Is TD Bank Still a Buy After Its Huge Runup?

It’s easy to feel like we’ve missed out on the best of TD Bank’s gains after its recent surge. Investors keep asking if the run-up is really over, or if we’re looking at another chance to buy quality at a fair price.

Despite the rally, there are still good reasons for long-term investors to keep TD Bank on their radar. However, there are also some issues. Is it one of the better stocks in Canada to buy today, or has it run its course?

What’s Behind TD Bank’s Recent Stock Rally?

Let’s be honest, TD’s rebound in 2025 caught plenty of investors off guard. After a slow stretch in late 2024 due to some anti money laundering issues, the stock surged over 25% in just six months, putting it near the top of the TSX’s banking sector performers.

Long-term performance has still dragged relative to a bank like Royal, and as you can see it all started when the AML issues surface.

But what’s sparked its recent sharp turnaround?

First, clarity on anti-money laundering (AML) penalties has lifted a big cloud. Investors hate uncertainty. With more details now public and the worst-case scenarios off the table, we’re seeing renewed confidence among both retail and institutional players. Money that was sitting on the sidelines is now coming back.

Stronger earnings have played a big role as well. When TD posted better-than-expected numbers, especially in its core Canadian personal and commercial banking business, it forced analysts to reconsider their bearish calls. Several brokerages have since bumped up their price targets and ratings for the stock.

Catalysts	Impact on TD Stock
Clarity on AML issues	Reduced risk discount
Higher earnings	Upward target revisions
Sector-wide momentum	Lifts banking valuations
Margin improvement (NIM growth)	Boosts future outlook

On the sector level, the broader Canadian financials have started to recover, thanks to more stable economic data. That tailwind has helped TD outperform some of its major peers recently, primarily because it was one of the cheaper Big 6 Banks.

I’ve also noticed more inflows into blue-chip financial names from pension and ETF managers, hinting that big-money players see long-term value in TD below $100 a share.

Core Banking Operations: Rebounding or Just Stabilizing?

Let’s dig into TD’s main segments: Canadian retail, U.S. operations, and wealth management, to see if the bank’s core is showing real momentum or just treading water. The numbers don’t always tell the full story, especially with so much noise from tariffs and geopolitical tensions.

Canadian retail banking is still the bank’s bread and butter. Net interest margins have firmed up a bit thanks to higher lending rates, but we’re not seeing the explosive loan growth we had a few years back. Deposit stickiness is holding, which should bode well for overall funding.

Segment	Net Interest Margin	Loan Growth	Credit Quality	Recent Trend
Canadian Retail	Solid, steady	Modest	Still strong	Slight rebound in profit margins
U.S. Operations	Under pressure	Flat	Minor uptick in NPLs	Started to stabilize, but no big recovery
Wealth Management	Mixed	Growth weak	High asset quality	Market-dependent with some fee pressure

The company’s US division has been a big drag. Last quarter, profit from that arm was soft, with little help from loan growth or fees.

Credit quality is holding up, thanks in part to cautious consumer lending, but it is also because the banks are scaling back. I’m watching for any cracks, since the Bank of Canada’s rate path affects both mortgage payments and overall borrowing activity.

It’s clear the core bank isn’t running away with record performance, but I do see signs of stabilization, especially in Canadian retail. Still, U.S. performance needs to show more before I could call this a full rebound.

Valuation: Still Undervalued or Fully Priced In?

After such a strong run, the core question is whether TD is still inexpensive or if the recent gains already reflect all the good news and strong results.

Looking at basic valuation metrics, TD is trading at a price-to-earnings (P/E) ratio right around its 5-year average. Compared to other major Canadian banks, TD’s P/E isn’t the highest, but it’s no longer at a deep discount, either.

Metric	TD Bank (2025)	5-Year Avg	Big 5 Banks Avg
P/E Ratio	11-12	~10	~10-11
Price/Book (P/B)	1.5	~1.3	~1.4
Dividend Yield	4.2%	~4.2%	~4.8%

Some valuation models peg TD as materially overvalued compared to intrinsic value, suggesting investors might be paying a premium post-rally. However, I have a feeling these are factoring in previous AML costs, which is why we should always take automated valuation models with a big grain of salt. Although I think it is likely expensive here, it is certainly not massively overpriced.

Is there room for multiple expansion? Unlikely, unless earnings growth surprises to the upside or the Bank of Canada’s rate policies change dramatically. These banks have very steady valuations and typically don’t veer too much off course in terms of what they historically trade at. Investors might now have to look for returns through continued earnings growth or buybacks, rather than hoping for a higher valuation ratio.

TD does have a solid capital position and has used buybacks before, but with the shares not looking cheap, repurchases may not boost value as much as they would have at prior lower prices.

If TD is to deliver outsized returns from here, it needs to deliver on profit growth, not just a higher share price multiple.

AML Penalty Fallout: Lingering Risk or Fully Absorbed?

Let’s get right to the heart of it. The U.S. regulatory hammer came down hard on TD, handing out a penalty of about $3 billion USD due to severe anti-money laundering (AML) failures.

The bank’s monitoring processes missed critical red flags, leading to significant scrutiny from the U.S. Department of Justice and other agencies. For TD Bank holders, this wasn’t just a slap on the wrist; it was a wake-up call.

Now, the big question we all have: is this risk behind us, or does it still linger?

Markets hate surprises, and in a sense, this is now a “known known.” The fine was public, and the market reacted accordingly, with TD’s share price taking a hit and then staging a recovery. At this point, many investors see these costs as mostly absorbed.

But it isn’t just about the cheque they wrote. There’s still a fog of uncertainty around potential asset cap-like restrictions, and ongoing regulatory monitoring in the U.S. remains a real risk. If we see more headlines or if regulators sense repeat problems, the bank’s access to American growth could be squeezed.

To their credit, TD has started boosting investment in compliance and beefed up internal controls. We’ve noticed management focusing more on hiring AML staff and upgrading their monitoring systems, which should address some of the gaps.

For Canadians invested in the bank, the penalty looks like a big hit that’s been digested, but the aftershocks, especially in terms of regulation and reputation, could linger longer than the market hopes.

We can look to a bank like Wells Fargo, which had its asset cap linger for the better part of 7 years.

US Regulators will be in no rush to remove TD’s unless they see notable improvements. I would expect this to exceed well beyond 2028.

Is There Still Upside for Investors?

TD has been the best performing Big 6 Bank over the last while. While that kind of runup is exciting, the key for me is long-term. I don’t care how much the bank moves over a 6 month time period. I care where it will be in a decade.

I ended up selling my TD Bank holding back in 2023. I didn’t like where the AML issues were going. However, I do see several positives now.

Earnings could normalize as credit losses steady and loan demand rebounds. If the Bank of Canada continues cutting rates, that may also boost the value of TD’s loan book and spark new growth, especially if U.S. regional banks remain shaky and TD’s American assets gain market share. However, we would need some sort of asset cap lift there or the company will need to continue to recycle and sell current assets to allow it to still take on new loans.

Risks remain though. Loan growth has been anemic and regulatory changes are still working through, with some lag that could impact profits. Even so, the stock seems priced for these headwinds, so surprises to the upside could have a bigger effect.

For long-term investors, TD fits well in a TFSA or RRSP, given its track record of growing dividends and stable operations. For those with a shorter time horizon, I’d keep an eye on the U.S. banking sentiment, the pace of Bank of Canada rate cuts, and how leadership steers through the next round of economic data.