TD's U.S. Inflection and AI-Powered Efficiency: Ahead of Every Target
The Quarter in Brief
TD delivered a strong Q2 2026, with EPS up 21% year-over-year and ROE of 14.4%, up over 200 basis points. As Ray Chun noted: “EPS was up 21% year-over-year and ROE was 14.4%, up over 200 basis points year-over-year.” — Raymond Chun, Chief Executive Officer · 2026-05-28 The bank is "ahead of schedule" on many Investor Day targets, particularly around structural cost reduction. Ray said: “We believe we're ahead of pace. We have momentum right across all of our lines of businesses.” — Raymond Chun, Chief Executive Officer · 2026-05-28 The Agentic AI program is a major driver: the bank has already delivered $145 million in value this year, and mortgage pre-adjudication time has dropped from 15 hours to 3 minutes.
U.S. Loan Growth Turns the Corner
The most notable inflection is in U.S. loan growth. Leo Salom highlighted:
This is earlier than the guidance given in August 2025 when Leo said: “I would expect that you'll still see from a headline standpoint that we'll see some contraction in the book through most of 2026 with an inflection point towards the end of the year.” — Leovigildo Salom, President and CEO, TD Bank, America's Most Convenient Bank · 2025-08-28 The acceleration is driven by core loan growth of 3% year-over-year, with bank card balances up 18% and account sales up 32%. Middle market lending commitments are up 17% year-over-year, signaling a sustainable rebound.On a spot basis, total loan growth this quarter versus last quarter was, in fact, positive. So that's the first quarter that we've seen that since we embarked on the balance sheet restructuring exercise.
Costs, Capital, and the Path to 16% ROE
AML remediation spend is shifting from implementation to validation and sustainability. Leo noted: “The composition of our AML remediation spend has begun to shift towards validation and sustainability costs as management implementation expenses have started to moderate on a quarter-over-quarter and year-over-year basis.” — Leo Salom, Group Head, U.S. Banking · 2026-05-28 This suggests the heavy lifting is done and costs will trend down in the second half. The bank reaffirmed its $500 million full-year AML guidance and its 3-4% enterprise expense growth target.
Capital deployment remains a highlight. CET1 came in at 14.3%, with a $7 billion buyback underway. This is consistent with Ray's earlier comment: “We are well on pace on our $2 billion to $2.5 billion expense takeout and the discipline and the structural cost reduction.” — Raymond Chun, CEO · 2026-02-26 The bank also raised its dividend by $0.04 to $1.12.
Credit quality remains benign, but the bank is building performing reserves to cushion against tariff and geopolitical risks. Ajai Bambawale said: “What I do expect is some pressure on PCLs because of 3 reasons: Trade and tariff actions, potential impacts of the Middle East war and the macro environment, particularly in Canada.” — Ajai Bambawale, Head of Credit Risk or similar senior credit role · 2026-05-28 Total PCL guidance of 40-50 bps is unchanged.
In contrast to the global frenzy around AI data centers, TD is quietly leveraging AI for internal efficiency, a less visible but highly accretive strategy. The ROE target of 16% looks increasingly achievable, with Ray suggesting it could arrive even faster than planned.