TD: Future Will Balance U.S. Regulatory Overhang And Capital Return Initiatives

Analysts have nudged their fair value estimate for Toronto Dominion Bank higher to approximately C$125 from about C$118, reflecting upwardly revised price targets supported by expectations for improving revenue trends, resilient earnings growth, and disciplined capital deployment under new leadership, despite ongoing U.S. regulatory overhang.

Analyst Commentary

Street research has turned more constructive on Toronto Dominion Bank in recent months, with a series of upward price target revisions reflecting improving growth expectations and greater confidence in managements strategic roadmap. At the same time, valuation and regulatory uncertainties continue to temper some views, resulting in a balanced but cautiously optimistic consensus.

Bullish Takeaways

Bullish analysts highlight that repeated price target increases into the C$114 to C$122 range signal rising confidence in medium term earnings power and support the recent fair value upgrade.
Several notes point to reinstated medium term EPS growth guidance in the high single digits and a return to positive operating leverage as key drivers underpinning higher valuation multiples.
Managements focus on deepening client relationships, simplifying the organization, and maintaining strict cost and capital discipline is viewed as enhancing execution quality and return on equity potential.
Higher than previously expected share buybacks and better U.S. retail earnings forecasts are seen as incremental supports to 2026 EPS estimates and to upside relative to prior expectations.

Bearish Takeaways

Bearish analysts argue that after a roughly 50 percent year to date share price rally, much of the near term improvement in fundamentals may already be reflected in the current valuation.
Ongoing U.S. regulatory constraints, including the asset cap on the U.S. subsidiary following past compliance issues, are seen as limiting capital deployment flexibility and near term growth optionality.
Some research maintains more neutral or even cautious ratings despite higher price targets, signaling that execution risks around restructuring, cost control, and regulatory remediation still warrant a valuation discount.
There is concern that achieving the upper end of managements EPS growth and ROE targets could prove challenging if macro conditions soften or if regulatory timelines extend, potentially capping further multiple expansion.

What's in the News

TD Bank is part of a consortium of ten global lenders exploring the issuance of stablecoins pegged to G7 currencies, signaling growing engagement with digital asset infrastructure and potential new payment rails for clients (Reuters).
The bank shifted from an annual to a semi annual dividend review cycle and declared a CAD 1.08 quarterly dividend per common share for the quarter ending January 31, 2026, reinforcing its focus on aligning shareholder returns with earnings growth.
TD completed a major share buyback tranche, repurchasing 64.6 million shares for CAD 6.1 billion in total, or roughly 3.73 percent of shares outstanding, underscoring active capital return alongside balance sheet strength.
New low cost and no cost banking options for Indigenous Peoples in Canada, including fee free TD Minimum Chequing for eligible customers and expanded transit transaction flexibility, highlight the bank's push on financial inclusion and compliance with updated national standards.
Through a new membership in MIT Media Lab's sAIpien program and the launch of an AI powered Wealth Virtual Assistant, TD is deepening its investment in responsible AI to modernize client service and internal knowledge management.

Valuation Changes

Fair Value Estimate has risen modestly to approximately CA$124.93 from about CA$118.13, reflecting improved expectations for earnings durability.
Discount Rate has edged down slightly to roughly 7.24 percent from about 7.26 percent, indicating a marginally lower perceived risk profile.
Revenue Growth outlook has improved, with the projected decline narrowing to around 2.35 percent from roughly 3.08 percent previously.
Net Profit Margin forecast has softened slightly to about 23.53 percent from approximately 24.48 percent, suggesting modestly lower profitability assumptions.
Future P/E multiple has increased slightly to around 16.9x from about 16.3x, implying a modestly higher valuation being ascribed to forward earnings.

Fintech disruption and regulatory expenses are pressuring traditional revenue streams and profit margins, challenging the bank's mid-term growth expectations.
Exposure to Canadian real estate and trade uncertainties heightens risk of credit losses and weakens confidence in lending and asset expansion strategies.
Strong revenue growth, digital innovation, strategic restructuring, and diversified operations position TD for sustained profitability and shareholder returns in evolving financial markets.

Catalysts

About Toronto-Dominion Bank

Provides various financial products and services in Canada, the United States, and internationally.What are the underlying business or industry changes driving this perspective?

Expectations for TD's future revenue growth may be overstated due to headwinds from the accelerating shift to digital and non-traditional financial services competitors, which are eroding the market share and fee income of traditional banks as fintechs and large tech platforms capture more of the financial services value chain.
Persistent investment in compliance (notably elevated AML remediation, cyber, and fraud prevention costs) is expected to drive higher structural expenses, weighing on net margins and overall earnings growth well into 2026 and 2027, as regulatory scrutiny and associated operational costs remain elevated.
The bank's outlook may be overly optimistic regarding lending growth and asset expansion in the US due to regulatory asset caps and balance sheet restructuring programs, which are anticipated to limit loan growth and put downward pressure on net interest income through most of 2026.
TD's overexposure to Canadian real estate and consumer lending heightens its sensitivity to a potential housing market correction, which could result in elevated credit losses, thereby increasing provisions and constraining EPS and return on equity in a slower-growth macroeconomic environment.
Prolonged uncertainty and potential volatility related to international trade (e.g., USMCA/CUSMA renegotiation and tariff risks) are likely to dampen business and consumer confidence, reducing demand for loans and wealth management products-threatening topline growth assumptions embedded in the valuation.

Toronto-Dominion Bank Earnings and Revenue Growth

Toronto-Dominion Bank Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Toronto-Dominion Bank's revenue will decrease by 0.5% annually over the next 3 years.
Analysts assume that profit margins will shrink from 32.0% today to 22.7% in 3 years time.
Analysts expect earnings to reach CA$14.2 billion (and earnings per share of CA$8.73) by about September 2028, down from CA$20.3 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as CA$16.4 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.6x on those 2028 earnings, up from 8.7x today. This future PE is lower than the current PE for the US Banks industry at 14.7x.
Analysts expect the number of shares outstanding to decline by 2.33% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.22%, as per the Simply Wall St company report.

Toronto-Dominion Bank Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Consistent volume and fee-based revenue growth in Canadian Personal and Commercial Banking, Wealth Management, and U.S. segments-and record asset levels in multiple divisions-indicate ongoing demand for TD's core services, which could support top-line revenue expansion even in challenging environments.
Robust execution in AI/digital initiatives (e.g., TD AI Prism, Virtual AI Assistant) and continued investment in digital/mobile banking position TD to benefit from the secular shift toward digital financial services, potentially increasing operational efficiency and net margins.
Strategic restructuring-including exiting low-return portfolios, targeted asset sales, and focused cost reduction programs-is generating significant cost savings and improving the bank's return on equity and profitability, providing cushion for long-term earnings growth.
Strong capital position, with a CET1 ratio at 14.8%, and completion of major share buybacks, enhances TD's ability to increase dividends or repurchase additional shares, which could underpin shareholder returns and support the share price.
Growing capital markets and advisory franchise (bolstered by the Cowen acquisition) and diversified earnings mix (including resilient insurance and wholesale banking) strategically position TD to capture growth opportunities and achieve stronger profit margins as global financial conditions stabilize.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of CA$106.0 for Toronto-Dominion Bank based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$120.0, and the most bearish reporting a price target of just CA$93.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$62.5 billion, earnings will come to CA$14.2 billion, and it would be trading on a PE ratio of 14.6x, assuming you use a discount rate of 7.2%.
Given the current share price of CA$103.33, the analyst price target of CA$106.0 is 2.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

TD: Future Performance Will Rely On U.S. Earnings And Cost Control Efforts