Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Key Morningstar Metrics for Toronto-Dominion Bank
- Fair Value Estimate: C$93.00
- 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 fiscal second-quarter results that were basically in line with our expectations. Adjusted EPS came in at C$1.97, down 3% from a year ago. That said, investors should be aware that the trajectory of the Canadian economy still has heightened uncertainty related to tariffs.
Why it matters: TD Bank is still going through US retail balance sheet restructuring and optimization efforts, with the segment posting a 23% decline in adjusted net income from a year ago. Wealth and insurance segment earnings were up 14%, helping overall bank results.
- Total provisioning was up 11% sequentially to C$1.3 billion, largely driven by a C$399 million increase in performing provisioning related to tariffs. The bank also slightly increased its loan loss allowance coverage ratio to 1.01% of loans, compared with 0.99% in the last quarter.
- TD maintained its guidance for total provisioning of 45-55 basis points of loans for 2025, but also noted the tariff uncertainty could lead to higher credit costs above the current guidance range.
The bottom line: We maintain our C$93 per share fair value estimate for wide-moat TD Bank, and we view shares as fairly valued. Our Medium Uncertainty Rating for the bank reflects the heightened uncertainty in the Canadian economy related to tariffs.
- Valuations for the Canadian bank have largely recovered from April lows after some deescalation in tariffs, particularly between the United States and China.
- We still think the Canadian economy has significant uncertainty, with negotiations for the United States-Mexico-Canada Agreement ongoing. Non-USMCA-compliant goods already face significantly higher tariff rates.
Coming up: The bank announced another restructuring program, expecting to incur costs of C$600 million-C$700 million the next several quarters, which is expected to deliver annual savings of C$550 million-C$650 million. The bank expects to reduce its total workforce headcount by 2%.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.