TD bets on its Canadian businesses to prop up its growth ambitions

Toronto-Dominion Bank’s TD-T top executives are betting on its Canadian businesses to pull it out of the trough caused by the lender’s anti-money-laundering failures in the United States. But the focus on Canada comes at a complex time.

Competition for banking services is heating up as challengers and fintechs charge into the market.

Ottawa is also angling for a shake-up in the sector, which has long been dominated by six big banks. Prime Minister Mark Carney’s government has pledged to improve choice in banking for consumers and businesses, and the country’s banking regulator is lowering barriers to encourage more innovators to enter the federally regulated financial system.

Few analysts and investors would wager against the green bank and its enviable position in the Canadian market. TD is a deposit powerhouse with its behemoth personal-banking division holding the most core deposits among its competitors. The bank says one in three Canadians has a product or service with the lender.

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TD has pegged three major business units as mission critical for growth in Canada: personal banking, business banking and wealth. The units have been tasked with ensuring that every client who walks through the bank’s doors – whether in a physical branch or online – builds their entire financial portfolio with the bank.

The plan is not unique to TD. Its peers spend plenty of time in investor meetings and on conference calls talking about their plans to bolster profit in the Canadian market, in part by poaching clients from each other and acquiring the most newcomers to the country. It’s a tall order in a market where consumers and businesses tend to stick with their bank.

The battle for customer deposits is an intensely competitive “dogfight,” according to Bank of America analyst Ebrahim Poonawala. But the banks have also committed to improving profitability, and no one wants to concede on pricing to win business. The rise of newer players could put pressure on big banks to lower fees and rates.

“It is a threat that you don’t want to underestimate, but in a lot of cases the fintechs end up nudging the banks to provide the same services or better services,” Mr. Poonawala said in an interview.

“But these banks have the customers, they have the scale and they also are very tech-savvy.”

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TD’s ambition must also overcome a major roadblock of its own making. For years, TD built out its U.S. operation as the keystone of its long-term growth plan. The business ballooned to become one of the largest commercial banks in the country.

In 2024, that strategy was upended when TD pleaded guilty to conspiracy to commit money laundering after a decade of shuffling funds for criminal organizations. U.S. regulators and law enforcement levied severe penalties on the bank, including fines of US$3-billion, a cap on assets that limits TD’s ability to grow its retail operations in the country, and requirements to fix gaps in its financial-crimes procedures.

The cost is massive, and the bank must do more while cutting expenses across the organization. To create space to continue growing in the U.S., it exited less-profitable loan portfolios and restructured its bond holdings. While there is no set timeline for when regulators will lift the restrictions, other banks that have faced similar penalties spent several years remediating deficiencies.

But TD has all the confidence of the second-biggest bank in Canada. Since it unveiled its turnaround strategy to investors in September, the bank has already made inroads.

“More Canadians say that TD is their primary bank. That’s an incredible starting point, but there is still opportunity to widen that leadership,” TD head of Canadian personal banking Sona Mehta said in an interview.

“We feel very confident in our starting position, in the value proposition that we offer and our ability to compete.”

TD’s personal-banking unit is its main gateway for new customers, with 86 per cent of clients joining the bank with a chequing or savings account.

In the first quarter ended Jan. 31, Ms. Mehta said, TD had the most growth among its peers in personal deposits, credit cards and real estate secured lending.

To get its customers’ attention, TD has been promoting products through its massive mobile platform. The lender has 11 million active mobile clients, more than any other bank in Canada, according to Ms. Mehta.

The bank boosted the number of existing clients it preapproved for credit products. In the first quarter, the bank booked its highest-ever take-up of preapproved offers.

TD also sees an opportunity to grab more business, especially as mortgages come up for renewal. The bank expects about 27 per cent of its clients to renew their mortgages this year.

In an investor presentation in September, Ms. Mehta said that if TD were to attract business from its clients who hold mortgages outside the bank, it could bring in $40-billion in real estate secured lending volume.

However, the real estate market has been one of the biggest headwinds in the banking industry. The housing market has remained stunted, dampening demand for mortgages.

As the weight of economic uncertainty weighs on Canadians’ wallets and more consumers struggle to pay off their debts, delinquencies in credit cards, mortgages and personal loans have picked up across the sector.

The strain has also tempered borrowing. Data from the Office of the Superintendent of Financial Institutions showed that real estate secured lending is still muted, edging up a slim 3.1 per cent in March compared with the same month last year. But TD was among the banks with the most growth, with loans rising 4.9 per cent, according to research by Bank of Montreal analyst Sohrab Movahedi.

In times of low activity or stiffer competition, lenders will sometimes resort to lowering prices or bringing on riskier clients. Ms. Mehta said TD is not employing either tactic.

Instead, TD streamlined and automated more of its mortgage application process to provide clients with decisions faster than its peers. The bank is deploying mortgage specialists with expertise in complex or nuanced applications.

The lender said it has doubled the number of clients that it responds to within a day.

“This has certainly been a market where buyers are tentative and perhaps sitting on the sidelines waiting to see what will happen,” Ms. Mehta said.

“Even in the backdrop of that softness in the market, we had our highest-ever proprietary originations for any Q1,” she added, referring to mortgages facilitated by its branch and mobile mortgage sales teams.

TD is also using artificial intelligence to speed up its processes. On Thursday, the lender launched its first agentic AI model to automate the application process for mortgages and home equity lines of credit. The autonomous agents sort through documents, calculate client income and conduct other reviews to generate summaries that inform underwriters’ lending decisions.

The bank said agentic AI is accelerating this process from an average of 15 hours to less than three minutes while producing more accurate results.

Personal banking has also been tasked with boosting referrals to other units, including the business banking division, which contributes about 15 per cent of TD’s adjusted earnings.

The business unit plans to hire 835 new front-line bankers, a 28-per-cent increase, in the coming years. So far this year, the bank has increased the size of its team by about 10 per cent with a mix of internal promotions and hires from competitors.

At the outset, the bulk of the hiring was focused in the lender’s small-business banking unit. But TD has also been adding bankers to its commercial team that manages large business accounts, as well as the agriculture team, whose portfolio has been growing.

The bank expects to see more growth in markets outside of Ontario, such as Calgary and Edmonton – regions with an expanding technology sector and a housing market buoyed by migration from less affordable cities. Some of TD’s peers have also targeted Alberta for expansion.

Through AI, TD is speeding up credit assessments for smaller loans for commercial banking clients. Barbara Hooper, head of Canadian business banking, said the workload for credit analysis and decision-making has been reduced by about 70 per cent.

“It’s letting us get back to clients more quickly with the answer, which means that more of these credit requests are actually being funded, and client satisfaction is higher,” Ms. Hooper said.

Much of Canada’s economy is made up of small and medium-sized businesses, which have borne the biggest impact from economic uncertainty. Trade upheaval has prompted some Canadian businesses to press pause on making investments, including new facilities, equipment and acquisitions.

OSFI data indicated that business and government loans across the sector inched higher by 2.9 per cent in March compared with a year earlier.

Ms. Hooper said she’s recently heard from clients who have decided they cannot continue to wait around for more certainty and are reviving their growth ambitions. Ottawa’s recent efforts to jump-start economic investment are also boosting sentiment among businesses.

“A lot of folks are surprised that the actual impact has been more muted than they might have expected,” Ms. Hooper said.

“When the tariff uncertainty arose, we expected to see some stress in our portfolio that really hasn’t materialized yet – it could still come. But the economy has been resilient, and maybe more resilient than people thought, and so it’s not perfect yet, but some people are deciding to move forward finally.”

The Competition Bureau is conducting a study of the competitive landscape of financing options for small and medium-sized businesses, as well as barriers that discourage banks from lending to the group.

OSFI is considering lowering risk weightings – the different levels of risk assigned to certain types of lending – for loans for small and medium-sized businesses.

Ms. Hooper said the move would make it easier for banks to lend to such clients by offering better rates and larger loans and expanding the number of businesses that could qualify.

“That will improve the overall equation for clients,” Ms. Hooper said. Small and medium-sized businesses are “so important to the Canadian economy, so it’s a big area of focus for us and one of the areas that we’re investing in quite deliberately.”

One of the biggest opportunities for TD lies in growing its wealth segment. More than 11 million of the bank’s retail clients do not use TD’s wealth-management products and services.

In September, TD set a goal of generating $40-billion in referrals to wealth from the personal banking unit by 2029. TD head of wealth management and insurance Paul Clark said he expects to exceed $30-billion this year.

“The opportunity is inside the four walls. We are underrepresented inside of our own client base,” Mr. Clark said. “It’s why we’re so focused on putting advisers into our branches and private bankers into our commercial banking centres, because the outsized opportunity is actually inside the bank versus out on the street.”

TD has 1,300 financial planners in retail branches and a dedicated private banker in every commercial banking centre across Canada. When commercial bankers meet with new or existing clients, they typically invite a private banker to attend with them and identify opportunities to recommend wealth products.

Mr. Clark pointed to a recent example where a commercial client was preparing to initiate a transaction worth hundreds of millions of dollars. That was likely bound for a competitor until the private banker based in that commercial banking office noticed an opportunity and pitched TD’s wealth services to the client.

Recently, TD has hired a few hundred wealth advisers and planners, with plans to add a total of 1,200 in the years ahead.

The wealth division must also fend against fintechs that have been scooping up business in recent years, with Wealthsimple Financial Corp., Questrade Financial Group Inc. and Koho Financial Inc. launching products aimed at a new generation of digitally savvy retail investors.

Mr. Clark said the ability for clients to speak with an adviser differentiates the bank from mounting competition, and that TD’s investments in its digital platforms have attracted a wider range of clients.

In 2024, TD’s direct investing unit launched fractional trading, a capability offered by only a few firms in Canada that allows investors to purchase partial shares of stocks that would otherwise be expensive if bought as a whole. Of the clients that opened an account last year, 44 per cent executed a partial trade, Mr. Clark said.

In March, TD launched a new mobile app aimed at do-it-yourself investors. Mr. Clark said the team that built the platform is made up of employees largely in their 30s.

With the app, Mr. Clark believes that fractional trading will become an even bigger draw for new and existing clients.

“In this space in particular, if you’re going to win, your colleagues – especially on the digital front – have to reflect those customers, because if they don’t, the pace of innovation and change is so high that you quickly will become an anachronism,” he said.