The Toronto-Dominion Bank

Good afternoon, everyone, and welcome to the TD Bank Group Q2 2023 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 second quarter 2023 investor presentation. Many of us are joining today's meeting from lands across North America. North America is known as Turtle Island by many Indigenous communities. I am currently situated in Toronto. As such, I would like to begin today's meeting by acknowledging that I am on the traditional territory of many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa, the Haudenosaunee, and the Wendat peoples, and is now home to many diverse nations, Métis, and Inuit peoples. We also acknowledge that Toronto is covered by Treaty 13, signed with the Mississaugas of the Credit, and the Williams Treaties, signed with multiple Mississaugas and Chippewa bands. 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 second quarter operating results. Ajay Bambawale, 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, Barbara Hooper, Group Head, Canadian Business Banking, Raymond Chun, Group Head, Wealth Management and Insurance. Leo Salam, President and CEO, TD Bank, America's Most Convenient Bank. And Riaz 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 provided 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 Q2 2023 report to shareholders. With that, let me turn the presentation over to Barrett.

Thank you, Brooke, and thank you everyone for joining us today. To start, I want to express that our thoughts are with Albertans in light of the devastating fires. TD has mobilized to provide assistance to impacted customers and colleagues. The bank has also contributed directly to relief efforts and enabled customers to do so as well through branches, phone, and online. In addition, before I review our second quarter, I'd like to provide a few comments on our joint announcement with First Horizon earlier this month. While we are not at liberty to address confidential discussions with our regulators, we are confident the mutual termination was the right decision given the uncertainty in timing of regulatory approvals. This decision provides clarity to our colleagues, our customers, and to you, our shareholders. I want to thank Brian Jordan, First Horizon's President and CEO, and esteem for their partnership and wish them great future success. Now let me turn to the future of our U.S. business. TD Bank, America's most convenient bank, is well capitalized with a stable deposit base and deep customer relationships. We've built a brand that is second to none and the best team in banking. A business model and footprint provide a robust foundation for continued growth. and we are already executing on significant opportunities. TD is strong, resilient, and well-positioned to build on our momentum in the months and years ahead. Let me now turn to our results. Q2 was a good quarter for TD. Earnings were $3.8 billion and EPS was $1.94. There were many moving parts this quarter. with strength in our retail businesses, while wholesale banking was impacted by challenging market conditions. Revenue grew 14% year-over-year, driven by margin expansion. This was offset by higher provision for credit losses and increased expenses, reflecting the inclusion of Cowan, investments in colleagues and business growth, and the impact of foreign exchange. PTPP was over 6% year-over-year, as CD's business fundamentals remain strong. Our longstanding strategic focus on gathering core deposits across our North American franchise continues to be a significant competitive advantage, particularly in the current operating environment, amid increased competition for deposits. And as expected, we saw some credit normalization this quarter, but credit performance remains robust. The bank's CET1 ratio was 15.3%, reflecting organic capital generation offset by the impact of the carbon acquisition. Beginning with the dividend declared today, we have decided to remove the discount to the shares issued under our dividend reinvestment plan. And to offset the discounted shares issued under the DRIP, today we announce our intention to repurchase up to 30 million common shares for cancellation subject to regulatory approval. Depending on market conditions, we expect to complete this share buyback by the end of the summer, at which point we will assess the opportunity for further buybacks. We have a strong capital position, which provides flexibility in an uncertain operating environment. We are pleased to be able to return capital to shareholders while simultaneously accelerating investments to drive profitable growth across attractive opportunities. For example, in the U.S., We're increasing new store openings by 50% and doubling wealth advisor hiring. In Canada, we are expanding hiring of frontline and specialist advisors and accelerating investment to upgrade platforms and enhance digital and mobile capabilities across our businesses. You will hear more about these strategic growth initiatives in the weeks and months to come. Turning to our Canadian personal and commercial banking segment, We delivered earnings of $1.6 billion, reflecting revenue growth of 11% and significant positive operating leverage. In the personal bank, we saw robust growth in everyday banking with sales up 28% year-over-year. And to help build confidence for newcomers to Canada, we enhanced our online appointment booking capabilities to enable customers to book appointments in their preferred language. The bank delivered industry-leading market share gains in core deposits, putting TD's market share at almost 26%. In credit cards, we saw record organic Q2 loan growth of 14% year-over-year and the highest quarter ever for active accounts and digital acquisition. TD recently launched an exclusive Canadian bank offer with Uber, adding to the list of leading global consumer brands that partner with TD, including Air Canada, Amazon, Expedia, and Starbucks. In real estate secured lending, we saw strong sequential volume growth. Our teams also delivered the highest quarterly retention rates since 2008. The business bank achieved double-digit loan growth for the seventh consecutive quarters. In the first phase of a multi-year initiative to modernize our customer and credit platforms, almost 3,000 business bankers across our footprint began using a new relationship management tool that will lead to improved customer experience and increased efficiency. NTD Auto Finance was ranked the highest in dealer satisfaction among non-captive, non-prime lenders with retail credit, for the sixth year in a row in the J.D. Power 2023 Canada Dealer Financing Satisfaction Study. Turning to the U.S., a U.S. retail bank delivered another strong quarter with earnings of $944 million U.S., up 23% year-over-year, reflecting revenue growth of 24% and record positive operating leverage. With the contribution from our investment in Schwab of 185 million U.S. dollars, segment earnings were U.S. 1.1 billion U.S. dollars. We saw robust loan growth again this quarter, with personal loans and business loans up 12% and 9% respectively year over year. TD also has strong momentum in customer acquisition, with new business checking accounts up 29% year over year. We continue to invest in our U.S. credit card business, where we have significant opportunity to expand our lending footprint and deepen relationships with existing deposit customers. Earlier this month, we launched TD Clear and TD FlexPay, innovative new cards that offer compelling value propositions to accelerate TD's growth in the market. The bank also enhanced benefits to the popular TD Cash and Double Up credit cards, and made significant advancements in our card servicing and digital capabilities. These investments are supported by TD's recent renewal of its agreements with Visa in Canada and the United States. Further driving organic growth, TD Bank, America's most convenient bank, has an ambitious plan to open 150 new stores by 2027. We're on track to open a total of 18 stores in 2023, with five already up and running. Earlier this month, we were excited to open our first store in Charlotte, North Carolina. When TD entered each of New York City, Philadelphia, Boston, and Miami, we meaningfully outgrew peers, and I'm confident that we will have the same success in Charlotte. Today, nearly 80% of TD's deposits are in the MSAs where we have a top three position as customers respond to our model by entrusting us with more of their business. and the bank continues to receive recognition for its unique and inclusive culture. In April, TD was once again named one of America's best employers for diversity by Forbes, moving up to number two spot out of 500 companies ranked. In wealth management and insurance, we earned $563 million this quarter. Revenue was up 2% year over year, reflecting the strength of our diversified business model as higher insurance volumes and the benefit of higher interest rates helped offset the impacts of trading normalization and market volatility. TD Direct Invest continued to widen the gap to peers with gross new accounts and trading market share increasing year over year. And we rolled out a series of enhancements to TD EasyTrade, adding streamlined access to ready-made TD one-click ETF portfolios, and more self-service capabilities. TD Asset Management widened its lead versus competitors as the number one Canadian institutional asset manager and the number one money manager for Canadian pension assets. TD Asset Management also led the banking industry in long-term mutual fund sales in the quarter and leverages brought product shelf to grow ETF market share. In advice, We continue to invest for future growth, adding over 500 advice professionals in the past year. And on the insurance side, we launched small business insurance this quarter. A direct-to-consumer offering is resonating with customers, and TD is uniquely positioned to satisfy this unmet need in the marketplace. We are Canada's number one direct insurer, and building on our digital leadership with almost one in four new sales across our insurance business, completed online from end to end this quarter. In wholesale banking, we delivered a net income of $213 million. Despite weaker market conditions, revenues were up 13% year over year, driven by the carbon acquisition and growth in transaction banking and lending. This was more than offset by an increase in expenses reflecting the carbon acquisition and the impact of investments in colleagues made throughout the year. The dealer has added almost 100 new corporate lending relationships over the past year, extending approximately $34 billion in additional loan commitments across a diversified range of industries. TD Securities was proud to be one of three banks shortlisted by Global Trade Review for the top North American leaders in trade award for its trade finance offering. And our integration with Cowen is well underway. In fact, Only one day after closing, TD Cowen acted as bookrunner on its first equity offering. And since then, TD Cowen has bookrun 13 equity offerings totaling $3.5 billion. This is just the beginning as we leverage our new capabilities in U.S. equities and extend our competitive advantage. I'm excited to welcome our Cowen colleagues once again and for all that we will accomplish together. Halfway through the year, much has shifted. With the mutual termination of the First Horizon Agreement and deterioration in the macroeconomic environment, we do not expect the bank to deliver adjusted EPS growth in the 7% to 10% medium-term target range in 2023. Despite the difficult operating environment, TD continues to deliver for all of its stakeholders and reimagine financial services to shape the future of banking. I hope you will join us for TD's Investor Day on June 8th, where we will provide more details on the bank's strategy and growth plans with a focus on our Canadian retail businesses. We will hold a subsequent Investor Day to highlight our U.S. and wholesale businesses. TD is forward-focused and purpose-driven, and our TD bankers around the globe bring that vision to life every day. I will close by thanking them for all they do to make TD the better bank. With that, I'll turn things over to Kelvin.