Toronto-Dominion Bank missed analysts’ earnings estimates after setting aside more money than forecast for potentially souring loans and announcing a restructuring charge related to a planned 3% cut to the lender’s workforce.

The bank, Canada’s second-largest lender, said Thursday that it took C$266 million ($195 million) in after-tax restructuring charges in the fiscal fourth quarter related to the staff reductions as well as reworking its real estate footprint, including a reduction of 1.2 million square feet (111,000 square meters) of office space in its US operations.

Toronto-Dominion also warned that it will be “challenging” for the bank to meet its medium-term earnings targets for fiscal 2024.

The layoffs, which the Toronto-based bank said will come through attrition as well as targeted cuts, follow similar announcements by other Canadian banks, including Royal Bank of Canada, Bank of Montreal and Bank of Nova Scotia. Toronto-Dominion’s workforce reduction would amount to more than 3,000 positions. On a pretax basis, Toronto-Dominion said that it expects the restructuring to generate C$400 million in savings in the current fiscal year and C$600 million annually.

“We’ve undertaken a restructuring program to streamline and deliver efficiency, to create capacity to invest in the future,” Toronto-Dominion Chief Financial Officer Kelvin Tran said in an interview. Some job cuts have already been made and others will happen in 2024, he said, declining to specify any particular area where the bank is trimming.

The bank’s shares slipped 1.8% to C$81.84 at 9:43 a.m. in Toronto trading. They have dropped 6.6% this year, compared with a 5.9% decline for the S&P/TSX Commercial Banks Index.

Also reporting results Thursday were Royal Bank, Canada’s biggest lender, and Canadian Imperial Bank of Commerce, both of which beat analysts’ estimates. Royal Bank’s earnings for the three months through October got a significant boost from C$578 million in deferred tax adjustments. The shares of both lenders climbed.

At Toronto-Dominion, provisions for credit losses totaled C$878 million in the quarter, more than the C$844.5 million analysts had expected. Toronto-Dominion earned C$1.83 a share on an adjusted basis, it said in a statement Thursday, less than the C$1.90 average estimate of analysts in a Bloomberg survey.

‘Complex’ Environment

For fiscal 2024, it will be difficult for the bank to meet its medium-term adjusted earnings-per-share growth target of 7% to 10% and return-on-equity target of more than 16% “as it navigates a complex macroeconomic environment” along with “expected further normalization” in loan-loss provisions, Toronto-Dominion said in the statement.

Adjusted non-interest expenses came in at C$7.24 billion for the fourth quarter, more than the C$6.89 billion analysts expected.

“We believe it was a mixed quarter for TD at first look with elevated expenses offsetting much better margins in US lending, while credit costs were as expected,” Keefe, Bruyette & Woods analysts Mike Rizvanovic and Abhilash Shashidharan said in a note to clients. “Looking ahead, however, we see the bank’s sizable restructuring program as a positive, and likely to boost forward consensus estimates meaningfully.”

Toronto-Dominion said it’s still dealing with a US Department of Justice investigation about its compliance with anti-money-laundering rules. It said it doesn’t think that will have a major impact on financial results, but “there is a possibility that the ultimate resolution of legal or regulatory actions may be material to the bank’s consolidated results of operations for any particular reporting period.”

Tran declined to comment further on the investigation.

Analysts have said they are unsure when a penalty in the matter could be assessed, but have estimated it could range from $500 million to $1 billion. While it can afford to pay such a fine — it has plenty of excess capital after its failed deal to acquire Memphis, Tennessee-based First Horizon Corp. — the matter could come with higher compliance costs and reputational damage, National Bank of Canada financial analysts led by Gabriel Dechaine wrote in a note to clients last week.

Royal Bank

At Royal Bank, corporate and investment banking revenue rose to the highest in almost two years in the fiscal fourth quarter, and the capital-markets unit’s net income climbed 36% from a year earlier. Results were also helped by a C$578 million boost related to deferred tax adjustments. The Toronto-based lender earned C$2.78 per share on an adjusted basis in the fiscal fourth quarter, topping the C$2.62 average estimate of analysts in a Bloomberg survey.

Provisions for credit losses totaled C$720 million, more than the C$662.6 million analysts had expected.

Read More: RBC Beats Estimates on an Increase in Capital-Markets Income

Royal Bank’s US subsidiary, City National Bank, reported an adjusted net loss of $89 million for the three-month period. That followed a loss of $12 million in the third quarter after its parent injected almost $3 billion in capital this year into the Los Angeles-based bank, which has struggled with deposit outflows and a higher cost of funding. Royal Bank cut 5% of City National employees and incurred severance costs in the quarter, Royal Bank Chief Executive Officer Dave McKay said on a conference call with analysts Thursday.

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Royal Bank is seeking new domestic growth through a landmark C$13.5 billion deal to acquire HSBC Holdings Plc’s Canadian operations, a deal announced a year ago. The transaction has won approval from the Competition Bureau, Canada’s antitrust authority, but is still awaiting the green light from Finance Minister Chrystia Freeland.

McKay said on the conference call that he’s “confident in the overall outcome of this transaction” and that it would send a “very bad signal” to foreign investors if the government were to block the deal.

“It would look horrible on Canada if you didn’t allow the free flow of capital,” he said.

CIBC Beats

Toronto-based CIBC also beat estimates as it reported lower-than-expected provisions for potentially bad loans and kept expenses in check.

The bank earned C$1.57 per share on an adjusted basis in the fiscal fourth quarter, beating analysts’ C$1.53 average estimate.

Read More: CIBC Earnings Beat Estimates on Lower-Than-Expected Provisions

CIBC set aside C$541 million in credit-loss provisions, less than the C$559.9 million forecast by analysts. Provisions for losses on impaired loans climbed C$259 million. CIBC’s earnings have previously been dented by a surge in impairments in the bank’s US office loan portfolio.

(Updates with CFO comment, other Canadian bank earnings starting in fifth paragraph.)