This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.
“The fundamentals of our businesses are strong, but we continue to face headwinds from slower loan growth in Canada and low interest rates globally. In Canada, the slowing housing market has raised concerns about the possibility of a more dramatic correction. As you know, several years we were worried about the housing market and the risk that Canada was running. We spoke publicly about those concerns. But the government has responded with a number of reforms, which are having an impact. In my opinion, given the structure of Canadian lending, Canadians do not need to worry that we will see the type of meltdown that has occurred in other countries. We may see some softening in prices, but this will be a good thing, not a prelude to a major correction.”
“Our views on the global economy have not changed materially from last quarter. On the positive side, economic fundamentals in the United States continue to improve. The main impediment to growth appears to be the speed and nature of the withdrawal of fiscal stimulus. Debate has actually now opened up on how and when to withdraw some of the monetary expansion. All of this is very good news.
At the same time, the rest of the world looks no stronger. Europe is mired in a recession, Asian growth seems more modest and Japanese attempts to restimulate their economy through monetary stimulation have set off further downward pressure on interest rates and currency values.
But Canada is affected by these competing global forces, and our view is likely to underperform the United States in the next few years. For TD, we have to assume, despite the discussion that’s going on about where interest rates are going, that for our purposes of running the business, that interest rates do not rise soon and, therefore, that we will continue to face downward pressure on margins for at least one more year. That’s why, despite the good performance we recorded in the first half of the year, we are continuing to focus on expense management. The operating environment has changed in the last couple of years, and we had changed with it. Finding current year cost savings is not enough. We continue to focus on more permanent cost reductions.”