Toronto-Dominion Bank Sets Aside $3 Billion for Compliance Fines, Sells Schwab Shares to Cover Costs

• TD Bank was founded in 1855 as the Bank of Toronto. It merged with the Dominion Bank in 1955 to form the Toronto-Dominion Bank.
• Over the years, TD has grown through mergers and acquisitions, including the acquisition of Canada Trust in 2000, which expanded its retail banking network across Canada.

Toronto-Dominion Bank (TD) is taking significant financial measures to address anticipated fines related to its anti-money laundering controls, including selling a portion of its stake in Charles Schwab Corp. The Canadian bank has earmarked a total of $3 billion to cover these expected penalties, reflecting its proactive steps to mitigate regulatory repercussions.

TD Bank is setting aside US$2.6-billion to cover U.S. regulatory penalties over anti-money laundering controls https://t.co/Y7ioFjKxQQ pic.twitter.com/IVnR8Q9qiL

— Connie (@reality_ca) August 21, 2024

TD announced that it had set aside $2.6 billion, adding to a previously announced $450 million provision. This allocation is intended to resolve compliance issues within its U.S. operations by the end of the calendar year. As a result of these financial strategies, TD’s shareholding in Schwab will decrease from 12.3% to 10.1%, following the sale of 40.5 million shares. This move was influenced by a need to strengthen its financial position amidst ongoing regulatory challenges.

The bank acquired its Schwab shares in 2020, as part of a deal involving the sale of its stake in TD Ameritrade to Schwab. The recent sale of shares was priced between $61.35 and $62.65, slightly below the market closing price, indicating a strategic discount to facilitate the transaction quickly.

The necessity for such financial maneuvers stems from TD’s challenges with its U.S. anti-money laundering (AML) operations, which have drawn scrutiny from the Department of Justice and other regulatory bodies. Allegations of bribery and failure to detect financial crimes across several U.S. branches have put TD under intense pressure, leading to the dismissal of approximately a dozen employees and the reshuffling of its senior compliance and legal teams.

⚠️ THIS IS NOT GOOD..

C anada’s TD Bank has set aside $2.6 billion for fines it is likely to face from U.S. regulators.

That’s bad news for Charles Schwab, because TD sold shares in the wealth manager to help offset the hit.. 🤔🤔 pic.twitter.com/TbzaFWDvyB

— CEO Watchlist (@CeoWatchlist) August 22, 2024

Furthermore, the bank’s ambitious $13.4 billion acquisition of First Horizon Corp was halted last year due to regulatory uncertainties, further complicating its U.S. expansion plans. This backdrop of compliance failures and regulatory investigations suggests that TD might also face operational restrictions in the U.S., affecting its growth and acquisition strategies.

Despite these challenges, TD remains committed to resolving its compliance deficiencies, with CEO Bharat Masrani emphasizing the importance of adhering to regulatory standards and obligations. The financial provisions and asset sales are part of broader efforts to stabilize the bank’s operations and reassure stakeholders of its commitment to regulatory compliance and sound financial management.

TD Bank takes US$2.6 billion hit on money laundering probe, sells Schwab shareshttps://t.co/FyurgjoaHE pic.twitter.com/adAdj7N3Qe

— National Post (@nationalpost) August 21, 2024

The bank’s upcoming fiscal reports will reflect these provisions, expected to impact its capital ratios, although it remains above the regulatory minimum requirements. The full extent of the non-monetary penalties remains uncertain, but the bank is bracing for a potentially prolonged period of regulatory scrutiny and operational limitations in the U.S. market.

Info

• Global Presence:
  • TD Bank operates in several countries, including Canada, the United States, and the United Kingdom. In the U.S., it is known as TD Bank, America’s Most Convenient Bank®.
  • TD is one of the top 10 banks in North America by assets and market capitalization.
• Financial Services:
  • TD offers a broad range of financial services, including retail and commercial banking, wealth management, and investment banking.
  • The bank is also involved in insurance, asset management, and capital markets.
• Environmental and Social Governance (ESG):
  • TD Bank is committed to sustainable finance and has set targets to reduce its carbon footprint. It has also pledged to achieve net-zero emissions by 2050.
  • The bank has been involved in various community development initiatives, particularly focusing on financial literacy and environmental sustainability.
• Recent Developments:
  • In recent years, TD has focused on digital transformation, enhancing its online and mobile banking platforms to improve customer experience.
• Charles Schwab was founded in 1971 by Charles R. Schwab. It started as a traditional brokerage firm but soon became a pioneer in the discount brokerage industry by offering low-cost trades.
• The company went public in 1987 and has since grown to become one of the largest brokerage firms in the U.S.

Major Points:

• Toronto-Dominion Bank (TD) has allocated $3 billion to cover expected fines due to deficiencies in its U.S. anti-money laundering controls.
• To finance these penalties, TD sold part of its stake in Charles Schwab Corp., reducing its share from 12.3% to 10.1%.
• The sale involved 40.5 million shares, priced between $61.35 and $62.65 each, slightly below the closing market price.
• Allegations include bribery and failure to prevent financial crimes in several U.S. branches, leading to significant personnel changes within TD, including the dismissal of about a dozen employees and reshuffling of senior compliance roles.
• Despite these challenges, TD aims to resolve these compliance issues by the end of the year, but the financial and non-monetary consequences could affect its growth and operational strategies in the U.S. market.

Lap Fu Ip – Reprinted with permission of Whatfinger News