The bank pleaded guilty to failures of its AML program in the US
The damage done to TD Banking Group from its anti-money-laundering failings in the US will have consequences far beyond the US$3 billion fine.
The big six bank’s shares have already taken a pummelling since it pleaded guilty to charges by US authorities last week and an investment advisor and portfolio manager for IA Private Wealth says it won’t be an attractive investment for some time.
In an interview with BNN Bloomberg, Grant White said the fine was roughly in line with what the markets expected, but there is a more concerning part of the TD story and that’s the ruling that the total assets of TD's two US banking subsidiaries (TD Bank, NA and TD Bank USA, NA) cannot exceed US$434 billion (total assets as at September 30, 2024).
While the limitation does not apply to TD Securities or any of the Bank's Canadian or other global businesses, it’s what market watchers like White feared and “…which has made it very difficult for us to consider TD as an option for investment throughout the majority of this year,” he said, adding that the additional red tape and compliance requirements that TD faces in the US market will add to the mix of concerns for investors.
But while investors will be concerned that the business – which only 18 months ago was hoping to buy US regional bank First Horizon in a deal that was ultimately scrapped due to the AML probes hanging over TD – will be restrained in its potential growth in the US, White is confident that their dividend will be safe, although growing it may be a challenge.
“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 told BNN Bloomberg, adding that the bank will have work to do to shore up trust among investors.
