Key Morningstar Metrics for Toronto-Dominion Bank
- Fair Value Estimate: $C92.00
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: Medium
What We Thought of Toronto-Dominion Bank’s Earnings
Toronto-Dominion Bank TD reported solid earnings in line with our expectations, with net revenue increasing 2% to C$14 billion. Meanwhile, diluted earnings per share were flat at C$1.55, which translated to a return on equity of 10.1%.
Why it matters: Like its peers, the bank enjoyed strong results from its wealth management and global markets businesses due to higher market valuations and activity. This strength was offset by the bank’s US retail segment, which saw its net income drop 62%, or 15% on an adjusted basis.
- The bank’s US operations will likely remain a short-term headwind as the firm works to reduce its assets, reposition its portfolio, and invest in its governance and controls following its settlement with US regulators. Most of this activity should be completed by the end of 2025.
- Credit costs increased again, with provisioning rising to C$1.2 billion from C$1 billion. We expect credit deterioration to plateau in 2025 before improving in 2026, but this will depend on economic conditions.
The bottom line: We maintain our fair value estimate of C$92 per share. We see the shares as slightly undervalued at the current price, as the firm’s ongoing issues in the US have been too much of a headwind to its performance.
- However, the firm is facing heightened economic uncertainty due to the possibility of US tariffs and their potential impact on the Canadian economy. We highlight the recent increase in our Uncertainty Rating to Medium from Low.
- That said, the company is well-positioned for a worse economic environment, thanks to the sale of its 10.1% Schwab stake for C$21 billion, which bolstered its financial position. Moreover, the firm’s balance sheet was already in a strong position before the sale, with a common equity Tier 1 ratio of 13.1%.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.