TD Bank Group's Strategic Position in U.S. Retail Banking and Growth Prospects for 2025-2026

In the evolving landscape of U.S. retail banking, TD Bank Group has emerged as a disciplined and forward-looking player under the leadership of Leo Salom. The bank’s strategic focus on asset rationalization, compliance modernization, and targeted growth has positioned it to navigate regulatory constraints while building a foundation for long-term profitability. As the 2025-2026 period unfolds, Salom’s leadership is proving pivotal in aligning TD’s U.S. operations with both regulatory expectations and market demands.

Strategic Asset Reduction: Creating Space for Profitability

Since October 2024, TD has reduced its U.S. assets by $48 billion—nearly 10% of its pre-restructuring balance sheet—by divesting non-core portfolios such as point-of-sale financing, commercial auto dealer loans, and correspondent lending [1]. This aggressive reduction, which includes a $25 billion securities sell-off, has brought the bank closer to its “fighting weight” target, enabling it to operate within the asset cap imposed by U.S. regulators [2]. Salom has emphasized that this restructuring is not merely a compliance exercise but a strategic pivot to free up capacity for higher-margin activities. By focusing on credit cards, home equity lines of credit, and small business lending, TD is targeting segments with stronger growth potential and better risk-adjusted returns [3].

The inflection point for U.S. loan growth, however, is expected to materialize closer to the end of 2026. This timeline reflects the time required to fully integrate the asset reduction with new lending initiatives while maintaining regulatory compliance [4]. For investors, this underscores the importance of patience: TD’s strategy prioritizes sustainable growth over short-term gains.

Strengthening Compliance and Risk Management

A critical pillar of Salom’s strategy is the modernization of TD’s compliance infrastructure. The bank has committed $1 billion over two years to bolster anti-money laundering (AML) controls, including the deployment of machine learning-driven transaction monitoring systems and enhanced training programs [5]. These investments are not just reactive but proactive, aiming to build a resilient framework that supports future business expansion. Salom has framed this as a long-term investment, with AML spending expected to continue into 2027 as the bank refines its risk management protocols [6].

Parallel to compliance efforts, TD is pursuing operational efficiency. A $550–650 million annualized cost savings target by fiscal 2026 is being achieved through real estate optimization and process automation [7]. These measures are critical to offsetting the costs of restructuring and compliance, ensuring that the bank’s U.S. operations remain profitable even as it scales back in size.

Financial Performance and Investor Confidence

Despite the costs associated with restructuring, TD’s U.S. business reported a net income of $695 million in Q3 2025, excluding restructuring expenses [8]. This performance highlights the bank’s ability to maintain profitability while executing complex strategic shifts. Salom’s emphasis on efficiency and productivity has allowed TD to balance short-term challenges with long-term opportunities, a trait that is increasingly valued in today’s volatile financial environment.

For investors, the key question is whether TD’s strategic bets will pay off as anticipated. The bank’s focus on relationship banking, digital transformation, and AI-driven customer insights suggests a commitment to innovation. However, the success of these initiatives will depend on execution—particularly in scaling credit card and home equity lending without compromising risk management.

Conclusion

Leo Salom’s leadership has transformed TD Bank’s U.S. operations into a model of strategic discipline. By reducing non-core assets, investing in compliance, and targeting high-growth segments, the bank is positioning itself to thrive in a post-restructuring era. While the path to profitability remains gradual, the combination of regulatory alignment, operational efficiency, and targeted growth makes TD a compelling case study in adaptive leadership. For investors, the 2025-2026 period will be a critical test of whether these strategies translate into sustained value creation.

Source:
[1] TD Bank has shrunk U.S. assets by $48B since asset cap [https://www.americanbanker.com/news/td-bank-shrinks-by-10-in-u-s-to-comply-with-asset-cap]
[2] The Toronto-Dominion Bank (TD) Q3 2025 Earnings Call [https://finance.yahoo.com/news/toronto-dominion-bank-td-q3-070510112.html]
[3] TD to spend $1B in 2-year span on compliance fixes [https://www.americanbanker.com/news/td-projects-1b-anti-money-laundering-spend-over-two-years]
[4] TD Bank Group Reports Third Quarter 2025 Results [https://stories.td.com/ca/en/news/2025-08-28-td-bank-group-reports-third-quarter-2025-results]