TD steadying the ship as a new era dawns

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In the same quarter that it pleaded guilty to historic money laundering crimes, TD Bank Group posted higher profits thanks to its stable operations in Canada.

The Toronto bank marked the start of a major transition in October when it agreed to pay more than $3 billion in fines to American regulators and law enforcement and limit its growth in the United States until its compliance functions are under control. TD’s fourth-quarter financial results, announced Thursday, show how the bank is dealing with the fallout from its anti-money laundering failures in the United States.

“Despite a challenging quarter, we are pleased with the Bank’s underlying fundamentals, which are reflected in our revenue growth,” CEO Bharat Masrani said in a press release. “A key development this quarter was the resolution of our U.S. anti-money laundering issues, providing important clarity to our stakeholders. Remediation is our number one priority, and we continue to make progress significant in remedying failures.”

The results reflect higher fee income in markets-related activities, volume growth in Canada and stable deposits in the United States, Masrani said. The bank said in October that it expects compliance spending and balance sheet restructuring to hold back profits through 2025.

TD’s earnings per share of C$1.97 ($1.40) for the quarter ended Oct. 31 fell short of analysts’ consensus estimates of C$2.52 according to S&P Capital IQ. Revenue rose to C$15.5 billion from C$13.2 billion and beat analysts’ forecasts of C$12.4 billion according to S&P Capital IQ.

TD had previously built a cushion to cover regulatory sanctions, which led to a loss of 14 Canadian cents per share in the third quarter, but largely shielded its fourth-quarter results from the shock of the fines.

On October 10, the Justice Department announced that TD was the first U.S. bank in history to plead guilty to money laundering conspiracy violations. The bank also pleaded guilty to lapses in its anti-money laundering controls, as part of a coordinated resolution with the Federal Reserve, the Office of the Comptroller of the Currency and the Department of Financial Services’ Financial Crimes Enforcement Network. Treasure.

“We take full responsibility for the failures of our U.S. anti-money laundering program and are making the investments, changes and improvements necessary to meet our commitments,” Masrani said in October. “This is a difficult chapter in the history of our bank.”

Masrani took responsibility for these debacles and said in September that he would step down as CEO in the spring, as did Raymond Chun, former head of personal banking in Canada, takes the helm.

As the bank struggles to make costly compliance updates and calibrate its strategy to meet regulatory limits on growth, operations south of the border We are in a “year of transition,” leaders said in October.

Leo Salom, CEO of TD’s U.S. subsidiary, said at the time that the bank would reduce its domestic assets by about 10 percent, implementing strategies such as shedding some business lines, including financing of automobile dealerships and the corresponding mortgage activities, and by selling part of its activities. its “giant” residential mortgages.

On Thursday, the bank suspended its mid-term financial targets for adjusted EPS growth, return on equity and positive operating leverage. TD said it aims to update these targets in the second half of 2025.

In the fourth quarter, TD saw its U.S. net profit decline 34% from a year earlier, to $634 million, as expenses of $1.5 billion weighed on revenue.

In Canada, TD saw its net profit increase 9% year over year to C$1.8 billion.