Dive Brief:

• TD will cut about 2% of its workforce as part of a broader restructuring it began during its fiscal second quarter, the Canadian lender said Thursday. 
• The Toronto-based bank, which has about 100,000 employees, expects to record between C$600 million and C$700 million ($432 million to $505 million) in restructuring charges over the next several quarters, CFO Kelvin Tran said Thursday, as the bank reported quarterly results for the period ending April 30. The effort is expected to generate C$100 million ($72 million) in savings for fiscal 2025.
• TD is also winding down a $3 billion portfolio tied to its U.S. point-of-sale financing business, which serves third-party retailers, as part of its effort to focus on core businesses, CEO Raymond Chun said.

Dive Insight:

TD, Canada’s second-largest bank, has been working to simplify its portfolio as part of a comprehensive strategic review kicked off last year, after the lender was hit with more than $3 billion in penalties and a $434 billion asset cap on its U.S. retail operations over deficiencies in its money laundering safeguards. 

TD is restructuring its balance sheet to reduce its U.S. retail assets by about 10% to comply with the asset cap. This year, TD has sold its entire investment in Charles Schwab and a $9 billion residential mortgage portfolio, both as part of the strategic review. 

In March, Chun said the bank was about two-thirds of the way through the strategic review, and executives were considering how best to restructure the bank’s cost base without jeopardizing required AML remediation work.

The restructuring program will shave costs through workforce and real estate optimization, asset write-off and business wind-down and exits, Tran said during Thursday’s call. “The impact is pretty broad based across the bank,” he said.

To shrink the workforce, “whenever possible, we will look to achieve this through attrition, and we will redeploy talent in areas where we are accelerating our capabilities,” Tran said. 

Restructuring efforts will free up funds to accelerate digital and AI investments, upgrade capabilities and scale relationship banking, said Chun, who took the helm of the bank in February. 

The POS financing business the bank has chosen to wind down “does not scale quite as well,” said U.S. CEO Leo Salom. Chun noted it involves “bespoke arrangements with each retailer, which impacts its profitability and scalability.” 

As TD considered what would be needed to transform that business, it “was going to be consumptive of significant investment resources, and at a time when we’re really thinking through where do we want to invest capital for the greatest return?” Salom told analysts.

Executives determined it would be more beneficial to reinvest capital into the bank’s proprietary bank card business, which, along with its co-brand cards business, remain priorities for the bank, he said.

Asked by an analyst if the bank is thinking of winding down any more businesses, Chun said TD executives “are looking at all of our options and going through all of our products, services and businesses,” and may have more to share at the bank’s next earnings call or its investor day Sept. 29. 

At the latter, TD executives plan to present “a clear direction for the bank’s future,” Chun said. 

The bank continues to expect AML costs to come in at US$500 million for fiscal 2025, and roughly the same in fiscal 2026, according to Salom. 

On the bank’s AML remediation efforts, Salom said TD continued to make enhancements to its transaction monitoring coverage and investigative practices. Specialized artificial intelligence is expected to be deployed next month to detect, isolate and automate the bank’s risk mitigation activities, he said. 

The bank also rolled out a streamlined workflow of its investigative practices, including updated procedures for analyzing customer activity, and is implementing risk reduction measures such as enhancements to its cash deposit requirements at its branches, Salom said. 

“Collectively, these measures will help us manage the bank’s financial crimes risk and coupled with our improved monitoring, enable us to detect, escalate and report potential activity of interest earlier and more effectively,” Salom said. 

The bank’s fiscal second quarter revenue jumped 66%, to C$22.9 billion ($16.5 billion), and it recorded a more than fourfold increase in its net income, to C$11.1 billion ($8 billion), largely due to the Schwab sale.