Bank exits Schwab investment, repurchasing shares and investing proceeds after US regulatory fine
TD Bank Group has announced its decision to sell its entire equity stake in The Charles Schwab Corporation through a registered offering and share repurchase by Schwab.
The bank confirmed it will continue its business relationship with Schwab through the Insured Deposit Account (IDA) Agreement.
TD currently holds 184.7 million shares of Schwab’s common stock, representing 10.1 percent economic ownership. Schwab has agreed to repurchase US$1.5bn of its shares from TD, subject to the offering’s completion.
“As part of our strategic review, we have been evaluating capital allocation and have made the decision to exit our Schwab investment. We are very pleased with the strong return we are generating on the Schwab shares we acquired in 2020,” said Raymond Chun, group president and CEO of TD Bank Group.
TD will allocate $8bn of the proceeds toward share repurchases while investing the remaining funds to enhance performance and accelerate organic growth.
TD Securities and Goldman Sachs will serve as joint bookrunning managers for the offering.
A preliminary prospectus supplement related to the secondary offering of TD’s Schwab shares will be filed with the US Securities and Exchange Commission (SEC). Copies of the prospectus supplement will be available through the SEC website and from TD Securities or Goldman Sachs.
The bank’s decision follows a strategic review undertaken after TD became the largest bank in US history to plead guilty to violating federal anti-money laundering laws.
In October, TD agreed to pay over US$3bn in penalties and accepted business limitations, including an asset cap.
TD previously warned of a challenging 2025 and suspended its medium-term earnings forecast as it works through its anti-money laundering remediation program.
Analysts suggest that exiting Schwab simplifies TD’s US operations, though its future strategy in US wealth management remains unclear.
According to Reuters, Schwab confirmed that it will repurchase US$1.5bn worth of shares from TD in a private transaction.
Meanwhile, Schwab’s shares fell 3.2 percent in premarket trading, while TD’s US-listed shares rose 2.7 percent.
In the past, TD has offloaded non-core assets, including selling TD Ameritrade to Schwab in 2020 as part of a US$26bn merger deal. That transaction granted TD its current stake in Schwab.
TD will continue managing its capital and infrastructure prudently. Additional details on its normal course issuer bid were released separately.
The bank will host a conference call to provide further updates.
