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
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.
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
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
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
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
(CAR), Leverage Requirements, and TLAC guidelines. Refer to the “Capital Position” section of this document for further details.
3
4
2025: $55,721 million, 2024: $50,142 million.
5
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 4
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
(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
~13%
Adj. ROE
6-8%
Y/Y Adj.
Growth
Positive
Adj.
Leverage
13%+
CET1 Ratio
Medium-Term (Fiscal Year 2029) Targets
~16%
Adj.
7-10%
Adj.
Positive
Adj.
Leverage
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
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
5
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 5
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
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
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)
2)
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)
system to provide unified data sets to help manage financial crime risk with a single view of the customer;
4)
5)
across all of U.S. Financial Crime Risk Management (FCRM);
6)
7)
subcommittee focused on reviewing and assessing new business products, services and geographies; and
8)
services.
Specifically in the fourth quarter of fiscal 2025, the Bank made the following progress:
1)
improve the accuracy and efficiency by which the Bank submits unusual transaction reports;
2)
U.S. BSA/AML program;
3)
4)
Going forward, the Bank’s focus will be on continuing to remediate and strengthen its U.S. BSA/AML program, including:
1)
2)
3)
4)
5)
advanced detection capabilities; and
6)
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)
2)
standardized processes across KYC, Customer Exits and investigative activities;
3)
4)
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)
investigations of identified FCRM risks;
2)
3)
4)
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
2025: ($205) million, 2024: ($242) million, reported in the Corporate segment.
2
i.
ii.
3
i.
ii.
other activities, reported in the Corporate segment.
4
i.
ii.
iii.
iv.
v.
vi.
vii.
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
segment:
i.
ii.
iii.
iv.
6
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
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
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 11
-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
document.
2
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
9
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TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 12
$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
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TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 13
$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
2
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
$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
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
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
document.
13
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
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
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
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
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
●
●
●
Business Banking
●
●
●
(including floor plan financing) for automotive dealers.
●
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
STRATEGIC OBJECTIVES, ACCOMPLISHMENTS AND PRIORITIES
BUSINESS STRATEGY
BUSINESS HIGHLIGHTS IN 2025
Deeper Relationships
●
●
●
–
–
–
–
●
accelerated growth in funded referrals and deeper relationships
●
–
the past 90 days
–
●
partnership with Amazon in Canada and a unique 6-month complimentary Uber One membership to eligible credit
cardholders
●
●
Bank to offer a tailored pre-approved solution
●
●
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
●
centers and branches
●
underwriting platforms, unlocking efficiencies
●
“Branch Service Excellence”
“Automated Telephone Banking Excellence” among the Big 5 Banks in the 2025 Ipsos Customer Service Index (CSI)
study
Disciplined Execution
●
●
TD Merchant Solutions clients while also streamlining operations, reducing costs, and boosting product penetration
●
workforce strategies as discussed in the section “Significant Events – Restructuring Charges”
15
16
17
18
Scotiabank (excluding The Toronto-Dominion Bank).
19
days.
20
21
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
23
24
25
26
27
28
October after fielding for the final quarter-ends in September.
29
Canada, and Scotiabank.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 23
KEY PRIORITIES FOR 2026
●
–
–
–
–
–
●
–
efficient, seamless, and personalized experiences for clients and colleagues
–
–
workload
–
–
●
–
–
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
2
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
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
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
-$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
●
channels.
●
●
national retailers.
●
Business Banking
●
specialty banking segments.
●
Wealth
●
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
document.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 25
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
●
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
●
delivering an enhanced relationship banking service and advice
●
Adoption (58%) and Self-Serve Transactions (85%), by providing clients a more holistic self-servicing experience to
expand store colleagues’ capacity to provide advice
●
Next Generation store (16% of total stores), with ~90% having dedicated Wealth space
●
US$77 million of OneTD fees in U.S. Retail Commercial Banking
●
●
Florida footprint for the 9th consecutive year
●
Lenders for 6th consecutive year in J.D. Power 2025 U.S. Dealer Financing Satisfaction Study
Simpler & Faster
●
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:
-
-
-
that are not profitable or aligned with the Bank’s core franchise
-
●
Restructuring Activities” section in this MD&A, generating a net interest income benefit of US$500 million pre-tax in
fiscal 2025
●
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
●
process for existing retail customers and Small Business Banking clients, and real-time debit card disputes
Disciplined Execution
●
Bank Secrecy Act/Anti-Money Laundering Program and Enterprise AML Program” section in this MD&A
●
stores, balance sheet, corporate real estate, workforce and vendor efficiencies as outlined in the “Significant Events –
Restructuring Charges” section in this MD&A
●
adjusted ROE growth of 180 bps in fiscal 2025
32
33
34
35
jdpower.com/awards for more details
36
SBA’s data for the units of loans approved during the period October 1, 2024 to September 30, 2025.
37
Satisfaction Study. Visit jdpower.com/awards for more details
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 26
KEY PRIORITIES FOR 2026
●
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.
●
-
capacity for store colleagues to provide advice, while upgrading store formats to the Next Generation design
-
Nordstrom partnership to gain servicing control and build out scalable capabilities to be a traditional co-brand partner of choice
-
distribution channels, and tailor investment products and services
-
agent positions, and partner with TD Securities to offer unique opportunities to Middle Market and Specialty segment clients
●
-
-
-
●
-
-
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
within the Bank’s control.
39
remaining loan portfolios are wound down.
40
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.
after-tax).
3
Adjusted non-interest income excludes the following item of note:
i.
US$170 million after-tax).
4
Adjusted non-interest expenses exclude the following items of note:
i.
ii.
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
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%
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
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
document.
43
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
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
$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
KEY PRODUCT GROUPS
Wealth Management
●
products through online, phone and mobile channels.
●
other Wealth businesses and the broader Bank.
●
products designed to provide attractive risk-adjusted returns.
Insurance
●
associations, post-secondary institutions such as universities and colleges, and employer groups.
●
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
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 30
STRATEGIC OBJECTIVES, ACCOMPLISHMENTS AND PRIORITIES
BUSINESS STRATEGY
BUSINESS HIGHLIGHTS IN 2025
Deeper Relationships
●
flows from Personal Banking to Wealth Management and within Wealth Management, and record flows from TD
Direct Investing to Advice
●
–
–
expand its institutional presence, winning new mandates domestically and globally
–
–
channel
–
Affinity market in Canada
●
and expanded Private Banking Direct and Financial Planning Direct, broadening clients’ access to specialist
capabilities
●
platforms:
–
consecutive year
–
Lipper Fund Awards
–
●
protect high-net-worth clients with travel, home and auto insurance products
●
Insurance Affinity market and leveraging these relationships to extend reach into valuable client segments
●
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
●
onboarded digitally
●
automatic authentication and reducing call times
●
calls referred to the Retail branch
●
–
–
–
–
●
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
●
and reward safe driving habits
Disciplined Execution
●
efficiency, productivity and reduced operational risk
●
●
catastrophe bond, providing additional sources of capital protection against losses from severe weather events
●
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
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
●
-
Business Banking to satisfy client needs holistically while adhering to the Bank Act (Canada)
-
-
Insurance’s marketing sophistication
●
-
capacity and improve productivity, and in insurance claims fraud detection to accelerate profitable growth
-
-
-
●
-
Insurance's low cost direct to consumer model
-
reduction while continuing to invest in risk and control infrastructure
-
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
2
3
4
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
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
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
$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
●
●
finance, cash management, investment portfolios, and related activities
●
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
document.
55
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 33
STRATEGIC OBJECTIVES, ACCOMPLISHMENTS AND PRIORITIES
BUSINESS STRATEGY
BUSINESS HIGHLIGHTS IN 2025
Deeper Relationships
●
client solutions
●
●
award recognitions and notable transactions:
-
innovative debt capital markets solutions for pre-capitalized securities
-
-
Convertibles
-
-
Canada, and Outstanding Use of Technology in Trade Finance – North America
-
bookrunner convertible offering in the U.S. since 2016
-
in 2025
-
bookrunner equity transaction in the mining sector
-
US$500 million bond offering
●
-
progressing the build for arranged financing and synthetic prime capabilities
-
-
-
voted #1 Overall Commodities Dealer by Energy Risk Commodities Rankings 2025
-
Communications Infrastructure in the 2025 U.S. Extel All-American Research Survey
-
Extel’s 2025 U.S. Corporate Access Survey (Buy-Side View)
Simpler & Faster
●
Corporate & Investment Banking leadership to create seamless client coverage
●
-
enhance client service
-
building automated onboarding tools
-
and services
●
systems to modernize operating platforms
Disciplined Execution
●
responsiveness by improving organizational alignment
●
adopted automation for testing and optimizing control inventory
●
●
estate, vendor and workforce strategy as outlined in the section “Significant Events – Restructuring Charges”
KEY PRIORITIES FOR 2026
●
-
-
with innovative, best-in-class products and solutions
-
-
the business to provide holistic cross product derivatives solutions for clients
●
-
-
●
-
management capabilities
-
and AI-driven efficiency gains
-
56
57
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 34
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.
document.
2.
($297 million after-tax).
3.
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
5
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, 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.
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.
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
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
document.
2
3
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
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
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
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
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
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
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
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
Other
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
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
2
3
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
3
4
5
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
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
2
3
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
2
Association master netting agreement.
3
4
5
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
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
3
, Financial Instruments: Recognition and Measurement
4
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
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
2
3
Credit cards are considered impaired when they are 90 days past due and written off at 180 days past due.
4
5
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
2
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
2
3
4
5
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
(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:
●
–
–
–
●
–
–
–
–
●
capitalization levels and provide a satisfactory return on shareholders’ equity.
●
unexpected loss or business growth).
●
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
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
3
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:
●
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.
●
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
●
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.
●
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.
●
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:
●
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.
●
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.
●
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
●
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
●
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)
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)
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
Statements.
2
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
a redemption price of $25.00 per Series 7 Preferred Share, for a total redemption cost of approximately $350 million.
4
Shares”), at a redemption price of $25.00 per Series 9 Preferred Share, for a total redemption cost of approximately $200 million.
5
6
details.
7
8
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
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
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
2
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.
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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,
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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.
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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
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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”.
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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:
●
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.
●
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.
●
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:
●
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
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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
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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.
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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.
2.
3.
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
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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:
●
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.
●
●
and compliant disclosure to regulators with respect to public disclosure, shareholders, and the market.
●
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.
●
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.
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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
●
services.
●
Bank’s customers, colleagues, and the Bank itself).
●
●
●
personal accountability.
●
controls.
●
●
includes monitoring and reporting on risk profile so that activities are within TD’s risk appetite and policies.
●
●
●
●
SECOND LINE
RISK OVERSIGHT
SET STANDARDS
AND CHALLENGE
●
●
where significant, documented, including:
-
-
-
-
-
and
-
●
●
●
●
●
independently of the business lines or operational management.
●
●
●
THIRD LINE
INTERNAL AUDIT
INDEPENDENT
ASSURANCE
●
●
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.
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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.
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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
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.
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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
to
%
Normal Risk
2
to
3
to
Medium Risk
4
to
5
to
High Risk
6
to
7
to
8
to
Default
9
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
2A to 2C
3A to 3C
Non-investment grade
4A to 4C
5A to 5C
Watch and classified
6 to 8
Impaired/default
9A to 9B
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
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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
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
% risk weight is applied
to equity holdings with the exception of speculative unlisted equities that receive a
% risk weight. Equity exposures to sovereigns and holdings made under
legislated programs continue to follow the OSFI prescribed risk weights of
%,
% or
%.
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
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
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)
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
products. GMR is computed as the threshold level that portfolio losses are not expected to exceed more than
one
one-day
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
ten-day
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
% 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
$
$
$
$
$
$
$
$
Credit spread risk
Equity risk
Foreign exchange risk
Commodity risk
Idiosyncratic debt specific risk
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)
1
2
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
$
(957 )
$
(1,558 )
$
(2,515 )
$
$
$
$
(2,489 )
$
(441 )
(419 )
(860 )
(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
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 $
increase of $
100 bps decrease in interest rates would have a positive impact to the Bank’s EVE of $
impact to the Bank’s NII of $
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.
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
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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:
●
●
●
●
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
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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
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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
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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
$
$
$
$
$
Obligations of government, federal agencies, public sector entities,
and multilateral development banks
2
Equities
Other debt securities
Other securities
Total Canadian dollar-denominated
Cash and central bank reserves
Obligations of government, federal agencies, public sector entities,
and multilateral development banks
Equities
Other debt securities
Other securities
Total non-Canadian dollar-denominated
Total
$
$
$
$
$
October 31, 2024
Total Canadian dollar-denominated
Total non-Canadian dollar-denominated
Total
$
$
$
$
$
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
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)
$
$
Bank subsidiaries
Foreign branches
Total
$
$
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
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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
liquid assets.
2
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
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
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
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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
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
3
4
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
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
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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
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
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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
2
positions, open maturity positions, non-HQLA equities, and physical traded commodities.
3
4
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
% (October 31, 2024 –
%) 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
$
$
Non-personal
Total
$
$
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
2
3
including debt with an original term-to-maturity of less than 400 days.
4
regime (October 31, 2024 – $4.4 billion).
5
6
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
$
$
$
$
$
$
$
$
$
$
Interest-bearing deposits with banks
Trading loans, securities, and other
1
Non-trading financial assets at fair value through
profit or loss
Derivatives
Financial assets designated at fair value through
profit or loss
Financial assets at fair value through other comprehensive
income
Debt securities at amortized cost, net of allowance
for credit losses
(1 )
Securities purchased under reverse repurchase
agreements
2
Loans
Residential mortgages
Consumer instalment and other personal
Credit card
Business and government
Total loans
Allowance for loan losses
(8,689 )
(8,689 )
Loans, net of allowance for loan losses
Goodwill
3
Other intangibles
3
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
3
Deferred tax assets
Amounts receivable from brokers, dealers, and clients
Other assets
Total assets
$
$
$
$
$
$
$
$
$
$
Liabilities
Trading deposits
$
$
$
$
$
$
$
$
$
$
Derivatives
Securitization liabilities at fair value
Financial liabilities designated at
fair value through profit or loss
Deposits
4,5
Personal
Banks
Business and government
Total deposits
Obligations related to securities sold short
1
Obligations related to securities sold under repurchase
agreements
2
Securitization liabilities at amortized cost
Amounts payable to brokers, dealers, and clients
Insurance-related liabilities
Other liabilities
Subordinated notes and debentures
Equity
Total liabilities and equity
$
$
$
$
$
$
$
$
$
$
Off-balance sheet commitments
Credit and liquidity commitments
6,7
$
$
$
$
$
$
$
$
$
$
Other commitments
8
Unconsolidated structured entity commitments
Total off-balance sheet commitments
$
$
$
$
$
$
$
$
$
$
1
Amount has been recorded according to the remaining contractual maturity of the underlying security.
2
3
4
5
months to 1 year’ $
6
7
8
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
$
$
$
$
$
$
$
$
$
$
Interest-bearing deposits with banks
Trading loans, securities, and other
1
Non-trading financial assets at fair value through
profit or loss
Derivatives
Financial assets designated at fair value through
profit or loss
Financial assets at fair value through other comprehensive
income
Debt securities at amortized cost, net of allowance
for credit losses
(3 )
Securities purchased under reverse repurchase
agreements
2
Loans
Residential mortgages
Consumer instalment and other personal
Credit card
Business and government
Total loans
Allowance for loan losses
(8,094 )
(8,094 )
Loans, net of allowance for loan losses
Investment in Schwab
Goodwill
3
Other intangibles
3
Land, buildings, equipment, other depreciable
assets, and right-of-use assets
3
Deferred tax assets
Amounts receivable from brokers, dealers, and clients
Other assets
Total assets
$
$
$
$
$
$
$
$
$
$
Liabilities
Trading deposits
$
$
$
$
$
$
$
$
$
$
Derivatives
Securitization liabilities at fair value
Financial liabilities designated at
fair value through profit or loss
Deposits
4,5
Personal
Banks
Business and government
Total deposits
Obligations related to securities sold short
1
Obligations related to securities sold under repurchase
agreements
2
Securitization liabilities at amortized cost
Amounts payable to brokers, dealers, and clients
Insurance-related liabilities
Other liabilities
Subordinated notes and debentures
Equity
Total liabilities and equity
$
$
$
$
$
$
$
$
$
$
Off-balance sheet commitments
Credit and liquidity commitments
6,7
$
$
$
$
$
$
$
$
$
$
Other commitments
8
Unconsolidated structured entity commitments
Total off-balance sheet commitments
$
$
$
$
$
$
$
$
$
$
1
Amount has been recorded according to the remaining contractual maturity of the underlying security.
2
3
4
5
2 years’, $
6
7
8
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.
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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.
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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.
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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.
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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:
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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:
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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.
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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
Presentation of
Financial Statements
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
Insurance Contracts
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
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
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
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
2
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
2
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
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
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
TD BANK GROUP • 2025 ANNUAL REPORT • MANAGEMENT’S DISCUSSION AND ANALYSIS
Page 113
GLOSSARY
Financial and Banking Terms
Adjusted Results:
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:
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:
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):
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):
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):
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):
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:
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):
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):
100 basis points.
Book Value per Share:
shareholders’ equity by number of common shares at the end of the period.
Carrying Value:
Consolidated Balance Sheet.
Catastrophe Claims:
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):
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):
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:
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:
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:
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):
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):
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:
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:
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:
one party to the contract to buy and the other party to sell an asset for a fixed
price at a future date.
Futures:
price on a specified future date.
Hedging:
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:
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):
incur when a borrower defaults on a loan, which is expressed as a percentage
of exposure at default.
Mark-to-Market (MTM):
balance sheet date for financial instruments that are carried at fair value.
Master Netting Agreements:
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:
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:
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:
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:
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):
to meet its scheduled repayments.
Provision for Credit Losses (PCL):
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):
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):
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
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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:
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):
financial asset that are consistent with a basic lending arrangement.
Swaps:
payment obligations and currencies on a notional principal for a specified period
of time.
Tangible common equity (TCE):
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):
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:
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:
Capital. Total Capital ratio is calculated as Total Capital divided by RWA.
Total Shareholder Return (TSR):
TD’s common shares. The return measures the change in shareholder value,
assuming dividends paid are reinvested in additional shares.
Trading-Related Revenue:
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):
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.