If you have followed Canadian bank stocks over the past year, you have probably noticed that Toronto-Dominion Bank (TSX:TD) has made a strong comeback. After underperforming earlier, TD stock has surged 59% over the last year, expanding its market cap to $217 billion. This strong move has raised an important question – is this just a relief rally, or is something more meaningful taking shape?
TD has spent the past year cleaning up, reshaping parts of its business, and strengthening its capital position. Those efforts are now starting to show up in the numbers. Its earnings quality has improved, key banking segments are growing again, and management has laid out clear targets for the years ahead. With 2026 just beginning, TD is once again being discussed as a potential long-term holding rather than a recovery trade.
In this article, I’ll walk through the bank’s recent performance, its latest financial results, and what could matter most for TD stock over the next phase of growth.
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What has driven TD stock’s recent momentum?
The recent strength in TD stock is mainly tied to its improved operating performance across several business lines. In the fourth quarter of its fiscal 2025 (for three months ended in October), the bank’s adjusted earnings rose to $2.18 per share, reflecting a strong YoY (year-over-year) improvement once one-time items were removed.
TD’s Canadian personal and commercial banking segment played a major role as the segment’s revenue reached a record $5.3 billion, up 5% YoY, backed by solid loan and deposit growth. Similarly, its loan volumes climbed 5% YoY, while deposits increased 4%, showing that its core customer activity remains healthy even in a mixed economic environment.
Meanwhile, the Canadian banking giant’s U.S. retail banking division also contributed to improved sentiment. Excluding past contributions from Charles Schwab, its reported U.S. retail net income rose 29% YoY in U.S. dollar terms with the help of lower credit losses and balance sheet restructuring. These improvements reassured investors that earlier challenges are now becoming more manageable.
A closer look at TD’s financial trends
Stepping back to the full year, TD’s net income stood firm at $20.5 billion, largely due to the sale of its remaining Schwab stake. On an adjusted basis, net income reached $15 billion, up from $14.3 billion last year, showing steady underlying growth.
Adjusted earnings per share for the year increased to $8.37, compared with $7.81 last year. That improvement came from higher revenue, disciplined cost control, and more stable credit conditions. Importantly, provisions for credit losses remained contained, with full-year provisions equating to 0.47% of average loans, a level that suggests manageable risk.
Similarly, TD’s capital position also strengthened. Its Common Equity Tier 1 ratio stood at 14.7% at the end of the latest quarter, providing it with a sizable buffer and flexibility for future growth and dividends.
Why TD stock still has long-term appeal
Beyond recent results, TD’s strategy points toward sustainable growth. Its management has laid out clear targets for fiscal 2026, including a roughly 13% adjusted return on equity and 6% to 8% adjusted earnings growth. These goals clearly reflect an increasing focus on deeper customer relationships, stronger fee income, and disciplined capital allocation.
Moreover, TD is still investing heavily in governance, controls, and technology, especially in its U.S. operations. While these investments add costs in the short term, they are likely to support long-term stability and earnings durability.
Taken together, these factors explain why TD stock continues to be a strong long-term holding. With solid core banking performance, strong capital levels, and clearly defined growth targets, I expect TD stock to continue outperforming the broader market in 2026 and beyond.
