- Key insight: TD Bank will spend much of 2026 internally auditing the enhancements it's made to its anti-money-laundering protocols.
- What's at stake: The bank was hit with historic penalties of more than $3 billion, along with an asset cap on U.S. operations last year.
- Supporting data: The bank spent $507 million on remediation in its 2025 fiscal year, and it expects to spend a similar amount in 2026.
More than a year after TD Bank Group was hit with historic anti-money-laundering related penalties in the U.S., the Canadian bank believes it's achieved promising momentum in America.
Leo Salom, who leads the Toronto-based company's stateside subsidiary, said Thursday that TD completed "the majority" of the U.S. management remediation actions this year.
"That being said, we're not at end of job," Salom said during TD's fourth-quarter earnings call, which covered the three-month period ending Oct. 31. "AML remediation remains our top priority, with significant work ahead and important milestones to come in 2026 and 2027."
Every action is subject to internal audit validation, much of which will take place in 2026, Salom said during the call.
The Bank Secrecy Act and AML remediation investments cost $507 million in the last fiscal year, and the bank expects similar expenses in 2026, as it had previously outlined.
TD's efforts have included machine learning enhancements to transaction monitoring, "advanced risk detection capabilities" and a look-back review, as required by its fall 2024 consent order with the Office of the Comptroller of the Currency.
Salom said the bank is working closely with both regulators and its regulator-mandated monitor to "ensure that we can demonstrate sustainability over the long term." But he was vague about how long the company may be bound by the enforcement actions.
"I think being able to demonstrate that, not only we've implemented the right actions, we've reduced residual risk, but that we can [also] demonstrate that over time will be critical in terms of earning release from the consent order eventually — and then potentially any interim relief," Salom said.
Last October, TD pleaded guilty to fumbling AML controls that allowed the laundering of hundreds of millions of dollars in dirty money through U.S. branches. It was hit with a regulatory asset cap, enforcement actions and more than $3 billion in fines and penalties.
The bank has been steadily shrinking parts of its now $382 billion-asset operation in the U.S., as it makes room for growth in certain lines of business while staying under its $434 billion asset cap.
In the quarter that ended Oct. 31, 2025, TD reduced its noncore loans by $5 billion and sold a notional $7 billion of investments. The bank will continue to sell some loans through the next fiscal year, but it doesn't expect additional investment portfolio changes.
Earlier this year, TD also rolled out a restructuring program, which it projects will eventually yield 750 million of Canadian dollars in annual cost savings. The bank now says that it plans to cut its full-time, company-wide workforce by some 3% — an increase from previous projections of 2% — and "optimize" its U.S. branch footprint to drive savings.
The company expects to complete the restructuring plan next quarter.
Jefferies analyst John Aiken said Thursday that TD delivered "a resilient performance in its U.S. retail banking platform" during the most recent quarter. The company reeled in $520 million of net income from its American business.
"As TD continues down its U.S. remediation path, avenues for growth become more apparent for 2026," Aiken wrote in a note to clients. "We believe that with the balance sheet restructuring essentially complete and with the efficiency benefits from the restructuring charges beginning to be felt, a resumption of growth should be expected for TD."
But Aiken added that TD will need to demonstrate loan growth in the first half of 2026 to prove that its future is indeed sunnier.
Raymond Chun, TD's president and CEO, said on the earnings call Thursday that he sees momentum "in every single one of the businesses," based on fourth-quarter earnings. He also said that U.S. core banking operations performed better than the bank had predicted they would earlier this year.
Chun did warn of "a high degree of uncertainty around tariffs and Canada-U.S. trade dynamics," but he said the shifting economic environment hasn't been all bad.
"In the U.S., the economy continues to perform, with businesses and households benefiting from regulatory and monetary policy changes," Chun said. "And we're seeing a pickup in investment activity in some sectors."
