TD Bank (TSX: TD) has been a staple in Canadian portfolios for decades. With over 27 million customers and a strong presence in both Canada and the U.S., it’s one of the country’s most recognizable financial institutions. But like many big banks, TD stock has had a rocky ride recently. So, let’s dig into where TD stock might be in two years and whether now is a smart time to stay patient or walk away.
What happened?
The biggest headline has been TD stock’s regulatory mess south of the border. In early 2025, TD reported that it would face fines of around $3 billion related to long-standing anti-money laundering (AML) issues in its U.S. operations. It’s a major setback, not only in dollars but in reputation. The situation also contributed to the collapse of its planned US$13.4 billion acquisition of First Horizon Bank in 2023, which had been intended to expand TD’s American footprint.
The impact of these challenges showed up in its earnings. In the first quarter (Q1) of 2025, TD stock reported net income of $2.79 billion, a slight drop from $2.82 billion in the same quarter a year earlier. Earnings per share (EPS) held steady at $1.55, but the details reveal a more complicated picture. U.S. retail earnings plummeted 61% to $342 million, with a big part of that decline tied to the AML fallout and asset growth restrictions imposed by U.S. regulators.
Still strong
But here’s where things get interesting. Despite the American trouble, TD stock’s Canadian operations are still going strong. In Q2 2024, Canadian personal and commercial banking income rose by 7% year over year, thanks to a 10% revenue increase. That growth came from more lending activity, margin expansion, and better cost control. It’s a reminder that TD’s home base is still a powerful engine, even as its U.S. ambitions face speed bumps.
And TD stock is making moves to stabilize. In late 2024, it sold its US$13.5 billion stake in Charles Schwab, adding to its capital reserves and giving it more flexibility. The bank also brought in Raymond Chun as the new Group Head of U.S. Retail. These steps signal a broader cleanup and reset, and investors should expect the next year or so to be focused on rebuilding confidence and restoring compliance.
Capital markets have also helped cushion the blow. In Q1 2025, TD’s capital markets division saw income jump 46% to $507 million. That growth was driven by strength in trading and underwriting, as well as advisory services. While more volatile than retail banking, it shows that TD stock isn’t a one-trick pony. The bank still has multiple income streams, and some of them are firing on all cylinders.
Looking ahead
So, where will TD stock be in two years? A lot depends on how quickly it can resolve its U.S. issues. If it can satisfy regulators, lift the asset cap, and rebuild its compliance infrastructure, it could return to growth mode in the U.S. But even without aggressive U.S. growth, the bank’s Canadian operations and wealth management segments offer plenty of room for stable earnings.
On the dividend front, TD stock remains reliable. The bank currently offers a yield of 4.76%, and it has a long history of dividend increases. With a strong capital base and disciplined management, it’s unlikely that dividend investors will be left disappointed. The payout gives some cushion during these more uncertain months.
Bottom line
TD stock is down around 15% from its all-time high, making it one of the weaker performers among Canada’s Big Six banks over the last year. However, long-term investors may see this as a buying opportunity. If TD can resolve its compliance issues and return to growth, the current dip could turn out to be a decent entry point.
In the end, TD Bank isn’t in crisis, but it’s also not coasting. The next two years are likely to be a period of transition, with more restructuring than expansion. But for long-term investors looking for stable income, strong Canadian roots, and a management team working to fix the damage, TD stock could still be a smart hold. As always, patience is key, especially when the foundations are still solid.
