Bharat Masrani: Nice to hear from you, Ebrahim. And hopefully it’s not your birthday as well today.
Ebrahim Poonawala: Gabe, would have nothing, but three bank supports, so everyone take note for next year as well, right?
Bharat Masrani: I know, I can imagine we look at opportunities, you know, to improve. That’s what we do. Sometimes we learn it ourselves, sometimes we learn from our regulators. We see that the level of innovation with respect to technology is moving at quite a speed. And when we recognize that we need to invest, we do. And we make investments to enhance our programs, you know, that fit our organization and manage our risk. And this includes investments, you know, to — and we’ve talked about it before in our U.S. AML program, and that will include people, training, you know, data, technology, et cetera, because, you know, there are sort of the evolving areas, and we got to make sure that we’re keeping up with what is expected of a very large bank in the domestic business in the United States and so we’re doing that.
And I expect that we will get there, and we will get there in a manner that you would expect out of TD. And so — that’s — I think that’s the best way I can describe it, Ebrahim.
Ebrahim Poonawala: And maybe the other side. Bharat, two other sort of follow-ups there. One — maybe for Leo, I think in the past, I think in the immediate aftermath of the deal termination with First Horizon, you talked about, like opening several stores across the Southeast, which sounded like a good plan in terms of when you think about household growth. Give us an update, is that still in the works or is that on a pause, till you solve for this over the next year or so?
Bharat Masrani: Well, Ebrahim, I’ll start by simply saying, this year we did focus on building out distribution, but broadly a distribution with a broader definition. So, in fact, this quarter, we upgraded our TD mobile application infrastructure to the next-generation solution, and it was successfully rolled out to 4.8 million clients. And we’re thrilled with the reception that we’ve gotten from our clients. Physical distribution will always be important. This year, to your point, we did open up 18 stores, I would say six of those in LMI communities. And so there’ll always be a view on both physical and sort of virtual. But I would just point — I know that the underlying question there is around organic growth momentum, and I would just ask you to look at the underlying stats that we posted in the fourth quarter.
We had personal loan growth of 12% with good representation across all the major loan categories. As you and I spoke in one of our analyst discussions, growing our consumer lending portfolio was a distinct priority of ours. And I’m encouraged that we’ve been able to do that, while preserving quality, while increasing selective loan pricing. And likewise, on the commercial side, quite pleased that we were able to post a 9% growth in what is a much more challenged environment. And once again, I would say we were able to do that by increased focus and investment in our mid-market business, which is an area that we’ve said we have aspirations to continue to grow and leverage our existing specialty businesses as a foundation to do so. So I think we’ve got good fundamental momentum.
We’ll continue to leverage our core. And when I say our core, historically, we’ve been an exceptionally strong retail and small business deposit institution. And that was on display again this quarter. We actually grew on a quarter-on-quarter basis. And so that’ll be an area of focus and continuing to acquire clients and scaling our — you know, our operation is going to be a priority. As — I think we mentioned last quarter, we eclipsed the 10 million client mark, which is a big milestone for the franchise and speaks to our ability to not only deepen relationships, but also continue to acquire and grow our franchise organically. So, a bit of a long-winded way of saying, I feel quite comfortable with the franchise. But as Bharat said, we’re also committed in strengthening our core risk and control environment.
It’s a major priority. We are interested not only growth, but doing it in a sustainable and responsible manner, you know, certainly consistent with what TD has done historically.
Ebrahim Poonawala: Got it. So do you expect to open more stores this year or is that we are done for now?
Leo Salom: Well, we did open up six stores in the quarter.
Ebrahim Poonawala: Right? No, but looking into ’24, I’m just wondering your expense growth guide, how many store — new stores is it baking in?
Leo Salom: We haven’t released the number, but we do intend to make investments in both physical as well as virtual distribution.
Ebrahim Poonawala: Got it. Thank you.
Leo Salom: Thank you, Ebrahim.
Operator: Thank you. The next question is from Meny Grauman from Scotiabank. Please go ahead.
Meny Grauman: Hi, good afternoon. Just wanted to clarify going back to the restructuring program, CAD600 million pre-tax when fully realized annual cost savings, how much of that is actually going to be able to fall to the bottom line in ’24 and ’25, given the reinvestment requirements that you have? So I just wanted to clarify — make sure I’m thinking about that correctly.
Kelvin Tran: Yes, so we’ve given you the net amount and so the bulk of that would be into the business and mostly into risk and control.
Meny Grauman: Okay. So the bulk of that into risk and control in ’24 and ’25 — potentially ’25. The other question I had was just in terms of your EPS growth guidance, you’re guiding to below medium-term target. I’m just curious what — that forecast, what is it baking in in terms of buybacks? Is it assuming that the buyback activity continues at the current pace?
Kelvin Tran: Yes. First, just to — as a reminder, our medium-term target is EPS growth of 7% to 10%. And given the markets that continue to be challenging and also, as Ajai said, the normalization of PCL, that’s going to make it hard and challenging to meet that range. And that would include share buyback as well. But as you have noticed, we bought back a lot of shares to date and that would give us more flexibility on the pacing of the share buyback in the future, but always subject to market conditions.
Meny Grauman: I’m asking about the buyback just in the context of the decline in the CET1 ratio this quarter and just wondering if you’re viewing the buyback a little bit more cautiously going forward. Also there’s some headwinds that you highlight in terms of regulatory changes, the FDIC levy, you know, potentially maybe a legal charge in the US. I’m just wondering how you’re viewing the buyback going forward, you know, factoring all that in?
Bharat Masrani: Meny this is Bharat. As Kelvin said, we bought back a lot. You know, it gives us great flexibility how we pace our buyback. Buybacks, as you probably know and you know for sure, would depend on market conditions, you know, how we’re thinking about that, what kind of programs we put in place, and the bank, the level of capital we have, you know, we like our position and every quarter, you know, we add to that. So I feel very comfortable as to where the bank’s capital position is. And buybacks are largely influenced by market conditions. It’s hard to predict exactly, you know, what those markets would be and then we’d adjust, you know, that you would expect us to do based on those conditions.
