The Toronto-Dominion Bank (TD) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the TD Bank Group Conference Call. I would now like to turn the meeting over to Ms. Brooke Hales, Head of Investor Relations. Please go ahead, Ms. Hales.

Thank you, operator. Good morning, and welcome to TD Bank Group's conference call. We will begin today's call with remarks from Bharat Masrani, the bank's CEO; and Raymond Chun, Group Head, Canadian Personal Banking, after which, we will invite questions from prequalified analysts and investors on the phone. Today's announcement was timed to enable Bharat and Ray to connect with 2,500 TD executives currently gathered in Toronto for the bank's annual Senior Management Group Conference. Therefore, we will be ending promptly at 10:30 a.m. [Operator Instructions] Our comments during this call may contain forward-looking statements, which involve assumptions and have inherent risks and uncertainties. More information is available in this morning's press release, which is on our website. With that, let me turn the call over to Bharat.

Thank you, Brooke, and thank you, everyone, for joining us today. It is an exciting day for TD's future. We issued a press release this morning announcing the bank's succession plan, including a series of senior executive team changes reflecting the strength of our leadership bench and our commitment to executing a smooth CEO transition. We have set my retirement for April 10, 2025. The Board has a rigorous and well-defined succession planning process undertaken over many years. The process involves careful and dynamic consideration of the characteristics and skills required to fulfill the bank's strategic ambitions, a review of the external marketplace against our internal talent and ongoing development of their talent to create a deep succession bench. Following this robust process and careful consideration, the Board has chosen Ray Chun as my successor. Effective November 1, 2024, Ray will be appointed TD's -- will be appointed TD's Board of Directors and will become the bank's Chief Operating Officer with responsibility for all of TD's business lines. The Board announced its intention that Ray will become Group President and CEO on April 10, 2025, at the bank's next Annual Meeting of Shareholders. Following my retirement as CEO, I'll continue to serve as an adviser to the bank until October 31, 2025. I'm delighted the Board has selected Ray as TD's next CEO. I've known Ray for a long time. He started at TD in 1992 in our management training program. Over the decades, as he rose through the ranks, he grew businesses across our franchise. Ray led regions, product teams and key business segments. Each time, he captured opportunity and built winning teams. Ray has delivered in every single role in his over 30 years at the bank. I'm confident he'll continue to deliver as the bank's Chief Operating Officer and then as TD's Group President and CEO. Ray is the right leader at the right time. This morning, we also announced that Riaz Ahmed will retire at the end of January 2025. For close to 3 decades, Riaz helped define TD's strategy and deliver business growth. He led corporate strategy, expanded our insurance in North American credit cards businesses, helped solidify one of the strongest balance sheets in banking and delivered exceptional financial performance as CFO. Over the past 3 years, as Head of TD Securities, Riaz led the TD Cowen acquisition and integration, enhancing our competitiveness and accelerating our strategy. I want to extend my personal thanks for his close partnership, sound counsel and successful leadership over many years. I wish him the very best in his next exciting chapter. We also announced additional changes to the senior executive team. Effective November 1, 2024, the following leaders will report to Ray. Sona Mehta, who already leads the bank's Real Estate Secured Lending and Everyday Banking, Saving & Investing businesses, will become Group Head, Canadian Personal Banking and join the senior executive team. Sona is a terrific leader who inspires the teams to deliver. Tim Wiggan, who is currently Group Head, Wealth Management and Insurance, will return to TD Securities as its President and CEO. Tim helped build TD Securities and will continue the momentum in the wholesale bank. And Paul Clark, currently Executive Vice President, Private Wealth Management & Financial Planning, will become Senior Executive Vice President, Wealth Management and join the senior executive team. A long-time TD leader, Paul's contribution spans multiple businesses and roles. Barbara Hooper, Group Head, Canadian Business Banking; and Leo Salom, Group Head U.S. Retail Banking and President and CEO of TD Bank, America's Most Convenient Bank, will also report to Ray. In addition, while Wealth Management and Insurance will remain together as a reporting segment, James Russell will report directly to Ray. Along with Ray, our Chief Risk Officer, Ajai Bambawale; our Chief Financial Officer, Kelvin Tran; and other members of the senior executive team who lead corporate functions will continue to report to me. These changes demonstrate the depth of our leadership bench, combining long-standing leaders and newly elevated talent. Together, they will ensure a successful transition and lead the bank into the future. Before I turn it over to Ray, I want to acknowledge that as we've stated previously, TD's U.S. AML deficiencies were serious and a significant remediation work is underway. This took place on my watch as CEO, and I take full responsibility. As I've said before, AML remediation is my top priority. In the coming months, I will continue to advance and direct the critical remediation program required to meet our obligations and responsibilities and strengthen our risk and control foundation, supporting Leo and Ray in that endeavor. With that, I'll turn the call over to Ray.

Thank you, Bharat. First, let me say that I am honored by the trust the Board has placed in me. TD is a critical part of our financial system and economy. The bank helps households and businesses achieve their financial goals, communities thrive and our colleagues succeed. I understand what it means to be entrusted with the privilege and responsibility to lead TD, a place I have called home for over 30 years. I also want to congratulate Riaz on his retirement. Riaz has made an enormous contribution to TD, and I personally have learned so much from him over the years. The new senior executive team structure we announced today demonstrates the depth of leadership talent at TD and positions the bank to continue to deliver for all our stakeholders. I am particularly excited about the opportunity to interact with you, our shareholders, in my new capacity. As Bharat said, he and I have worked together for a long time. Bharat, I want to thank you for your leadership and support over many years. Through a tough period, you have been a steady hand, guiding us forward for almost 4 decades, and as CEO for the past 10 years, you helped build and strengthen the bank. TD has so many advantages, a powerful balance sheet, terrific talent, high-performing businesses and leading franchises in Canada and the U.S. with over 28 million customers and clients. We also have a significant challenge in front of us. We must remediate our U.S. AML program. This is our top priority. We have the team in place to strengthen our foundations, overcome the current challenges and write the next chapter of TD's story. I am committed to the work ahead and energized by the opportunity to lead this outstanding bank into the future. With that, let me turn it back over to Bharat.

Thank you, Ray. Before we begin the Q&A session, I want to note that we will not be providing any update on the U.S. AML investigations at this time. Today, is about our succession plan. With that, operator, we are now ready to begin the Q&A session.

[Operator Instructions] The first question is from Meny Grauman from Scotiabank.

And first off, let me congratulate you, Ray, on the appointment. The first question is really just about process. Maybe Bharat, you're best place to answer. Just in terms of -- the real question is, did the Board consider outside candidates for this role? If you can give us sort of an insight into that.

It is the Board's process. And of course, much of the process is confidential. But I can confirm that, absolutely, we consider the external market. Any strong process would. The most important aspect of a succession process is to rely -- to really focus on the profile of the CEO you're looking for, which is dynamic and contextual. What quality of skills and experiences does the organization need for the short, medium and long term? The Board and our HR Committee specifically defined the CEO profile and once developed, considered the internal and external market available to match that profile. That profile was reviewed regularly to ensure it accurately reflected the view of the Board. Internally, we've spent -- as we've talked many, many times before, we've spent years developing talent, and our process was very intentional in that regard. And the Board was, of course, assisted and throughout my independent consultants. Now Ray was selected after a lengthy and competitive process, and I couldn't be happier with the decision. It's terrific to have Ray and see it as we move forward. So I hope that covers off the process for you, Meny.

Yes. And then just a question to follow up just on strategy. I mean, Ray's background is very much Canada-focused. So I guess the question is, what can we read into that? Is that really -- can we say that this is a signal that Canada is really going to take even more of a central role in terms of the strategic direction of the bank going forward, especially in the context of the AML issues that the U.S. is less of a focus right now and maybe even into the future given Ray's background?

Well, absolutely not, Meny. TD is a unique franchise in the U.S. We serve over more than 10 million Americans. Ray and Leo, whom you know, have strong working relationships. Ray has run many businesses and is looking forward to working closely with Leo in the years to come.

The next question is from Ebrahim Poonawala from Bank of America.

Congratulations Bharat, Tim, Ray and Riaz on your respective announcements. I guess maybe just a question, Bharat, for you. And again, you mentioned Ray's successful track record at TD. I think -- some of the feedback, I think, over the last few months around the CEO succession has been -- it felt like the line of business heads were still kind of new in their seats, so not quite ready to be CEO. Just talk to us in terms of, you mentioned that you looked externally. So maybe spend some time and again, not to put Raymond on the spot, but why Ray was the right choice in terms of running this through the AML process and just managing a bank as complex as TD.

Well, I'm delighted the Board has selected Ray as TD's next CEO, Ebrahim. And I've known Ray for a long time. He started TD in 1992 in our management training program. And over the decades, he rose through various ranks. He grew businesses across our franchise. He's led regions, product teams and operations. He's led critical business segments at TD and has deep retail banking experience, which is important to TD now and into the future. Each time, Ray captured every opportunity that was available and built winning teams, working collaboratively with his peers and always focused on making strategic decisions to benefit the entire bank. So Ray has really delivered it, Ebrahim, for the past 30 years, and I'm confident he will continue to deliver as the bank's Chief Operating Officer and then TD Bank Group's CEO. Ray is the right leader at the right time, absolutely is the right leader at the right time. So very comfortable where we are. It's a terrific choice, and I'm looking forward to transitioning with Ray over the next few months as he becomes the next CEO of TD.

Noted. And just one question I had was, should we expect another round of leadership changes as Ray gets in a seat, particularly in terms of the U.S. business? Any -- just give us a perspective around Leo heading that business and your comfort around being with the bank through this AML issue?

Leo is a great leader. Ray and Leo have worked together. In fact, Ray working the wealth business when Leo was there as well. So I don't expect, and I'm not aware of any pending changes.

The next question is from Sohrab Movahedi from BMO Capital Markets.

Congrats, Bharat, on your retirement; and Ray, on your appointment. I guess what I wanted to -- I wanted to put Ray on the spot and see if he could just talk to us a little bit based on his 30-year history, when -- where can he draw -- on what sort of experience can he draw over the past 30 years, that would be relevant for the next 5 years at TD Bank, taking both AML but other strategic, I guess, considerations into account?

Thanks for the questions, Sohrab, and thanks for your comments at the start. And as Bharat said, I have spanned my career at TD over a variety of different areas. And so I would tell you that from a retail banking background, not only have I run the regions, but I have run all of our product areas, both sides of the balance sheet and worked very closely -- when you're running the largest deposit business in the country, we work very closely with treasury. We work very closely with risk and compliance, AML teams. And also had responsibility for the lending side. We've also -- when I was in Canadian Personal Banking previously, had all of our data and analytics teams reporting into us. And as we think forward with the importance of GenAI and analytics, that will prove to be valuable. I've also had the opportunity to run all of our channels, whether it's physical channels, contact centers, digital. At one point in my career, they've all reported into me. And as we move forward, I can't think of a channel, certainly, digital and mobile will absolutely be important for our customers and for our organization. And so I'd say over the last few years, as I took over as President and CEO of the TD Insurance business, it gave me lens into the entirety of a business and certainly, from a risk perspective, lots of exposure. And then I took over as President of the Direct Investing Business, one of our most innovative businesses that we move forward. And then when I took over for Leo in our global wealth and insurance business, I did have responsibility for all of global wealth for TD Bank, which includes TD Asset Management, our advice businesses, our direct investing, our trust and estate businesses, and so -- which also had responsibility into the U.S. wealth strategy and U.S. wealth management. So lots of experience running big businesses, complicated businesses, big P&Ls and having to work with all of our control and risk partners across TD Bank. I hope that answers your question, Sohrab.

Ray, that is very helpful. I appreciate you answering the question. And in any of those experiences, like what would have been the single biggest problem you've had to deal with, given the AML issue that the bank sorts through? I'm just trying to understand, have you had to deal with problems before? And if there's something we could look back to just to get a sense of that sort of a process.

Sohrab, all I would say is when you're running these large complex businesses that I've run, running into complexity and dealing with regulators and mapping out complex strategies as we move forward has all been sort of in my experience. And so early days, and I look forward to sharing more with all of you in the days and weeks and months to come.

Okay. And congrats to Riaz as well.

The next question is from Lemar Persaud from Cormark Securities.

My question is more on the timing of the announcement. Like why did the Board find it necessary to make this announcement today versus, say, waiting until everything was out there on the outcome of the U.S. AML investigations, which you guys are clear in suggesting that's going to be by the end of the calendar year? Like why is September 19, the right time to make this announcement?

Lemar, it's -- by the way, good to hear you. As Brooke mentioned in her opening, every year, TD has a Senior Management Group Conference. It's a one-year event when 2,500 of our executives from around the world gather here in Toronto. So they are here today. Our conference has just started this morning. So we thought it's a perfect time to make the announcement and have the -- have our senior leaders all be here in person, and it's a perfect opportunity to make such an announcement.

Okay. And then it seems like your retirement Day, Bharat, of April 10, it doesn't allow all that much time for Ray to get fully up to speed on discussions with the U.S. regulators, addressing their needs and concerns effectively while kind of learning and building all the relationships required as for a large Canadian bank CEO. I guess, are you going to be very involved up until you're -- you actually step down as a special adviser at the end of October 2025? Is that the intention here?

Well, I'll be available to Ray and the bank in any capacity that I'm required post-April 10. So we'll see what needs are important, where I can add value, and that will be up to Ray and the bank to take advantage of my time as adviser.

Okay. Congratulations on the appointment, Ray; and Bharat in retirement.

Thank you. There are no further questions at this time. I will turn the call back to Bharat Masrani.

Thanks. Thanks very much, operator, and thanks for folks who joined this morning. Very exciting day for TD. Big, big announcement. We are in front of our 2,500 executives from around the world. And there's lots of excitement for the future, and we're going to be spending the day with them and look forward to Ray becoming COO on November 1 and then, of course, the Group President and CEO of TD Bank Group. So thanks for joining, and we will see you, I guess, in December. Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.