The bank’s Canadian residential mortgage portfolio fell to $267.4 billion in Q2, down from $270.9 billion in Q1. The decline reflects continued pressure on homebuying activity amid elevated interest rates, rising inventory and cautious consumer sentiment.
“Uncertainty is weighing on buyer sentiment,” said Sona Mehta, Group Head of Canadian Personal Banking, during the bank’s earnings call. She noted that the bank had expected a stronger spring market earlier in the year, but “a lot has changed in the last four months.”
While broker-originated volumes were softer, Mehta highlighted strength in TD’s proprietary channels.
“Despite the macro headwinds, I’m really pleased with the strength that we’ve seen in our proprietary channels,” she said, adding that both branch and Mobile Mortgage Specialist (MMS) originations were up double digits year-over-year. “The branch-MMS referral ecosystem is performing incredibly well.”
TD also pointed to elevated mortgage paydowns earlier in the quarter, particularly in January and February. “Both months were high paydown periods,” Mehta said, attributing the trend partly to the bank’s premium borrower base, many of whom used year-end bonuses or personal liquidity to reduce balances.
Even with the slowdown in overall volumes, Mehta said TD is staying focused on doing quality business, not just chasing growth.
“Profitability should always be a factor,” she said. “We will compete to win profitable business and then leverage our strength in channels where we can differentiate on speed and customer experience.”
PCLs decline on strong credit quality
Beyond the mortgage portfolio, TD’s Q2 results included signs of stabilizing credit performance. The bank reported impaired provisions for credit losses (PCLs) of $946 million, a decline of $270 million from the previous quarter.
Chief Risk Officer Ajai Bambawale attributed the drop to broad-based strength across the bank’s lending book.
“We’re seeing good credit quality,” he said. “If you keep this tariff issue aside, we were really seeing peak PCL and good quality. And I think the fact that rates have come down have helped borrowers.”
Impaired PCLs in Canadian Personal and Commercial Banking were down across all asset classes, including real estate, auto, cards, and commercial lending. The bank also saw similar improvements in its U.S. consumer and business portfolios.
While TD increased its performing PCLs by $395 million to account for trade and policy risks, the bank’s overall credit picture remains stable.
“We are well reserved,” Bambawale said, noting that the bank has added more than $500 million in reserves over the past two quarters as a precaution.
Large share of mortgages set to renew by end of 2026
TD data show that roughly $144 billion in amortizing mortgage balances—about 40% of its total book—are scheduled to come up for renewal by the end of 2026.
That includes $36.2 billion in the second half of this year and $108 billion in 2026, the majority of which are fixed-rate loans that, in many cases, are renewing at much higher interest rates.
TD earnings highlights
Q2 net income (adjusted): $3.6 billion (-4% Y/Y)
Earnings per share: $1.97 (-3% Y/Y)
| Q2 2024 | Q1 2025 | Q2 2025 | |
|---|---|---|---|
| Residential mortgage portfolio | $266.4B | $270.5B | $267.4B |
| HELOC portfolio | $119.2B | $124.2B | $128.6B |
| Percentage of mortgage portfolio uninsured | 83% | 84% | 85% |
| Avg. loan-to-value (LTV) of uninsured book | 53% | 53% | 54% |
| Portfolio mix: percentage with variable rates | 34% | 36% | 38% |
| % of mortgages renewing in next 12 months | 9% | 59% | 59% |
| Canadian banking gross impaired loans | 0.15% | 0.19% | 0.18% |
| Canadian banking net interest margin (NIM) | 2.84% | 2.81% | 2.82% |
| Total provisions for credit losses | $1.07B | $1.109B | $622M |
| CET1 ratio | 13.4% | 13.1% | 14.9% |
From the call
- On housing market softness
“This quarter, tariff uncertainty weighed on the Canadian housing market, and we saw slower purchase activity,” said CFO Kelvin Tran.
- On the bank’s real estate-secured lending portfolio
“We continue to enhance speed to decision and to provide tailored customer advice by referring more complex deals to our mobile mortgage specialists,” said CEO Raymond Chun. “As you know, our single greatest opportunity is to deepen relationships with our more than 15 million customers in Canada.”
- On TD’s U.S. AML remediation (from Leo Salom, President & CEO, TD Bank)
“I am very pleased with the progress we’ve made on our U.S. AML remediation, which, as we’ve said before, is our top priority. We’re executing against our remediation plan with focus and purpose.”
“We implemented the final round of planned scenarios in our transaction monitoring system… Work is progressing on the use of specialized AI to detect, isolate and automate our risk mitigation activities…”
“This quarter, we introduced further enhancements to our cash deposit requirements at TD stores… enabling us to detect, escalate and report potential activity of interest earlier and more effectively.”
CFO Kelvin Tran added: “We continue to expect U.S. BSA/AML remediation and related governance and control investments of approximately $500 million pre-tax in fiscal 2025. We expect similar investments in fiscal 2026.”
Source: TD Q2 earnings call
Note: Transcripts are provided as-is from the companies and/or third-party sources, and their accuracy cannot be 100% assured.
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Last modified: May 25, 2025