RAROC profile and corporate credit pricing model derived from Pillar 3 disclosures.
TD Bank is a Canada-based bank with approximately EUR 420bn of corporate credit exposure (EAD) under the Mixed approach to credit risk capital. The numbers below come directly from TD Bank's most recent Pillar 3 CR6 regulatory filings and are used to model how this bank prices corporate credit facilities.
TD Bank is mid-sized by corporate EAD (24 of 59). Its cost-to-income ratio of 55.0% is structurally efficient (+5.2pp vs the 59-bank cross-section average of 49.8%). The corporate portfolio is mixed-grade, with an EAD-weighted average PD of 2.1% against a cross-bank average of 2.1%.
The consolidated book blends A-IRB and F-IRB sub-portfolios, so the headline PD and LGD averages mask meaningful dispersion between segments — relevant when benchmarking specific sectors or geographies. Unsecured LGD disclosed at 32.9% is -3.9pp against the 36.8% cross-bank average, indicating recovery assumptions that are more favourable than the peer median — often a feature of senior-unsecured lending to large investment-grade obligors.
On the standardised BBB+ EUR 25M 5-year term loan used across every bank profile, TD Bank lands in the top half of the pricing ranking (#14 of 59), with a RAROC of 7.70% and a minimum spread of 239bp to reach the 12% hurdle. Within Canada specifically, the bank ranks #2 of 3 on this same calculation.
| Parameter | Value | What it means |
|---|---|---|
| IRB approach | Mixed | How the bank computes risk-weighted assets |
| Cost-to-income ratio | 55.0% | Operating cost share of net revenue |
| Effective tax rate | 21.0% | Applied to RAROC numerator after EL and funding |
| Average corporate PD | 2.09% | EAD-weighted probability of default |
| Avg LGD (unsecured) | 32.9% | Loss share if borrower defaults, no collateral |
| Avg LGD (secured) | 20.0% | Loss share with eligible collateral |
| Funding spread | 15bp | Bank's wholesale funding cost above risk-free |
| Corporate EAD | EUR 420bn | Total exposure at default to corporates |
On a representative BBB+ rated, 5-year term loan of EUR 25M at 150bp spread with a 20bp commitment fee, TD Bank would generate an estimated RAROC of 7.70% against a typical 12% bank hurdle rate. To hit that hurdle on this exact deal, the bank would need a minimum spread of 239bp. This deal is significantly below target — the bank would either reprice it or decline.
| Component | Value |
|---|---|
| Annual revenue (spread + fees) | EUR 385,000 |
| Operating cost | EUR 154,000 |
| Expected loss (PD × LGD × EAD) | EUR 28,750 |
| Capital required (FPE) | EUR 2,451,320 |
| RAROC (after tax) | 7.70% |
| Min spread to hit 12% RAROC | 239bp |
Out of 59 banks in the OpenRAROC dataset, TD Bank ranks #14 by RAROC on this sample deal.
| Rank | Bank | Country | RAROC | Min spread |
|---|---|---|---|---|
| 1 | Qatar National Bank | Qatar | 9.00% | 203bp |
| 2 | DBS Group | Singapore | 8.18% | 224bp |
| 3 | JP Morgan | United States | 8.12% | 231bp |
| 4 | ICBC | China | 8.06% | 233bp |
| 5 | China Construction Bank | China | 8.06% | 233bp |
| 13 | Royal Bank of Canada | Canada | 7.70% | 239bp |
| 14 | TD Bank | Canada | 7.70% | 239bp |
| 15 | Credit Agricole | France | 7.67% | 243bp |
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