Canada’s next economic boom may not be built by one company. It could be financed by several very large banks.
Ottawa is trying to unleash roughly $1 trillion of investment over five years across energy, critical minerals, defence, artificial intelligence (AI), transportation, and infrastructure. Mines need financing. Data centres need financing. Ports, railways, pipelines, and factories need financing, too.
That creates an interesting opportunity for investors. Instead of trying to guess which individual project becomes the biggest winner, you could own a company collecting interest and fees from many of them.
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Follow the money
Prime Minister Mark Carney’s Canada Investment Summit produced commitments of nearly $500 billion in investments and financing, with roughly $325 billion coming from Canadian banks. Those aren’t cheques being written tomorrow. Instead, banks are essentially signalling how much capital they’re prepared to deploy as viable projects actually emerge.
Still, there’s a reason they’re getting ready. TD Economics estimates that more than 300 proposed or approved projects could generate about $1 trillion of Canadian investment through 2035. With stronger policy support, it believes the broader opportunity could reach $1.7 trillion.
Ottawa is trying to improve those odds as well. New measures announced around the summit would allow businesses to immediately deduct many forms of capital investment while speeding up certain approvals and tax rulings for very large projects.
More projects reaching a final investment decision could mean more borrowing, underwriting, advisory work, and capital-markets activity. That brings us to one bank making an especially large bet.
TD Bank is in for $150 billion of the action
Toronto-Dominion Bank (TSX: TD) announced a $150 billion, five-year commitment toward new lending, underwriting, advisory services, and other financing activities.
The money will target five areas: energy, critical minerals and resources, defence and aerospace, digital and AI infrastructure, and traditional infrastructure.
That makes TD an interesting picks-and-shovels play on Canada’s investment ambitions. If a mining company needs debt financing, TD can participate. If an infrastructure company issues securities, TD Securities can help underwrite them. And if two businesses strike a deal, its investment bankers can collect advisory fees.
Already strong
TD’s third-quarter adjusted earnings per share (EPS) rose 26% year over year, to $2.77. The segment most relevant to this investment boom looked even better. Wholesale Banking revenue climbed 25%, to $2.58 billion, helped by stronger lending revenue and underwriting fees. Adjusted net income surged 76%, to $743 million.
Those are precisely the activities that could benefit from a prolonged Canadian capital-spending cycle. TD also ended the quarter with a 14.3% Common Equity Tier 1 ratio. That capital cushion gives the bank flexibility to lend, invest, return money to shareholders, and withstand economic bumps along the way.
There’s 1 catch
TD stock has already had a tremendous run. Shares recently traded near $168, not far below their 52-week high, after climbing dramatically over the past year. TD’s latest results put its price-to-earnings ratio around 18, compared with the historically much cheaper valuations when investors were worried about its U.S. regulatory problems.
The dividend yield has also fallen to roughly 2.8% as the share price climbed. In other words, the bad-news discount is mostly gone. For investors buying stocks in Canada, the valuation the biggest reason not to chase TD aggressively today.
There are economic risks, too. Higher interest rates, weaker commodity prices, project delays, or an economic slowdown could reduce borrowing demand. Large projects announced with great enthusiasm also have an unfortunate habit of becoming smaller projects several years later.
Bottom line
I still like TD for long-term investors, particularly if you’re buying on pullbacks. But the news about the $150 billion commitment isn’t a reason to buy the stock on its own. What makes the story interesting is that TD’s lending and capital-markets businesses are already growing quickly just as Canada attempts to kick off its largest investment cycle in decades.
If even part of that $1 trillion-plus pipeline becomes reality, TD doesn’t have to guess which shovel hits gold. It’ll be financing the shovel.
