TD Bank's Q2 2025: Unpacking Contradictions in Expenses, NII Strategies, and Retail Expansion

Expenses and remediation costs, U.S. balance sheet repositioning and NII impact, US retail expansion strategy, and expansion of net interest margin are the key contradictions discussed in The Toronto-Dominion Bank's latest 2025Q2 earnings call.



Strong Financial Performance:
- TD Bank Group delivered earnings of $3.6 billion and EPS of $1.97 in Q2, reflecting robust trading and fee income.
- The growth was driven by strong performance across its markets businesses and volume growth in Canadian Personal and Commercial Banking.

Strategic Review and Cost Management:
- TD completed the sale of approximately $9 billion in correspondent loans and communicated plans to wind down its US point-of-sale financing business.
- The strategic review aims to structurally reduce costs by $600 million to $700 million in restructuring charges, enabling capacity for digital and AI investments.

Credit Quality and Provisions:
- Gross impaired loan formations decreased by 4 basis points, and gross impaired loans decreased by $587 million to $4.87 billion, reflecting strong credit performance across asset classes.
- The bank added over $0.5 billion to performing reserves for policy and trade uncertainty.

Investment Portfolio Repositioning:
- TD expects the investment portfolio repositioning to generate an NII benefit in fiscal 2025 at the upper end of the $300 million to $500 million estimated range, contributing to improved return on equity.
- The repositioning involves a significant loss upfront but anticipated NII recapture through higher rate structures on the investment bond portfolio over the next three years.