(Bloomberg) -- Raymond Chun’s unlikely path to the top job at Toronto-Dominion Bank steered well clear of the US anti-money laundering troubles plaguing Canada’s second-largest lender.
Chun, a Toronto-Dominion lifer who will officially take over as chief executive officer on April 10, spent three decades across the bank’s operations, from running wealth management and insurance to leading the lender’s online brokerage. But there’s one notable absence on his resume: a stint in the lender’s US retail business, once its prized possession and now the source of its costly problems.
That stands in stark contrast to others who were in the running to replace Bharat Masrani. Capital markets head Riaz Ahmed, a long-time top executive who helped lead the US push, and Leo Salom, who has run the US division since 2022, were both seen as potential successors.
Allegations that Toronto-Dominion failed to catch money laundering and other financial crimes at several of its US branches led to the scuttling of its $13.4 billion takeover of First Horizon Corp. last year and threw Masrani’s role as CEO into doubt. Chun’s appointment could help the bank finally turn the page on a chapter that’s bruised its share price and is set to cost it billions.
Sleeper Candidate
Chun only emerged as a sleeper candidate for the job in recent months. In December, he took over the high-profile Canadian personal banking unit after Michael Rhodes, another potential CEO contender, decamped for America, where he’s now running Ally Financial Inc. Chun wasn’t listed among the bank’s five named executive officers in the firm’s annual proxy statement earlier this year, whereas Rhodes, Ahmed and Salom were.
“They’re bringing in a very clean CEO,” Richard Fogler, chief investment officer of Kingwest & Co., said on BNN Bloomberg Television. “He hasn’t US experience, he hasn’t been involved in the US — he wasn’t involved with the problem.”
Bank of Nova Scotia analyst Meny Grauman also pointed to Chun’s lack of ties to “any of TD’s issues in the US.” But while Chun is a seasoned executive, he has a relatively low profile on Bay Street “and is certainly not the ‘outsider’ candidate that most investors had expected,” Grauman wrote.
During its search for a new CEO, Toronto-Dominion considered external candidates as well as its own executives, Masrani, 68, said on a conference call Thursday. The bank began examining outside options as part of its succession-planning process about a year and a half ago to two years ago, according to a person familiar with the matter.
But ultimately the bank’s board concluded Chun is “the right leader at the right time,” Masrani said.
The outgoing CEO did his best to clear the deck for his successor, saying the anti-money laundering troubles the bank faces in the US “took place on my watch as CEO and I take full responsibility.”
Those issues came to a head last month when the bank set aside $2.6 billion for expected settlements, causing the bank’s first quarterly loss in decades.
Masrani said he’ll continue to advance a critical remediation program to strengthen risk and controls. He’ll also continue as an advisor to Toronto-Dominion until the end of October next year.
Strong Following
Chun, 55, who was born in Korea, studied at the University of Western Ontario and started at Toronto-Dominion in 1992 in the bank’s management training program. His stretch at the bank has made him deeply familiar with the core, day-to-day banking business that makes up much of the firm’s profits.
He spent several minutes detailing his qualifications for analysts on the conference call, noting he’s had experience in both the lending and deposit sides of the balance sheet, run divisions that have encompassed all the bank’s products and worked with people on the treasury, risk and compliance teams.
“So, lots of experience running big businesses, complicated businesses, big P&Ls and having to work with all of our control and risk partners across TD Bank,” he said.
And while he may have entered the succession race relatively late, his experience across several of the bank’s divisions has left him with a wide swathe of allies, according to people familiar with the matter, who declined to be named discussing private information.
For Tim Hockey, a former senior executive of the bank who’s known Chun for more than two decades, Chun was an early standout. Hockey recalls being introduced to him by his boss as a “bright young guy.”
“He’s very smart and he’s very intense in the sense that he listens intently and thinks through issues,” Hockey said. He also gains people’s trust by “walking the talk,” he added.
Chun has been highlighting his leadership credentials in recent weeks. Through LinkedIn posts, he’s touted his attendance at several company events, including meeting with hundreds of bank branch leaders and delivering remarks at a gala celebrating the lender’s Black employees earlier this month.
Kenneth Wong, professor of marketing at the Smith School of Business at Queen’s University, who crossed paths with Chun when he did an executive MBA at the school about 20 years ago, praised his people skills in an interview.
“While he is a numbers guy, his skill set goes beyond analytics to understand the people — clients and employees — who make those numbers happen,” Wong said.
Issues Resolved
Toronto-Dominion also announced a slew of other changes. Ahmed, the bank’s former chief financial officer who has been running its capital-markets business since 2021, will retire at the end of January. Under the bank’s previous CEO Ed Clark, Ahmed worked alongside Masrani on a series of acquisitions that helped expand the bank’s US operations, which now include almost 1,200 branches and 10 million customers.
Some analysts said they had expected the bank to announce the succession process only after it settles the money laundering cases with US law enforcement and regulators. That could be relatively soon, after Toronto-Dominion said last month it hopes to reach a global settlement by the end of the year and anticipates paying total fines of about $3 billion.
But the bank’s confirmation a new CEO is on deck could also help demonstrate to US agencies, including the Department of Justice, the Office of the Comptroller of Currency and the Federal Reserve, that it’s taken accountability for the issue at the highest levels, potentially clearing the way for an overall agreement.
Scotiabank’s Grauman took it as a signal that the anti-money laundering issues will likely be resolved soon. The bank said that the timing of the CEO announcement was tied to an annual gathering of 2,500 senior leaders in Toronto. Spokesperson Lisa Hodgins said Toronto-Dominion could not comment on its discussions with regulators.
Jefferies Financial Group Inc. analyst John Aiken also noted Chun’s lack of he direct ties with the US retail banking operations — a fact “which probably moved him up the list.”
--With assistance from Paula Sambo, Hannah Levitt, Layan Odeh and Chunzi Xu.
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