The Toronto-Dominion Bank

Good afternoon, everyone. Welcome to the TD Bank Group Q4 2023 Earnings Conference Call. I would 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 fourth 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 fourth quarter operating results. Ajay Bambuale, 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 Salaam, 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 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 2023 Annual Report. With that, let me turn the presentation over to Barrett.

Thank you, Brooke, and thank you everyone for joining us today. Before I begin, I want to say how saddened we are about recent events in the world and close to home. TD has contributed $1 million to support urgent humanitarian aid in Israel and Gaza, as well as to local organizations in North America that combat the rise of racism and hate. At TD, we stand against anti-Semitism and Islamophobia. For the past several days, it has been encouraging to see the release of some hostages and pause in the fighting. As this situation evolves and with the war in Ukraine now well into the second year, we hope and pray for peace. I also want to acknowledge our colleagues, customers, and neighbors impacted by the Lewiston shooting in Maine last month. TD contributed $200,000 to help those affected. We are the largest bank in the state We know that Mainers are resilient, and the bank will continue to support the community to overcome those painful events. Let's now turn to our fourth quarter earnings. Q4 was a mixed quarter for TD. While expenses were elevated and we saw weaker results in our wholesale banking segment, fundamentals remained strong across our retail businesses. Earnings were $3.5 billion, and EPS was $1.83. Revenue grew 8% year-over-year, reflecting margin expansion and loan volume growth, the contribution from TD Cowan, and the strength of our diversified business model. PCLs were higher as credit continued to normalize as expected. This quarter, expenses increased driven by variable compensation and the inclusion of TD Cowan. More generally, we recognize that the bank's cost base is higher than it should be. We're undertaking a broad-based restructuring program to deliver efficiencies and drive profitability across the enterprise. As Kelvin will describe in more detail, the program includes real estate optimization, asset impairments as we accelerate transitions to new platforms, and a 3% reduction in FTE through attrition and targeted actions to create capacity to invest for future growth and limit the impact on our people. While we are focused on expenses, we are pursuing meaningful revenue opportunities across our businesses. We outlined our strategies to accelerate growth in our Canadian retail businesses at our recent investor day, and the acquisition of TD Carbon provides additional capabilities for TD to grow its investment bank. In U.S. retail, our brand, footprint, and deep customer relationships provide a robust foundation for continued growth. As you'll hear from my colleagues, we are already executing on these opportunities across the bank. The bank's CET1 ratio was 14.4%, reflecting organic capital generation and the impact of almost 38 million common shares bought back during the quarter. With heightened uncertainty in the economy and the markets, TD is in a position of strength. We have the capacity to return capital to shareholders while continuing to invest to drive growth across our businesses. We remain confident in the earnings power of our franchise, and today I declared a $0.06 dividend increase, bringing our dividend to $1.02 per share. And last month, we introduced TD Invent, the bank's enterprise approach to innovation. This will build on our track record of innovations including the recently redesigned TD mobile app, which first launched in the U.S. and then in Canada this quarter. TD's digital strength continues to receive recognition, with Global Finance recently naming the bank the best consumer digital bank in North America for the third year in a row. We are also leveraging advanced technologies, including AI, and have been granted 55 patents relating to AI inventions since 2018. This quarter, our in-house AI team, Layer 6, won the annual ACM REXIS Challenge for the third time. Let me now turn to each of our businesses and review some highlights from Q4. In our Canadian personal and commercial banking segment, earnings were $1.7 billion, down 1% year-over-year, and PTPP was $2.7 billion, up 7% year-over-year. In a challenging environment, we saw strong momentum across our businesses with loans and deposits up 2% and 1% quarter-over-quarter, respectively, and NIM expansion of four basis points. In the personal bank, everyday banking delivered a record quarter for new-to-Canada accounts as TD continued to make progress towards our medium-term target of 50% growth in new-to-Canada acquisition outlined at our recent investor day. In credit cards, we delivered strong volumes in Q4 and record spend for the year. And Rewards Canada readers recognized TD with more awards in 2023 than all other card issuers combined, with the bank taking first place in four of seven categories. In real estate secured lending, the bank continued to deliver market share gains. And to help Canadians invest tax-free for a down payment on their first home, this quarter TD launched first home savings accounts. The business bank grew loans by 9% year-over-year. In small business banking, we are focused on helping clients refinance their SEBA loans in advance of the upcoming partial forgiveness deadline. And the bank continued to execute on its 1TD strategies, more than doubling the number of senior private bankers co-located in our commercial banking centers over the last two quarters. Turning to the U.S., U.S. retail bank earnings were $800 million U.S., down 17% year-over-year, and PTPP was $1.1 billion U.S., down 13% year-over-year. Expenses increased 6% year-over-year, reflecting higher legal and regulatory costs and continued investments in our franchise, and credit continued to normalize. However, we saw operating momentum with net interest income up 1% quarter-over-quarter, reflecting volume growth across loans and deposits, excluding sweeps, and a 7 basis point increase in NIM. With the contribution from our investment in Schwab of $146 million, segment earnings were $946 million. TD Bank, America's most convenient bank, is adding customers and deepening relationships. delivering peer-leading personal and business loan growth of 12% and 9% year-over-year, respectively. In commercial banking, middle market and specialty lending grew 22% and 12% year-over-year, respectively. In our U.S. bank card business, new accounts were up 45% year-over-year as our product suite continued to resonate with customers. And for the seventh year in a row, the bank ranked number one is small business administration lending in its Maine to Florida footprint and ranked number two in SBA loans nationally. TD continued to demonstrate resilience in deposits in a competitive environment with balances excluding sweeps up 1% quarter over quarter. The wealth management and insurance segment earned $501 million this quarter, down 3% year over year. Revenue growth of 9%, reflecting the strength of our diversified business model, was offset by increased claims due to inflation, auto thefts, and more severe weather-related events. In private investment advice, TD gained market share year-over-year and ranked number one among Canadian banks in net new asset growth as the bank makes progress towards our investor day targets. In TD Direct Investing, We launched TD Active Trader this quarter, the bank's completely redesigned platform for sophisticated active traders, offering leading capabilities unmatched in the marketplace. And TD Direct Investing was recently named the best Canadian brokerage by Benzinga, a leading financial media company. Finally, in insurance, we continue to increase market share amongst Canadian personal lines insurers year over year. It was a challenging quarter for the wholesale banking segment. Net income was $178 million, down 35% year-over-year, as higher revenues from equity commissions and underwriting and advisory fees were more than offset by investments to grow TD Cowan and our U.S. business. This quarter, we expanded our credit trading team and financial institutions group in the U.S., We also achieved a significant milestone in the integration of TD Securities and TD Cavan with the combination of our U.S. institutional equities and convertible businesses to deliver even better outcomes for our clients and strengthen our brand in U.S. equity markets. We are pleased with our integration to date and continue to pursue strategies to ensure our combined businesses and cost structure allows us to serve our clients optimally and drive profitability. For fiscal 2024, it will be challenging to meet our medium-term adjusted EPS growth and ROE objectives as the bank navigates a complex macroeconomic environment, expected further normalization in PCLs, and elevated expenses, including investments, to enhance the bank's risk and control infrastructure and accelerate growth. Despite these headwinds, the bank continues to deliver on its purpose to enrich the lives of our customers, communities, and colleagues. This quarter, we released the TD and Indigenous Communities in Canada 2023 report, which highlights the bank's collaborations with First Nation, Métis, and Inuit people and communities. We also opened a new branch in the province of Alberta on the lands of the Tsutina Nation, staffed entirely by indigenous peoples. In addition, the bank continued to focus on energy transition. Earlier this month, TD announced an agreement with 1.5 to purchase carbon dioxide removal credits from the direct air capture plant, subject to it becoming operational. This transaction will help drive innovative technology-based solutions to advance decarbonization goals for TD, and our clients. I want to end by thanking all our TD Bankers around the globe who live our purpose every day. Thank you for your many contributions in 2023 and I look forward to what we will achieve together in 2024. With that, I'll turn things over to Kelvin.