TD Bank Pledges to Cut Billions in Costs as It Restores Medium-Term Guidance
In a bold move signaling confidence amid ongoing U.S. regulatory headwinds, Toronto-Dominion Bank (TD) announced on September 29, 2025, plans to slash between C$2 billion and C$2.5 billion ($1.4 billion to $1.8 billion) in annual costs while reinstating its medium-term growth targets—mirroring pre-scandal ambitions. The disclosure, unveiled during an investor day in Toronto, comes as the Canadian lender emerges from a bruising $3 billion U.S. money-laundering penalty in December 2024, which capped its U.S. retail assets at $434 billion and suspended guidance. CEO Raymond Chun framed the strategy as building “a simpler, faster, and more efficient TD,” focusing on high-fee segments like wholesale banking and wealth management to drive revenue through client acquisition and cross-selling.
This cost-cutting pledge builds on earlier restructuring efforts, including a May 2025 plan to trim 2% of its 100,000-strong workforce and wind down a $3 billion U.S. point-of-sale financing portfolio, expected to yield C$100 million in savings for fiscal 2025 alone. The broader initiative incorporates AI and technology efficiencies, alongside asset repositioning, to offset AML compliance costs projected at US$500 million for both 2025 and 2026. TD’s shares rose 1.2% in early Toronto trading on the news, reflecting investor relief after a year of volatility.
The Scandal’s Shadow: From Suspension to Strategic Reset
TD’s troubles trace back to failures in detecting money laundering at U.S. branches, culminating in a guilty plea and the asset cap that forced a 10% U.S. retail asset reduction—achieved by selling its Charles Schwab stake and a $9 billion mortgage portfolio. Guidance suspension followed, with 2025 dubbed a “transition year” focused on balance sheet restructuring. Now, reinstatement signals stabilization: Medium-term targets include 5-7% annual revenue growth and ROE of 13-15%, akin to pre-2024 levels.
Chun, a TD veteran elevated to CEO in November 2024, has prioritized operational overhaul, including a dedicated U.S. AML committee and $1 billion over two years for compliance upgrades. The cost savings—partly from the existing program—aim to fund C$8 billion in share buybacks and bolster high-margin areas, with U.S. retail advisers and wealth specialists key to cross-selling.
| Key Metric | Pre-Scandal Target | Restored 2025 Guidance | Notes |
|---|---|---|---|
| Annual Revenue Growth | 5-7% | 5-7% | Focus on wholesale/wealth segments |
| ROE | 13-15% | 13-15% | Post-restructuring efficiency gains |
| Annual Cost Savings | N/A | C$2B-C$2.5B | Via AI, tech, and restructuring |
| U.S. Assets | Unrestricted | Capped at $434B | 10% reduction achieved |
This table illustrates the symmetry in targets, underscoring TD’s recovery narrative.
Market Reactions: Relief Amid Cautious Optimism
Analysts welcomed the clarity. “TD’s reinstatement is a vote of confidence, but execution on costs will be key amid tariff risks,” noted Canaccord’s Matthew Lee, who flagged exposure in automotive and manufacturing loans (9% of portfolio). Shares hit C$85.50, up from a 2024 low of C$72, but trail peers like RBC’s 15% YTD gain. Provisions for credit losses rose to C$1.34 billion in Q3, up from C$1.07 billion, reflecting economic uncertainty.
On X, sentiment mixed: @BankingInsider praised the “aggressive reset,” while @FinTechWatch warned of “tariff traps” in 9% of loans. TD’s Q3 earnings call highlighted contradictions in U.S. loan growth but reaffirmed expense guidance at $11B-$11.2B for 2025.
U.S. Ties: A Canadian Giant Grapples with American Realities
For American readers, TD’s saga hits close: Its U.S. operations, spanning 1,100 branches from Maine to Florida, generate 40% of revenue but now face the asset cap’s squeeze. Cost cuts could mean branch optimizations or job trims (beyond the 2% workforce reduction), impacting local economies in swing states like Florida. Politically, it underscores Biden-era AML enforcement, with TD’s $1B compliance spend a cautionary tale for cross-border banks.
Lifestyle ripple? Everyday U.S. customers may see streamlined services—fewer low-yield products—but potential fee hikes in wealth management. Careers? Compliance roles boom, with TD hiring for AML oversight amid the transition.
Forward Momentum: A Leaner TD Emerges
TD’s pledge to cut billions in costs as it restores guidance charts a path from scandal to stability, blending austerity with ambition in high-fee arenas. With Q4 earnings looming, execution will test Chun’s vision—tariffs and credit risks loom, but a simpler TD could reclaim its spot among Canada’s Big Five. For now, the market buys the reset, betting on a bank reborn from its own ashes.
By Sam Michael
September 30, 2025
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