Toronto-Dominion Bank is expecting to cut about two per cent of its workforce as part of a new restructuring program it initiated in the second quarter this year.
The goal is to “reduce its cost base and achieve greater efficiency,” the bank, which employs about 100,000 workers, said in a statement on Thursday as it released its second-quarter results.
“We will look to achieve this through attrition, and we will redeploy talent in areas where we are accelerating our capabilities through this restructuring program,” chief financial officer Kelvin Tran said on a conference call with analysts.
The bank incurred $163 million pre-tax in restructuring charges, primarily due to “real estate optimization, employee severance and other personnel-related costs, and asset impairment and other rationalization, including certain business wind-downs,” it said.
Overall, TD expects to incur $600 million to $700 million in restructuring charges before tax during the next several quarters. The move will generate savings of about $100 million pre-tax in fiscal 2025 and annual savings of up to $650 million going forward, the bank said.
TD announced the move as it reported slightly lower second-quarter profits due to higher provisions for credit losses amid an uncertain economy impacted by tariffs. However, it still topped analysts’ expectations.
Its net income for the three months ending April 30 was $11.1 billion, compared to $2.5 billion during the same period a year ago, resulting in net earnings per share of $6.27. The 334 per cent increase reflects the bank’s sale of its remaining equity investment in Charles Schwab Corp. earlier this year.
But TD’s adjusted net income — which removes the impact of non-recurring items — was $3.6 billion, compared to $3.78 billion a year ago, resulting in adjusted earnings per share of $1.97, topping analysts’ expectations of about $1.75 per share.
Chief executive Raymond Chun said TD’s results were strong, but acknowledged the current economic environment was uncertain.
“There continues to be a high degree of macroeconomic and policy uncertainty. This has made it difficult for businesses to make long-term decisions and created economic distortions such as inventory stockpiling and purchases being pulled forward to avoid tariffs,” he said on the call. “This fluid environment has also driven volatility in capital markets and created angst for some households.”
Chen referenced the slowing housing activity and the softening job market in Canada, but also said he was encouraged that the federal government is working towards eliminating interprovincial trade barriers and taking other steps to boost the economy.
TD is the first of Canada’s six biggest banks to release its second-quarter results. Their earnings are often considered a signpost for how the country’s economy is doing, but this is the first time the tariffs imposed by the United States on an array of Canadian exports will have an effect. The levies were imposed on March 4 and the Big Six earnings cover the three-month period ending April 30.
As a result, analysts are keeping an eye on the amount of money the banks keep aside to tackle loans that may potentially go bad, also known as provisions for credit losses (PCLs), which are a key credit metric for measuring the health of a bank’s loan book as well as the ability of households and businesses to pay their debts.
TD increased its PCLs to $1.3 billion, up from about $1.2 billion in the previous quarter and about $1 billion a year ago. This increase was lower than what analysts expected.
“With lower-than-forecast provisions helping with the beat, we question whether the market will see the allowance build as sufficient,” Jefferies Inc. analyst John Aiken said in a note on Thursday.
Despite the overall increase in PCLs, the bank’s provision for impaired loans — or loans that are more likely to go bad — declined to $946 million in the second quarter, compared to $1.2 billion in the previous quarter. Its provisions for performing loans — or those less likely to default — increased to $395 million compared to a recovery of $4 million in the first quarter.
The increase in performing loan provisions reflects the “macro environment, more specifically, the tariff uncertainty,” Tran said in an interview. “We have taken that into account in assessing our reserve and that’s why we built it.
He said the fate of these reserves will depend on the health of the Canadian economy, which is likely to be impacted by the ongoing tariff saga.
“People are still negotiating through the tariffs, so it depends on the outcome,” he said. “We are seeing customers pausing in the wait-and-see mode and deferring some long-term decisions or shifting purchasing behaviours.”
The bank’s net income from its Canadian personal and commercial segment declined by four per cent to about $1.66 billion as a result of the higher provisions and non-interest expenses, TD said.
Canada’s second-largest bank has undergone a series of changes since it was fined $3.1 billion and ordered by U.S. regulators to cap the expansion of its retail banking business in that country last year for failing to prevent money laundering at its branches there.
Leo Salom, who heads TD in the U.S., said the bank has made progress with regard to the remediation of its anti-money laundering program.
“Work is progressing on the use of specialized AI to detect, isolate and automate our risk-mitigation activities, and teams are continuing to work on the implementation of the machine learning tools, with these capabilities expected to come online next month,” he said.
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