Toronto-Dominion Bank (TD) is positioned for sustained earnings growth and significant capital returns, with stronger-than-expected fiscal Q3 results and lower credit-loss expectations supporting a favorable outlook, RBC Capital Markets said Friday in a report.

RBC said the company's adjusted Q3 EPS of 2.77 Canadian dollars ($1.99) beat its CA$2.51 estimate and CA$2.47 consensus, driven by broad-based segment strength, particularly in wholesale banking and corporate, along with higher-than-expected net interest income and lower stage 3 provision for credit losses.

Management expects to "significantly outperform" its fiscal 2026 targets for 6% to 8% core EPS growth and 13% core return on equity, while lowering its outlook on the total provision for credit losses toward the low end of its 40 to 50 basis-point range and achieving its CA$900 million structural cost-reduction target, RBC said.

Toronto-Dominion may return more than CA$13 billion through share buybacks in fiscal 2027 while targeting a common equity tier 1 ratio of about 13% by the second half of 2027. The bank also remains on track toward its CA$2 billion to CA$2.5 billion medium-term structural cost-reduction goal, supporting continued operating leverage and capital generation, the report said.

RBC raised its price target on Toronto-Dominion stock to CA$173 from CA$156 and maintained its outperform rating.

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