Key Morningstar Metrics for Toronto-Dominion Bank
- : C$136.00Fair Value Estimate
- : ★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : LowMorningstar Uncertainty Rating
What We Thought of Toronto-Dominion Bank’s Earnings
Toronto-Dominion Bank TD reported strong fiscal third-quarter results. Adjusted EPS came in at C$2.77, up 26% from a year ago. The bank’s third-quarter results translated into an adjusted return on equity of 16%, well above its fiscal 2026 target of 13%.
Why it matters: TD Bank’s US retail segment saw adjusted loan growth of 3% year over year after excluding noncore portfolios for runoff or for sale. Segment return on equity improved 130 basis points year over year to 10.2% in the quarter. Management expects to open 100 new branches and add 450 new bankers in the US by the end of calendar 2028.
- TD Bank is still remediating its US regulatory issues, so any new branches would require regulatory approval. It remains confident about its expansion plan based on discussions with US regulators but indicated no signal yet on lifting its US asset cap.
- As part of its US restructuring, the bank closed 90 branches in the past two years. This new expansion plan is expected to deepen its reach in key US markets, with most of the branch investments, in our view, funded by cost savings, as it guided no material expense growth from its expansion plan.
The bottom line: As we incorporate the bank’s fiscal third-quarter results, we expect to increase our fair value estimates for wide-moat TD Bank by a high-single-digit percentage. We continue to view the shares as overvalued.
- The increase in our valuation will primarily be driven by higher fee income from the bank’s wealth and wholesale banking businesses, as well as higher net interest margin, partially offset by higher compensation costs.
- We still think the bank will deliver on its adjusted expense growth of 3%-4% for fiscal 2026. TD reiterated its cost reduction plan of around C$900 million in fiscal 2026.
Coming up: Amid the latest tariff spat between the United States and Canada, TD Bank lowered its credit guidance to the lower end of the prior range of 40-50 basis points for its provisioning for credit losses.
