Despite a sharp slowdown in mortgage originations this year, TD Bank reported strong annual volume growth of 4% in the second quarter.
That helped drive overall loan volume growth across all of its Canadian personal and business lending of 6%.
“TD continued to execute against the strategies outlined at our recent Investor Day, taking share in a slower growth market and expanding our portfolio,” TD’s President and CEO Bharat Masrani said during the bank’s earnings call.
In previous quarters, TD, like other banks that offer fixed-payment variable-rate mortgages like BMO, RBC and CIBC, had seen the amortization periods for those mortgages lengthen dramatically.
As of Q3, 22.8% of the bank’s mortgage portfolio had an amortization period of over 35 years, down from a high of 27.4% reached in the first quarter.
| Q3 2022 | Q2 2023 | Q3 2023 | |
| 15-20 years | 15.6% | 13.8% | 13.7% |
| 20-25 years | 40% | 29.7% | 29.3% |
| 25-30 years | 34.2% | 20.5% | 22.3% |
| 30-35 years | 1% | 1.8% | 2.9% |
| 35 years and more | NA | 25.1% | 22.8% |
“What we’re seeing is our customers, when they’re hitting [their] trigger rate, we have a proactive program to reach out…and give them the options, which include lump sum payments, increasing their payments, switching to a fixed-rate product, etc.,” explained Michael Rhodes, Group Head, Canadian Personal Banking.
“And we’re having good uptake,” he added. “So I think that table shows consumers reacting to our outreaches with respect to the customers who have [reached their] trigger rate.”
Asked specifically what percentage of the bank’s mortgage portfolio that might represent, Rhodes simply said it’s a “meaningful number of customers who we reach out to who are making the changes.”
| Q3 2022 | Q2 2023 | Q3 2023 | |
| Residential mortgage portfolio | $244.5B | $247.7B | $256.4B |
| HELOC portfolio | $112.2B | $114.4B | $117B |
| Percentage of mortgage portfolio uninsured | 80% | 81% | 82% |
| Avg. loan-to-value (LTV) of uninsured book | 47% | 53% | 52% |
| Portfolio mix: percentage with variable rates | 44% | 43% | 39% |
| Mortgages renewing in the next 12 months | NA | ~9% | ~9% |
| Canadian banking gross impaired loans | 0.16% | 0.22% | 0.24% |
| Canadian banking net interest margin (NIM) | 2.70% | 2.74% | 2.74% |
| Provisions for credit losses | $351M | $247M | $766M |
Source: TD Bank Q3 Investor Presentation
Source: TD Conference Call
Note: Transcripts are provided as-is from the companies and/or third-party sources, and their accuracy cannot be 100% assured.
Featured image: Cole Burston/Bloomberg via Getty Images
