The Toronto-Dominion Bank

Good afternoon, everyone, and welcome to the TD Bank Group Q1 2022 earnings conference call. I would now like to turn the meeting over to Ms. Brooke Hales. Please go ahead, Ms. Hales.

Thank you, Operator. Good afternoon, and welcome to TD Bank Group's first quarter 2022 investor presentation. We will begin today's presentation with remarks from Barrett Mizrani, the bank's CEO, after which Kelvin Tran, the bank's CFO, will present our first quarter operating results. Ajay Bambawali, Chief Risk Officer, will then offer comments on credit quality, after which we will invite questions from pre-qualified analysts and investors on the phone. Also present today to answer your questions are Michael Rhodes, Group Head, Canadian Personal Banking, Paul Douglas, Group Head, Canadian Business Banking, Raymond Chun, Group Head, Wealth and Insurance, Leo Salam, President and CEO, TD Bank, America's Most Convenient Bank, and Riyaz Ahmed, Group Head, Wholesale Banking. please turn to slide two. At this time, I would like to caution our listeners that this presentation contains forward-looking statements, that there are risks that actual results could differ materially from what is discussed, and that certain material factors or assumptions were applied in making these forward-looking statements. Any forward-looking statements contained in this presentation represent the views of management 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. Forward-looking statements may not be appropriate for other purposes. I would also like to remind listeners that the bank uses non-GAAP financial measures, such as adjusted results, to assess each of its businesses and to measure overall bank performance. The bank believes that adjusted results provide readers with a better understanding of how management views the bank's performance. Barrett will be referring to adjusted results in his remarks. Additional information on items of note, the bank's use of non-GAAP and other financial measures, the bank's reported results, and factors and assumptions related to forward-looking information are all available in our Q1 2022 report to shareholders. With that, let me turn the presentation over to Barrett.

Thank you, Brooke, and thank you, everyone, for joining us today. I'd like to welcome Michael Rhodes, Group Head, Canadian Personal Banking, and Leo Salam, President and CEO of TD Bank, America's most convenient bank, who are joining us for the first time. We're also including two additional participants on the call beginning this quarter, Paul Douglas, who leads Canadian business banking, and Ray Chun, who leads wealth and insurance. They are here to answer more specific questions you may have about their businesses and results. Before we review the quarter, I want to once again express to all Ukrainians around the world and across our footprints our sincere hope that the violence will come to an end as soon as possible. To help support humanitarian efforts, we have donated more than a quarter million dollars to agencies who are on the ground providing urgent care to the people of Ukraine. TD customers can make donations to the Canadian Red Cross in our branches in Canada, and soon to the American Red Cross in our U.S. stores. Together, our collective efforts can make a real difference. Let me now turn to our first quarter performance. Q1 was a great quarter for TD. Earnings were $3.8 billion, and EPS was $2.08, up 13% and 14% respectively from the first quarter of last year. Revenue increased across our retail and wholesale segments as customers and clients brought us more of their business, and PCL remained low, reflecting good credit performance against the backdrop of of an improving economic outlook. Reflecting these strong results, our CET1 ratio ended the quarter at 15.2%, including a 17 basis point impact from the repurchase of 7.5 million common shares during the quarter. Our proven business model, anchored by our diversified business mix, North American scale, and risk discipline, has enabled us to continue to invest in transforming the bank for the digital age. This quarter, we announced an acceleration of our strategy to establish an enterprise-level data platform on Microsoft Azure. This initiative to modernize our data infrastructure, which includes a multi-year agreement with Databricks to unlock data at scale, will further enhance our analytical capabilities and deliver richer insights, driving better customer experiences and enabling colleagues to collaborate with more agility across the bank. We're also investing in our colleagues, building on our brand as an employer of choice for top technology talent. We are hiring more than 2,000 technology roles in 2022 to drive investments that will help power the future of banking with a focus on skills in cloud, machine learning, and automation. As we continue to evolve the colleague and customer experience, growing and empowering skilled technology talent will remain a cornerstone cornerstone of our forward-focused strategy. Let me now turn to each of our businesses and review some highlights from Q1. Our Canadian retail segment earned $2.3 billion, delivering record revenue and earnings. The personal bank had a strong quarter. In our real estate secured lending business, we have been encouraged by the early response to the introduction of our popular FlexLine hybrid lending product, into the broker channel in January. Our cards business is performing very well. Balances rose year-over-year for the first time since Q1 2020, and card retail sales were up 23% year-over-year. Our customers are highly engaged with our loyalty programs, including our Amazon shop with points offer, where we've seen approximately 2 million redemptions to date. Even as we continued to grow personal deposits, we took market share in mutual funds as we leveraged our OneTD strategy to help more Canadians meet their long-term investing goals. And we strengthened our New to Canada offering, bundling a digitally convenient way to send money to over 200 countries via our award-winning TD Global Transfer Service. Since launch, we have seen increased customer acquisition and volume growth, with over 200,000 customers conducting more than 1.8 million transfers to date. It was also a very strong quarter for the business bank, with double-digit growth in both loans and deposits. In our wealth business, revenue increased 7%, as strong net asset growth and mutual fund sales helped offset a moderation in direct investing trading volumes. Our web broker platform again took top spot among Canadian banks in the Globe and Mail, annual ranking of digital brokers, and we are excited to have extended those capabilities into a fully mobile environment with the launch of the TD EasyTrade app this quarter. We have seen strong take-up of the app, which is designed to make investing simpler for new and emerging investors. Turning to the U.S., a U.S. retail bank earned $806 million in Q1, an increase of 31% year-over-year. Commercial loan origination volumes improved with mid-single-digit growth in middle market, offset by continued PPP runoff and lower commercial real estate exposures. Line of credit utilization rates also increased modestly quarter over quarter. This quarter, we piloted a next-generation digital platform for U.S. commercial clients, providing them with an end-to-end view of their relationship with TD, including access to treasury applications, and the ability to transact across products. We also announced additional enhancements to our overdraft policies. These build on the changes we introduced last August, including the launch of TD Essential Banking, a low-cost deposit account designed to meet the needs of unbanked or underbanked households. The latest enhancements are intended to help customers better manage their accounts and make informed financial choices. And we continue to see good take-up of our Double Up credit card. Double Up has become a primary driver of new bank card accounts for U.S. retail banks, with almost 100,000 accounts added to date since its launch last spring. And with the contribution from our investment in Schwab of U.S. $200 million, a U.S. retail segment earnings were $1 billion this quarter. Let me turn briefly to our announcement this week of the agreement to acquire First Horizon, headquartered in Memphis, Tennessee. I was in Tennessee this week meeting with First Horizon associates, and I was incredibly impressed with the talented people I met with their passion for their customers and communities. Regarding our U.S. aspirations, for years I've been sharing on these calls and elsewhere that one of our goals is to expand in the fast-growing southeast of the United States. This week, we delivered on that promise with the announcement of our agreement to acquire First Horizon. Upon closing, we will achieve leadership positions in key markets, strengthen our presence in states such as Florida and the Carolinas, and gain footholds in the large Georgia and Texas markets. And as you heard on Monday, First Horizon's banking centers are located in markets whose populations are projected to grow 50% faster than the U.S. national average. First Horizon is a fantastic bank, customer-centric, deeply committed to the communities in which they operate, and focused on growth, just like TD. With this acquisition, we extend our reach, acquire new commercial and specialty banking capabilities, add over 400 branches, and expand to serve 1.1 million more customers. And as we said on Monday, we expect to achieve $610 million U.S. in annual cost synergies. The main drivers of these savings are expected to be technology and vendor costs as we reach the benefit of scale across our platforms and vendor relationships and corporate real estate. With overall bank costs across the industry migrating to the center of and away from the branch network over the past few years, the benefits of consolidation are increasingly achievable in market-adjacent deals without significant impacts to the front line. As outlined in our First Horizon investor presentation, this transaction is expected to deliver 10% plus fully synergized adjusted EPS accretion in fiscal 2023, and the deal is immediately accreted to adjusted EPS at closing. This transaction is strategically compelling, financially attractive, within our risk appetite, and culturally aligned. First Horizon is a terrific fit for TD and will enable us to further accelerate our growth in the U.S. Let me now return to our Q1 results. In wholesale banking, earnings were $434 million this quarter. Business activity and markets remained robust, resulting in strong revenue performance and continued lower PCL. Our U.S. dollar strategy and investments continue to bear fruit and have contributed significantly to the revenue growth over the last three years. In addition, TD Securities won several key mandates in the quarter. In Canada, we acted as joint lead book runner on Nestle's inaugural Canadian dollar offering, a successful $2 billion issuance. TD Securities continued to demonstrate its advisory and financing capabilities in the sustainable finance space, acting as advisor to Clearway Energy on its $1.9 billion U.S. sale of Clearway Community Energy to KKR. Further reflecting our commitment to embed ESG principles across our business, this quarter TD Securities' debt capital markets team partnered with a syndicate of underwriters, the majority of which were diverse-owned businesses to lead a $500 million U.S. dollar green bond offering by TD Bank. This offering was the first time that a syndicate group for a Canadian bank offering, bond offering, included minority women and veteran-owned businesses as active joint book runners. And this was just one of the deals making up a record quarter for our debt capital markets team in financial institutions, which participated in underwriting almost $40 billion of investment-grade debt for the sector. Overall, as I reflect on our performance this quarter, I'm pleased with our strong start to fiscal 2022 and encouraged by the momentum in our businesses. It's been two years since the COVID-19 pandemic transformed the way we work and live. While there are still challenges ahead, including inflation, labor market, and supply chain pressures, and serious geopolitical tensions, macroeconomic conditions remain positive as we evolve our approach to COVID-19 and economies recover. With the strength of our business model and balance sheet, we remain well positioned to continue executing on our growth strategies. At the same time, we know the impact of the pandemic has not been evenly distributed. In particular, it has disrupted education across North America and the transition to alternative ways of teaching has created challenges for both students and teachers due to uneven implementation and unequal access to technology. That's why the focus of the 2021 TD Ready Challenge was on supporting innovative solutions to address predicted learning loss in math and reading for disproportionately impacted students in grades K to 12. This quarter, we were pleased to announce $10 million in grants to 15 organizations to help them develop innovative solutions to address these inequities. We're also promoting equitable and inclusive innovation through TD Labs' new Equity, Diversity, and Inclusion Resource Hub, a platform to support the inclusion of the unique perspectives and experiences of different community groups into the development, design, and build of our products and services. This platform has been piloted with success, and we look forward to leveraging it more broadly. We also continue to focus on inclusion and diversity across the bank, most recently through a series of well-attended Black History Month events and initiatives. CD's commitment to diversity and inclusion and environmental, social, and governance initiatives more broadly continues to receive recognition. This quarter, We were proud to be recognized with an S&P Global Silver Class Distinction in the 2022 S&P Global Sustainability Yearbook, one of the most comprehensive annual publications on the state of corporate responsibility, the only North American bank to carry the S&P Global Gold or Silver Class Distinctions. Our strategy is centered on our vision, purpose, and shared commitments. And I'd like to thank our 90,000 bankers across the globe who bring those commitments to life every day. Their hard work, dedication, and strong performance sustains and strengthens our winning culture. With that, I'll turn things over to Kelvin.