05
Total deposits booked in other international
80,954
3,082
3.81
81,148
4,102
5.05
Total average deposits
$
1,501,505
$
40,039
2.67
%
$
1,422,634
$
46,860
3.29
%
1
As at October 31, 2025, deposits by foreign depositors in TD’s Canadian bank offices
amounted to $234 billion (October 31, 2024 – $218 billion).
TABLE 65: DEPOSITS – Denominations of $100,000
or greater
1
(millions of Canadian dollars)
As at
Remaining term-to-maturity
Within 3
3 months to
6 months to
Over 12
months
6 months
12 months
months
Total
October 31, 2025
Canada
$
98,967
$
53,964
$
61,602
$
164,862
$
379,395
United States
2
45,371
33,745
15,509
4,006
98,631
Other international
37,949
7,220
20,475
84
65,728
Total
$
182,287
$
94,929
$
97,586
$
168,952
$
543,754
October 31, 2024
Canada
$
87,189
$
39,584
$
68,581
$
162,097
$
357,451
United States
2
41,824
33,614
27,596
3,336
106,370
Other international
36,401
9,911
35,960
258
82,530
Total
$
165,414
$
83,109
$
132,137
$
165,691
$
546,351
1
Deposits in Canada, U.S., and Other international include wholesale and retail deposits.
2
Includes deposits based on denominations of US$250,000 or greater of $43.5 billion in ‘within 3 months’, $35.2
billion in ‘over 3 months to 6 months’, $17.6 billion in ‘over 6 months to
12 months’, and $3.8 billion in ‘over 12 months’ (October 31, 2024 – $36.9 billion in ‘within 3 months’, $30.5 billion
in ‘over 3 months to 6 months’, $30.0 billion in ‘over 6 months to
12 months’, $3.2 billion in ‘over 12 months’).
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 111
TABLE 66: NET INTEREST INCOME ON
AVERAGE INTEREST-EARNING BALANCES
1,2
(millions of Canadian dollars, except as noted)
2025
2024
Average
Average
Average
Average
balance
Interest
3
rate
balance
Interest
3
rate
Interest-earning assets
Interest-bearing deposits with Banks
Canada
$
32,986
$
1,141
3.46
%
$
29,251
$
1,833
6.27
%
U.S.
96,099
3,950
4.11
72,331
3,446
4.76
Securities
Trading
Canada
82,454
3,026
3.67
77,792
3,110
4.00
U.S.
26,674
976
3.66
26,410
999
3.78
Non-trading
Canada
129,989
4,630
3.56
117,514
6,067
5.16
U.S.
214,597
9,793
4.56
226,820
10,293
4.54
Securities purchased under reverse
repurchase agreements
Canada
86,383
2,711
3.14
86,905
4,253
4.89
U.S.
86,647
4,644
5.36
74,237
4,837
6.52
Loans
Residential mortgages
4
Canada
295,546
11,654
3.94
287,609
12,772
4.44
U.S.
52,366
2,111
4.03
56,771
2,203
3.88
Consumer instalment and other personal
Canada
180,223
9,364
5.20
165,582
8,377
5.06
U.S.
55,762
3,454
6.19
52,340
3,243
6.20
Credit card
Canada
22,093
2,985
13.51
20,581
2,712
13.18
U.S.
19,291
3,615
18.74
18,953
3,652
19.27
Business and government
4
Canada
182,407
9,170
5.03
173,410
10,364
5.98
U.S.
164,923
9,165
5.56
163,744
10,097
6.17
International
5
145,420
5,232
3.60
124,093
5,131
4.13
Total interest-earning assets
6
1,873,860
87,621
4.68
1,774,343
93,389
5.26
Interest-bearing liabilities
Deposits
Personal
7
Canada
344,072
5,393
1.57
328,798
7,124
2.17
U.S.
271,867
7,103
2.61
264,636
7,647
2.89
Banks
8,9
Canada
23,160
766
3.31
20,121
1,078
5.36
U.S.
28,597
903
3.16
24,319
908
3.73
Business and government
8,9
Canada
429,316
15,587
3.63
394,345
17,414
4.42
U.S.
191,620
7,205
3.76
179,530
8,587
4.78
Subordinated notes and debentures
11,673
519
4.45
10,417
436
4.19
Obligations related to securities sold short
and under repurchase agreements
Canada
78,361
2,590
3.31
77,529
3,596
4.64
U.S.
111,981
6,345
5.67
109,960
7,015
6.38
Securitization liabilities
10
36,304
886
2.44
30,503
1,002
3.28
Other liabilities
Canada
5,117
234
4.57
4,092
156
3.81
U.S.
15,879
1,277
8.04
20,321
1,137
5.60
International
8,9
143,342
5,751
4.01
135,392
6,817
5.04
Total interest-bearing liabilities
6
1,691,289
54,559
3.23
1,599,963
62,917
3.93
Total interest-earning assets, net interest
income, and net interest margin
$
1,873,860
$
33,062
1.76
%
$
1,774,343
$
30,472
1.72
%
Add: non-interest earning assets
234,004
–
–
201,032
–
–
Total assets, net interest income and
margin
$
2,107,864
$
33,062
1.57
%
$
1,975,375
$
30,472
1.54
%
1
Net interest income includes dividends on securities.
2
Geographic classification of assets and liabilities is based on the domicile of the booking point of assets and liabilities.
3
Interest income includes loan fees earned by the Bank, which are recognized in net interest income over the life
of the loan through the effective interest rate method (EIRM).
4
Includes average trading loans of $26 billion (2024 – $20 billion).
5
Comprised of interest-bearing deposits with Banks, securities, securities purchased under reverse repurchase
agreements, and business and government loans.
6
Average interest-earning assets and average interest-bearing liabilities are non-GAAP financial measures
that depict the Bank’s financial position, and are calculated using daily
balances. 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.
7
Includes charges incurred on the Schwab IDA Agreement of $1.4 billion (2024 – $0.9 billion).
8
Includes average trading deposits with a fair value of $31 billion (2024 – $31 billion).
9
Includes average deposit designated at FVTPL of $202 billion (2024 – $188 billion).
10
Includes average securitization liabilities at fair value of $23 billion (2024
– $18 billion) and average securitization liabilities at amortized cost of $14 billion (2024 – $13
billion).
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 112
The following table presents an analysis of the
change in net interest income due to volume
and interest rate changes. In this analysis,
changes due to
volume/interest rate variance have been
allocated to average interest rate.
TABLE 67: ANALYSIS OF CHANGE
IN NET INTEREST INCOME
1,2
(millions of Canadian dollars)
2025 vs. 2024
Increase (decrease) due to changes in
Average volume
Average rate
Net change
Interest-earning assets
Interest-bearing deposits with banks
Canada
$
234
$
(926)
$
(692)
U.S.
1,132
(628)
504
Securities
Trading
Canada
186
(270)
(84)
U.S.
10
(33)
(23)
Non-trading
Canada
644
(2,081)
(1,437)
U.S.
(555)
55
(500)
Securities purchased under reverse
repurchase agreements
Canada
(26)
(1,516)
(1,542)
U.S.
809
(1,002)
(193)
Loans
Residential mortgages
Canada
352
(1,470)
(1,118)
U.S.
(170)
78
(92)
Consumer instalment and other personal
Canada
741
246
987
U.S.
213
(2)
211
Credit card
Canada
199
74
273
U.S.
65
(102)
(37)
Business and government
Canada
537
(1,731)
(1,194)
U.S.
73
(1,005)
(932)
International
896
(795)
101
Total interest income
5,340
(11,108)
(5,768)
Interest-bearing liabilities
Deposits
Personal
Canada
331
(2,062)
(1,731)
U.S.
210
(754)
(544)
Banks
Canada
163
(475)
(312)
U.S.
160
(165)
(5)
Business and government
Canada
1,545
(3,372)
(1,827)
U.S.
578
(1,960)
(1,382)
Subordinated notes and debentures
53
30
83
Obligations related to securities sold
short and under repurchase agreements
Canada
39
(1,045)
(1,006)
U.S.
129
(799)
(670)
Securitization liabilities
191
(307)
(116)
Other liabilities
Canada
38
40
78
U.S.
(249)
389
140
International
389
(1,455)
(1,066)
Total interest expense
3,577
(11,935)
(8,358)
Net interest income
$
1,763
$
827
$
2,590
1
Geographic classification of assets and liabilities is based on the domicile of the booking point of assets and liabilities.
2
Interest income includes loan fees earned by the Bank, which are recognized in net interest income over the life
of the loan through the EIRM.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 113
GLOSSARY
Financial and Banking Terms
Adjusted Results:
Non-GAAP financial measures
used to assess each of the
Bank’s businesses and to measure the Bank’s overall
performance. To arrive at
adjusted results, the Bank adjusts for “items
of note”, from reported results. The
items of note relate to items which management
does not believe are indicative
of underlying business performance.
Allowance for Credit Losses:
Represent expected credit losses (ECLs)
on
financial assets, including any off-balance sheet
exposures, at the balance
sheet date. Allowance for credit losses consists
of Stage 3 allowance for
impaired financial assets and Stage 2 and
Stage 1 allowance for performing
financial assets and off-balance sheet instruments.
The allowance is increased
by the provision for credit losses,
decreased by write-offs net of recoveries and
disposals,
and impacted by foreign exchange.
Amortized Cost:
The amount at which a financial asset or
financial liability is
measured at initial recognition minus principal
repayments, plus or minus the
cumulative amortization, using EIRM, of any
differences between the initial
amount and the maturity amount, and
minus any reduction for impairment.
Assets under Administration (AUA):
Assets that are beneficially owned by
customers where the Bank provides services
of an administrative nature, such
as the collection of investment income and
the placing of trades on behalf of the
clients (where the client has made his or
her own investment selection). The
majority of these assets are not reported on
the Bank’s Consolidated Balance
Sheet.
Assets under Management (AUM):
Assets that are beneficially owned by
customers, managed by the Bank, where
the Bank has discretion to make
investment selections on behalf of the
client (in accordance with an investment
policy). In addition to the TD family of mutual
funds, the Bank manages assets
on behalf of individuals, pension funds, corporations,
institutions, endowments
and foundations. These assets are not reported
on the Bank’s Consolidated
Balance Sheet. Some assets under management
that are also administered by
the Bank are included in assets under administration.
Asset-Backed Commercial Paper (ABCP):
A form of commercial paper that is
collateralized by other financial assets.
Institutional investors usually purchase
such instruments in order to diversify their assets
and generate short-term
gains.
Asset-Backed Securities (ABS):
A security whose value and income
payments are derived from and collateralized
(or “backed”) by a specified pool
of underlying assets.
Average Common Equity:
Average common equity for the business
segments
reflects the average allocated capital. The
Bank’s methodology for allocating
capital to its business segments is largely aligned
with the common equity
capital requirements under Basel III.
Average Interest-Earning Assets:
A non-GAAP financial measure that depicts
the Bank’s financial position, and is calculated
as the average carrying value of
deposits with banks, loans and securities based
on daily balances for the period
ending October 31 in each fiscal year.
Basic Earnings per Share (EPS):
A performance measure calculated by
dividing net income available to common
shareholders by the weighted average
number of common shares outstanding
for the period. Adjusted basic EPS is
calculated in the same manner using adjusted
net income.
Basis Points
(bps):
A unit equal to 1/100 of 1%. Thus, a 1%
change is equal to
100 basis points.
Book Value per Share:
A measure calculated by dividing common
shareholders’
equity by number of common shares at the
end of the period.
Carrying Value:
The value at which an asset or liability
is carried at on the
Consolidated Balance Sheet.
Catastrophe Claims:
Insurance claims that relate to any single
event that
occurred in the period, for which the aggregate
insurance claims are equal to
or greater than an internal threshold of $5
million before reinsurance. The
Bank’s internal threshold may change from time
to time.
Collateralized Mortgage Obligation (CMO):
They are collateralized debt
obligations consisting of mortgage-backed
securities that are separated and
issued as different classes of mortgage pass-through
securities with different
terms, interest rates, and risks. CMOs by private
issuers are collectively
referred to as non-agency CMOs.
Common Equity Tier 1 (CET1) Capital:
This is a primary Basel III capital
measure comprised mainly of common equity, retained earnings and
qualifying
non-controlling interest in subsidiaries. Regulatory
deductions made to arrive
at the CET1 Capital include goodwill
and intangibles, unconsolidated
investments in banking, financial, and insurance
entities, deferred tax assets,
defined benefit pension fund assets, and
shortfalls in allowances.
Common Equity Tier 1 (CET1) Capital Ratio:
CET1 Capital ratio represents
the predominant measure of capital adequacy
under Basel III
and equals CET1 Capital divided by RWA.
Compound Annual Growth Rate (CAGR):
A measure of growth over multiple
time periods from the initial investment value
to the ending investment value
assuming that the investment has been compounding
over the time period.
Credit Valuation Adjustment (CVA):
CVA represents a capital charge that
measures credit risk due to default of derivative
counterparties. This charge
requires banks to capitalize for the potential
changes in counterparty credit
spread for the derivative portfolios.
Diluted EPS:
A performance measure calculated by dividing
net income
available to common shareholders by the
weighted average number of
common shares outstanding adjusting
for the effect of all potentially dilutive
common shares. Adjusted diluted EPS is
calculated in the same manner using
adjusted net income.
Dividend Payout Ratio:
A ratio represents the percentage of Bank’s earnings
being paid to common shareholders in
the form of dividends and is calculated
by dividing common dividends by net income
available to common
shareholders. Adjusted dividend payout ratio
is calculated in the same manner
using adjusted net income.
Dividend Yield:
A ratio calculated as the dividend per
common share for the
year divided by the daily average closing
stock price during the year.
Effective Income Tax Rate:
A rate and performance indicator calculated
by
dividing the provision for income taxes as a percentage
of net income before
taxes. Adjusted effective income tax rate is calculated
in the same manner
using adjusted results.
Effective Interest Rate (EIR):
The rate that discounts expected future cash
flows for the expected life of the financial instrument
to its carrying value. The
calculation takes into account the contractual
interest rate, along with any fees
or incremental costs that are directly
attributable to the instrument and all other
premiums or discounts.
Effective Interest Rate Method (EIRM):
A technique for calculating the actual
interest rate in a period based on the amount
of a financial instrument’s book
value at the beginning of the accounting period.
Under EIRM,
the effective
interest rate, which is a key component of
the calculation, discounts the
expected future cash inflows and outflows expected
over the life of a financial
instrument.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 114
Efficiency Ratio:
The efficiency ratio measures operating efficiency and
is
calculated by taking the non-interest expenses
as a percentage of total revenue.
A lower ratio indicates a more efficient business
operation. Adjusted efficiency
ratio is calculated in the same manner using
adjusted non-interest expenses
and adjusted total revenue.
Enhanced Disclosure Task Force (EDTF):
Established by the FSB in
May 2012, comprised of banks, analysts, investors,
and auditors, with the goal
of enhancing the risk disclosures of banks and
other financial institutions.
Expected Credit Losses (ECLs):
ECLs are the probability-weighted present
value of expected cash shortfalls over
the remaining expected life of the
financial instrument and considers reasonable
and supportable information
about past events, current conditions, and forecasts
of future events and
economic conditions that impact the Bank’s
credit risk assessment.
Fair Value:
The price that would be received to sell an
asset or paid to transfer
a liability in an orderly transaction between
market participants at the
measurement date, under current market
conditions.
Fair value through other comprehensive
income (FVOCI):
Under IFRS 9, if
the asset passes the contractual cash
flows test (named SPPI), the business
model assessment determines how the instrument
is classified. If the instrument
is being held to collect contractual cash flows,
that is, if it is not expected to be
sold, it is measured as amortized cost. If the
business model for the instrument
is to both collect contractual cash flows and
potentially sell the asset, it is
measured at FVOCI.
Fair value through profit or loss (FVTPL):
Under IFRS 9, the classification is
dependent on two tests, a contractual
cash flow test (named SPPI) and a
business model assessment. Unless the
asset meets the requirements of both
tests, it is measured at fair value with all
changes in fair value reported in profit
or loss.
Federal Deposit Insurance Corporation
(FDIC):
A U.S. government
corporation which provides deposit insurance
guaranteeing the safety of a
depositor’s accounts in member banks.
The FDIC also examines and
supervises certain financial institutions for
safety and soundness, performs
certain consumer-protection functions, and
manages banks in receiverships
(failed banks).
Forward Contracts:
Over-the-counter contracts between two parties
that oblige
one party to the contract to buy and the other
party to sell an asset for a fixed
price at a future date.
Futures:
Exchange-traded contracts to buy or
sell a security at a predetermined
price on a specified future date.
Hedging:
A risk management technique intended
to mitigate the Bank’s
exposure to fluctuations in interest rates,
foreign currency exchange rates, or
other market factors. The elimination or
reduction of such exposure is
accomplished by engaging in capital markets
activities to establish offsetting
positions.
Impaired Loans:
Loans where, in management’s opinion,
there has been a
deterioration of credit quality to the extent
that the Bank no longer has
reasonable assurance as to the timely collection
of the full amount of principal
and interest.
Loss Given Default (LGD):
It is the amount of the loss the Bank
would likely
incur when a borrower defaults on a loan,
which is expressed as a percentage
of exposure at default.
Mark-to-Market (MTM):
A valuation that reflects current market rates
as at the
balance sheet date for financial instruments
that are carried at fair value.
Master Netting Agreements:
Legal agreements between two parties
that
have
multiple derivative contracts with each other
that provide for the net settlement
of all contracts through a single payment, in
a single currency, in the event of
default or termination of any one contract.
Net Corporate Expenses:
Non-interest expenses related to corporate
service
and control groups which are not allocated to a
business segment.
Net Interest Margin:
A non-GAAP ratio calculated as net interest
income as a
percentage of average interest-earning assets
to measure performance. This
metric is an indicator of the profitability of
the Bank’s earning assets less the
cost of funding. Adjusted net interest
margin is calculated in the same manner
using adjusted net interest income.
Non-Viability Contingent Capital (NVCC):
Instruments (preferred shares and
subordinated debt) that contain a feature or
a provision that allows the financial
institution to either permanently convert these
instruments into common shares
or fully write-down the instrument, in the event
that the institution is no longer
viable.
Notional:
A reference amount on which payments
for derivative financial
instruments are based.
Office of the Superintendent of Financial
Institutions Canada (OSFI):
The
regulator of Canadian federally chartered
financial institutions and federally
administered pension plans.
Operating Leverage:
A
non-GAAP measure that the Bank calculates
as the
difference between the % change in adjusted
revenue (U.S. Retail in source
currency) net of insurance service expense
(ISE), and adjusted expenses
(U.S. Retail in US$) grossed up by the retailer
program partners’
share of PCL
for the Bank’s U.S. strategic card portfolio.
Collectively, these adjustments
provide a measure of operating leverage
that management believes is more
reflective of underlying business performance.
Options:
Contracts in which the writer of the option grants
the buyer the future
right, but not the obligation, to buy or to sell a
security, exchange rate, interest
rate, or other financial instrument or commodity
at a predetermined price at or
by a specified future date.
Price-Earnings Ratio:
A ratio calculated by dividing the closing
share price by
EPS based on a trailing four quarters to indicate
market performance.
Adjusted
price-earnings ratio is calculated in the
same manner using adjusted EPS.
Probability of Default (PD):
It is the likelihood that a borrower will not
be able
to meet its scheduled repayments.
Provision for Credit Losses (PCL):
Amount added to the allowance for credit
losses to bring it to a level that management
considers adequate to reflect
expected credit-related losses on its
portfolio.
Return on Common Equity (ROE):
The consolidated Bank ROE is calculated
as net income available to common shareholders
as a percentage of average
common shareholders’
equity,
utilized in assessing the Bank’s use of equity.
ROE for the business segments is calculated
as the segment net income
available to common shareholders as a percentage
of average allocated
capital. Adjusted ROE is calculated in
the same manner using adjusted net
income.
Return on Tangible Common Equity (ROTCE):
A non-GAAP financial
measure calculated as reported net income
available to common shareholders
after adjusting for the after-tax amortization
of acquired intangibles, which are
treated as an item of note, as a percentage
of average Tangible common
equity. Adjusted ROTCE is calculated in the same manner using
adjusted net
income.
Both measures can be utilized in assessing
the Bank’s use of equity.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 115
Return on Risk-weighted Assets:
Net income available to common
shareholders as a percentage of average risk-weighted
assets.
Risk-Weighted Assets (RWA):
Assets calculated by applying a regulatory
risk-
weight factor to on and off-balance sheet exposures.
The risk-weight factors are
established by the OSFI to convert on and off-balance
sheet exposures to a
comparable risk level.
Securitization:
The process by which financial assets,
mainly loans, are
transferred to structures,
which normally issue a series of asset-backed
securities to investors to fund the purchase
of loans.
Solely Payments of Principal and Interest
(SPPI):
Contractual cash flows of a
financial asset that are consistent with a basic
lending arrangement.
Swaps:
Contracts that involve the exchange of fixed
and floating interest rate
payment obligations and currencies on a notional
principal for a specified period
of time.
Tangible common equity (TCE):
A non-GAAP financial measure calculated
as
common shareholders’ equity less goodwill,
imputed goodwill, and intangibles
on an investment in Schwab and other acquired
intangible assets, net of related
deferred tax liabilities. It can be utilized in assessing
the Bank’s use of equity.
Taxable Equivalent Basis (TEB):
A calculation method (not defined in GAAP)
that increases revenues and the provision
for income taxes on certain tax-
exempt securities to an equivalent before-tax
basis to facilitate comparison of
net interest income from both taxable and
tax-exempt sources.
Tier 1 Capital Ratio:
Tier 1 Capital represents the more permanent
forms of
capital, consisting primarily of common
shareholders’
equity, retained earnings,
preferred shares and innovative instruments.
Tier 1 Capital ratio is calculated as
Tier 1 Capital divided by RWA.
Total Capital Ratio:
Total Capital is defined as the total of net Tier 1 and Tier 2
Capital. Total Capital ratio is calculated as Total Capital divided by RWA.
Total Shareholder Return (TSR):
The total return earned on an investment
in
TD’s common shares. The return measures the
change in shareholder value,
assuming dividends paid are reinvested in
additional shares.
Trading-Related Revenue:
A non-GAAP financial measure that is
the total of
trading income (loss), net interest income on
trading positions, and income from
financial instruments designated at FVTPL
that are managed within a trading
portfolio. Trading-related revenue (TEB) in the Wholesale
Banking segment is
also a non-GAAP financial measure and is
calculated in the same manner,
including TEB adjustments. Both are used
for measuring trading performance.
Value-at-Risk (VaR):
A metric used to monitor and control overall
risk levels
and to calculate the regulatory capital required
for market risk in trading
activities. VaR measures the adverse impact that potential changes
in market
rates and prices could have on the value
of a portfolio over a specified period of
time.