Key Morningstar Metrics for TD Bank Group
- : C$115.00Fair Value Estimate
- : ★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : MediumMorningstar Uncertainty Rating
What We Thought of TD Bank Group’s Earnings
Toronto-Dominion Bank TD reported strong fiscal second-quarter results. Adjusted EPS came in at C$2.38, up 21% from a year ago. The results translated into an adjusted return on equity of 14.4%, above its current fiscal 2026 target of 13.0%.
Why it matters: Wholesale banking was a standout, with adjusted earnings up 38% year over year, consistent with the broader peer group trend. In addition, the US banking segment’s adjusted loans rose by 3% year over year, excluding the portfolio for sale or run-off, and management commentary supports an expectation that sequential total loan growth will turn positive next quarter.
- TD Bank is seeing strong growth in middle-market commercial loans and card loans in its US banking segment, with management targeting higher card penetration within its retail deposit base. Historically, most US card growth has been driven by partnership programs rather than proprietary acquisition.
- We are relatively neutral on TD Bank’s growth initiative in US card loans. We view deepening client primacy as the more important driver than card growth for its US segment profitability improvement during the ongoing AML remediation period.
The bottom line: As we incorporate fiscal second-quarter results, we expect to increase our CAD115/USD 84 fair value estimates for wide-moat-rated Toronto-Dominion Bank by around a high-teens percentage and to lower our Uncertainty Rating to Low from Medium. We continue to view assess shares as overvalued.
- The valuation increase is primarily driven by a reduction in our cost of equity assumption to 8.1% from 9.0%, reflecting an updated view of TD’s business mix and cyclicality. In addition, we expect to increase our near-term capital markets fee income forecast on the backdrop of strong year-to-date results.
- The Uncertainty Rating change reflects both qualitative and quantitative factors, including a more favorable assessment of TD’s domestic earnings quality.
