Toronto Dominion Bank Scotiabank’s 27th Annual Financials Summit
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Up on stage. Just want to introduce Ray Chun, Chief Executive Officer of TD Bank.
Welcome, Ray. Thanks, Mike. Thanks for having me.
Great to see you again. Maybe we could sort of start with the quarter. Obviously, it was a very well-received quarter. Big step up in earnings. ROE now at 16%, so things are obviously moving in the right direction. Maybe just some high-level thoughts on what you were most excited about on the quarter.
Yeah. No, thanks. Great to be here, everyone. I think you saw in Q3, but it's sort of a continuation of what we said at Investor Day, which is fast approaching one-year anniversary. When we look at our strategy of deeper relationships, build a simpler, faster bank, and then discipline in how we execute on capital, restructuring our costs, and governance and controls, I would say that strategy we're executing across the board. Oh. Let me Sorry. When I look at the commitments that we made at Investor Day, and then how are we doing relative to that, on an ROE perspective, I think, like you said, we are at 16%.
Our target for this year was 13%, so we have gotten to the medium-term outlook and I couldn't be more proud of the team on that side. I would break that down into a couple areas. I think restructuring costs has been a really big focus for TD Bank. We said we would get to CAD 2 billion-CAD 2.5 billion of restructuring costs. I do emphasize that with everybody, that when we say we are restructuring our costs, we are trying to fundamentally reset the run costs of TD Bank, not slash our project spending or marketing spending or put some sort of a hiring freeze in places.
Can you take the unit cost of your biggest processes and fundamentally reset that cost down to 20%, 30%, some 50% or 60%? You are seeing that play through. Our goal was CAD 900 million this year. We hit that restructuring cost in Q3. We actually think that there is significant upside to the CAD 2 million, CAD 2.5 million as we go forward. From a business momentum, and you are seeing it across the board, we are having record earnings across literally every part of our organization. On the wholesale business, we have doubled the revenue on a quarterly basis since we did the TD Cowen acquisition, and still have significant upside. The reason I say that, everyone, is that when I took over as CEO, the earnings contribution from the wholesale bank for TD was about 9%.
At the end of Q3, we are at about 15%, is the earnings contribution from the wholesale bank. There probably isn't a G-SIB in the world that doesn't have probably around 25% of their earnings, Mike, coming from the wholesale business. So I do have a lot more upside, I would see, in our wholesale bank relative to potentially other G-SIBs, and we are seeing that play through. Then across the Canadian footprint, we have been number one in resi, credit cards, and deposit year-on-year growth for the last four quarters. So good momentum in the Canadian bank. Then as we announced in the U.S., the AML remediation program, which absolutely still is our number one priority as an organization, is on schedule.
We are now balancing bringing back the growth elements in TD United States, and you saw our announcement around launching 100 new stores or branches, they call them stores in the U.S., we call them branches here, by the end of 2020. So I will pause there, say lots of momentum on the things that we committed to doing at Investor Day, and I couldn't be more pleased.
Okay, thanks for that. Then maybe just asking about a couple questions on credit.
Yeah. Obviously, that was something that investors were very pleased about.
Lower than expected on the quarter, and it sounded like there is a bit more confidence on sort of landing at that lower end of your guided range, at least from the commentary on the call. Any thoughts on the credit outlook? Obviously, there is a lot of uncertainty now.
Sure. And sort of maybe dovetail that into your current reserves of CAD 500 million.
Yep I believe is still the number for the tariff-related risks.
How do you sort of see that in terms of where it sits today and where it needs to be?
No, and we did give the guidance for the balance of this year as lower end of our 40-50 basis points on our PCLs. We're certainly not seeing anything outside of what we would have expected, and so the resiliency in both Canada and the U.S., Mike, continues to be there. And I would say, and I think Ajai captured it well. I think we monitor quite extensively. We run a lot of stress scenarios around this uncertainty. And so we have taken, as all of you know, CAD 500 million of reserve specific for the tariff-related uncertainty, and we've modeled all the different variations of what could happen. And so we'll continue to be prudent on that piece. But we're also starting from a very healthy reserve. We've always been prudent on how we reserve from a PCL perspective.
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