Growth ambitions are suspended by TD Bank after a record settlement. In October, the bank and US regulators came to an agreement.
Analyst John Aiken of Jefferies Financial Group noted that TD's fourth-quarter results were "insignificant for its outlook," highlighting the bank's difficulties in generating profit growth for fiscal 2025. Investors they have to be patient for a catalyst to unlock the accumulated value in TD. Aiken said in a note to clients.
Restructuring of American assets
Bloomberg reported that the settlement and subsequent restructuring comes at a time when TD is also reducing its US assets by 10% to meet the asset limit set by US regulators.
Spending in the US division was also affected by the allegations related to the money laundering case. In its financial markets division, TD's adjusted net profit of $299 million came in below forecasts, but showed a 68% increase from a year earlier, thanks to lower expenses for the integration of Cowen Inc., an American investment bank acquired by TD. TD's loan loss provisions for the quarter were C$1.11 billion, in line with analysts' expectations. This was a more moderate result compared to Bank of Montreal's C$1.52 billion provisions, which had largely exceeded expectations.
Transition at TD's top
The resolutions also come ahead of the expected retirement of CEO Bharat Masrani in April 2025, with Chun, who has been at TD for three decades, expected to take over. RBC Capital Markets analyst Darko Mihelic noted that Chun will have to address the strategic challenges facing the bank and restore employee morale, which has been hit by recent scandals.
With the U.S. asset curb remaining in place indefinitely, TD shares are trading at a significant valuation discount to its peers, a trend Mihelic expects to continue until the situation improves. In addition to legal issues, TD has also faced difficulties in its insurance business. The bank reported a CA$388 million increase in natural disaster losses due to extreme weather and wildfires, which worsened its financial performance.
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