TD returns capital to shareholders for a second time, prompting questions about lending priorities
TD Bank Group has announced plans to repurchase up to $10 billion of its own common shares under a new buyback program, its second such move in less than a year, pending approval from the Office of the Superintendent of Financial Institutions (OSFI).
The program covers up to 61 million shares, representing approximately 3.74% of TD's outstanding common shares as of August 31, with all purchases expected to complete by July 2027. All acquired shares will be cancelled.
The announcement comes just days after TD completed a previous $7-billion buyback launched in January that resulted in the repurchase of 47.2 million shares.
Combined, the two programs would see TD return up to $17 billion in capital to shareholders within roughly a year.
What's driving the buybacks
The scale reflects a bank sitting on unusually high capital reserves. TD reported a Common Equity Tier 1 (CET1) capital ratio of 14.26% as of July 31, well above OSFI's minimum supervisory expectation of 11.5% for Canada's systemically important banks.
The bank posted a third-quarter profit of $4.62 billion for the period ended July 31, up 38% year-over-year, driven by record earnings in its Canadian businesses and wholesale banking operations.
The regulatory backdrop has also shifted in the banks' favour. OSFI reduced its Domestic Stability Buffer (DSB) from 3.5% to 3.0% of risk-weighted assets in June, freeing up an estimated $74 billion in excess capital across the Big Six banks.
OSFI's surprise decision to release billions in bank lending capacity subsequently confirmed the regulator had imposed no restrictions on how banks use the excess capital.
What it means for the broker channel
Capital returned to shareholders is capital not deployed into new lending, though TD's balance sheet is large enough that both can coexist simultaneously.
TD also indicated in late September that it is working to narrow pricing disparities between its broker and branch mortgage channels, a development worth tracking alongside the bank's concurrent decision to raise fixed rates as five-year bond yields climbed above 3.70%.
Together, the moves suggest TD is in margin optimisation mode rather than volume growth mode for now.
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