Ray Chun, Toronto-Dominion Bank's new chief executive, unveiled his turnaround plans during the bank's investor day on Monday.Galit Rodan/The Globe and Mail
Ray Chun, Toronto-Dominion Bank’s TD-T new chief executive, did not mince words while unveiling his multiyear rebuild strategy, emphasizing that TD needs to revamp its culture and also streamline its business for the digital age.
At the bank’s investor day on Monday, Mr. Chun stressed that TD is “getting back to winning” and will hold its employees accountable for better performance. He also promised to cut between $2-billion and $2.5-billion in annual costs, return another $8-billion to shareholders next year through share buybacks, and boost the revenue that TD earns per client.
Once a dominant bank that garnered a premium valuation, TD lost its lustre over the last five years. Much of the trouble emanated from the United States, where TD pleaded guilty in October, 2024, to conspiracy to commit money laundering. Yet across the organization, TD also suffered from a cultural erosion. Over time, the bank became more bureaucratic and turned more risk-averse.
TD Bank hires new COO from outside, revamps legal team as CEO Ray Chun puts his stamp on the lender
TD Bank hires new COO from outside, revamps legal team as CEO Ray Chun puts his stamp on the lender
TD has already committed to fixing its anti-money-laundering (AML) systems, and during his investor presentation in Toronto, Mr. Chun reiterated that this remediation plan remains his number one priority.
But he also promised to fix the way TD operates. “Probably the most important thing a CEO does is set the culture of an organization,” he said in an interview. On this front, he stressed three new pillars: accountability, curiosity and courage.
“Curiosity to me is what drives innovation. I think we’ve lost a little bit of that over the years,” he said. As for courage, he wants employees to think big again, “to set ambitious objectives for our clients, for our shareholders, for ourselves,” he said.
Mr. Chun also had a strong message for shareholders, promising to do better after TD underperformed on a variety of metrics over the last five years, such as share price performance and return on equity, which is a crucial marker in the banking industry.
“In recent years, our performance has slipped,” he said in his remarks to investors and analysts. “That’s unacceptable.”
Mr. Chun’s blunt messages are vastly different from those offered by the bank’s previous regime, which repeatedly told investors that TD was in stellar shape. They also follow widespread governance changes at the bank, which include a new board chair and five new board directors.
However, it will take time for Mr. Chun’s strategy to take hold, especially after U.S. regulators imposed an asset cap on TD’s U.S. retail-banking franchise because of the AML deficiencies, effectively limiting the division’s growth.
To start, the new CEO is targeting a 13-per-cent adjusted return on equity during TD’s next fiscal year, slightly below the 13.3-per-cent average adjusted ROE reported by Canada’s Big Six banks last year, and earnings-per-share growth of 6 to 8 per cent.
By fiscal 2029, four years out, TD is targeting a 16-per-cent adjusted return on equity and earnings-per-share growth of 7 to 10 per cent.
To reach these targets, Mr. Chun stressed that TD can gain a lot from cutting expenses, with plans to deliver $2-billion to $2.5-billion in annual savings. These reductions will come from multiple efforts, including pushing clients toward digital channels, where possible; making technology changes in the back office and middle office to modernize and digitize routine tasks; and utilizing artificial intelligence.
TD was an early adopter of AI, buying Toronto-based Layer 6 in 2018, but has yet to deploy the technology in a widespread manner. That is changing under Mr. Chun, and TD now expects AI will deliver $500-million in annualized cost savings, as well as $500-million in annualized revenue gains.
Mr. Chun is also changing TD’s capital strategy and is happy to return it to shareholders. That includes another big share buyback plan in fiscal 2026 that will return a total of roughly $8-billion. Much of this capital comes from selling the bank’s stake in The Charles Schwab Corp. SCHW-N
In all, roughly $15-billion will now be returned to shareholders from selling TD’s investment in Schwab.
Explaining his openness to returning cash, Mr. Chun said the new mandate fits will his overarching plan. “It’s not a capital-intensive strategy,” he said in the interview. Most of TD’s growth will come from organic expansion, and the business already generates excess cash.
Rather than spend on expensive acquisitions, Mr. Chun hopes to grow the bank by deepening client relationships. In other words, he wants it to generate more revenue per client.
TD has multiple initiatives for this, including making its branches more like advice centres. Today, clients often come in to complete transactions, but TD hopes to make transactions a digital experience and instead use the in-person interactions for activities such as wealth advice.
In doing so, TD can boost its wealth management business, something shareholders tend to like because the business is known for providing “sticky” fees. (In wealth, banks are usually paid as a percentage of the assets they manage, not per transaction).
To help with this effort, TD plans to add 1,200 advisers and private bankers in Canada, and 500 financial advisers in its U.S. retail business. A key element of this plan is to put more private bankers in TD’s commercial banking centres, because small-business owners tend to want wealth advice.
In the U.S., where TD’s asset growth is limited by regulators, the goal is to cross-sell wealth products to retail banking clients in the mass affluent cohort – wealthy, but not high-net-worth.
Leo Salom, head of U.S. retail at TD, said during his presentation that 30 per cent of TD’s U.S. retail clients are mass affluent, and they have a total of US$600-billion of net investable assets at other institutions.