Toronto-Dominion Bank

beat analysts’ expectations after reporting higher third-quarter profits on Thursday that were driven by a positive performance in its Canadian personal and commercial banking and wealth management and insurance segments.

TD’s net income for the three months ending July 31 was $3.3 billion, compared to a loss of $181 million during the same period last year when the bank had to keep aside a significant amount of money for investigations related to its anti-money laundering (AML) program, resulting in net earnings per share of $1.89.

Its adjusted net income — which removes the impact of non-recurring items — was $3.9 billion, compared to $3.65 billion last year, resulting in adjusted earnings per share of $2.20, which beat analysts’ expectations of about $2.05 per share.

“Our teams delivered another quarter of strong performance, driven by robust client activity and disciplined execution,” chief executive Raymond Chun said in a statement. “We are well-positioned to build on this momentum as we compete, grow and build our bank for the future.”

Canada’s second-largest bank has been strengthening its AML program and has taken a number of steps to boost its earnings after agencies in the United States slapped the bank with billions of dollars in fines and imposed growth restrictions on its operations down south for failing to prevent money laundering at its branches about a year ago.

The changes seem to be working from an earnings perspective, as the bank has beaten analysts’ expectations on a regular basis this year.

Leo Salom, who heads TD’s U.S. segment, believes the bank can complete a majority of its management actions, which he said was the first stage of its remediation efforts, by the end of 2025. The bank has already completed a series of important milestones, he said.

“The design of our programs, the documentation of the policies, the implementation of critical process changes, the data, the systems, those things that are foundational to a good program, we believe the majority will be completed by the end of 2025,” he said on the call. “But I’ve been very clear that some longer-tail items do stretch into 2026 and 2027.”

Once the management actions in 2025 are completed, TD will subject all its programs to internal audits and a validation process, and then the U.S. regulator will look for a “period of sustainability” to ensure that the program is living up to expectations, Salom said.

“What we want to do is make sure that we build a very strong program as quickly and as comprehensively as possible,” he said.

Observers closely monitor big-bank earnings as they often offer crucial insights into the state of the economy. Bank of Montreal, Bank of Nova Scotia,

Canadian Imperial Bank of Commerce

and Royal Bank of Canada also beat analysts’ expectations, while National Bank of Canada fell slightly short.

Given the uncertainty surrounding tariffs, analysts are closely monitoring the provisions for credit losses (PCLs), the reserves lenders set aside to address potentially problematic loans, a key metric for measuring the health of a bank’s loan book as well as the ability of households and businesses to pay their debts.

TD reported PCLs of $971 million in the third quarter, down from about a billion dollars in the same quarter a year ago.

Chun said tariffs, especially sector-specific tariffs, have created a sense of uncertainty, but the Canadian and U.S. economies have been resilient. Still, he said these are early days and it will likely be a “long road” before the full impact of tariffs is “well understood.”

He said it was encouraging to hear that Canada and the U.S. intensified their efforts to resolve the ongoing trade challenges last week, but a lot of work still remains.

“This is a time for bold, decisive leadership that unlocks Canada’s economic potential and strengthens our productivity and resilience,” he said.

John Aiken, an analyst at Jefferies Inc., said TD’s results were solid and came in ahead of expectations, partly due to lower-than-forecast PCLs.

“While progress is being made in its U.S. platform, we note that it was the one segment that came in (slightly) below expectations,” he said in a note on Thursday.

Mike Rizvanovic, an analyst at Bank of Nova Scotia, described TD’s results as a decent quarter, but said a $333-million restructuring charge related to its previously announced plan of cutting about two per cent of its workforce “somewhat diminished” the quality of the earnings.

The bank’s Canadian personal and commercial banking segment had a record net income of $1.9 billion, four per cent higher than last year, which TD said was driven by a higher revenue and partially offset by higher non-interest expenses and PCLs. Revenue was a record $5.2 billion.

“Canadian personal banking achieved record year-to-date digital sales in personal chequing, savings and cards combined,” TD said in a statement.

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TD’s wealth management and insurance segment posted a net income of $703 million, up 63 per cent from last year, driven by “record assets and record earnings in wealth management, strong insurance premium growth, and lower estimated losses from catastrophe claims,” the bank said.

• Email: nkarim@postmedia.com