One portfolio manager says Toronto Dominion Bank is still far away from being an attractive investment opportunity after the lender pleaded guilty to failing to prevent money laundering by criminals in the U.S.
Bloomberg News reported Thursday that two of the bank’s U.S. units entered guilty pleas to charges before a U.S. federal judge in New Jersey. In exchange for the pleas, the U.S. Justice Department, Federal Reserve and Office of the Comptroller of the Currency released statements regarding a resolution with the lender. TD Bank will pay nearly US$3.1 billion in fines and penalties after multiple probes into the bank’s failure to prevent money laundering and other financial crimes at U.S. branches.
Grant White, an investment advisor and portfolio manager at IA Private Wealth, said in an interview with BNN Bloomberg Thursday that he has concerns about TD as a stock pick.
“This is coming in as we had feared it could come in. The fine is the fine and we expected as much as $3 billion and maybe even if it was a little bit more, we might have some short-term concerns there,” White said.
“But the asset cap was what we ultimately feared for around this company. And it seems that is exactly what’s come to play here, which has made it very difficult for us to consider TD as an option for investment throughout the majority of this year.”
Speaking to the anti-money laundering charges, White said that it’s “put a lot of red tape around growth” and the lender will now face far greater compliance and regulatory oversight.
“That’s never a fun thing for a company to go through, and so I can only imagine the headaches that will cause for management and executives at TD and likewise for shareholders that would like to see this company have the ability to grow further,” he said.
White added that he thinks the “dividend is going to be safe” through this process, but TD will face challenges in growing it.
“When you’re comparing your options out there, I see a whole lot of other options that don’t have the same regulatory overhang, so I think it’s still a ways off from being an attractive investment opportunity,” he said.
In a news release Thursday, the bank’s Group President and Chief Executive Officer Bharat Masrani apologized for the wrongdoings which took place under his leadership.
“We have taken full responsibility for the failures of our U.S. AML program and are making the investments, changes and enhancements required to deliver on our commitments. This is a difficult chapter in our bank’s history. These failures took place on my watch as CEO and I apologize to all our stakeholders.”
TD announced last month that Masrani is stepping down as CEO in April 2025 to retire. He will be succeeded by Raymond Chun.
“I want to thank our colleagues, who continue to demonstrate their dedication and who play an important role in preventing criminal activity,” Masrani said.