Toronto-Dominion Bank Faces Potential ‘Lost Decade’ Amid U.S. Money-Laundering Allegations

 

Toronto-Dominion Bank Faces Potential ‘Lost Decade’ Amid U.S. Money-Laundering Allegations

According to a report by Stephanie Hughes from Bloomberg News, Toronto-Dominion Bank (TD) is under scrutiny for its alleged involvement in a money-laundering scheme, which could lead to significant fines and impede its growth in the United States. The U.S. Department of Justice is investigating TD’s connection to a US$653 million drug money-laundering case in New York and New Jersey. This investigation is part of a broader examination into how Chinese crime syndicates may have used TD and other financial institutions to launder proceeds from U.S. fentanyl sales.

Jefferies analyst John Aiken expressed concerns that TD might face a “lost decade” due to the allegations, with potential restrictions on its U.S. operations. The bank, which entered the U.S. market nearly two decades ago, has seen its regulatory challenges halt its acquisition strategies, including the failed bid for First Horizon Corp. last year.

TD has set aside an initial US$450 million for potential regulatory fines and anticipates further penalties as multiple regulatory bodies are conducting investigations. Aiken estimates that the fines could reach US$2 billion, although there is considerable uncertainty around the final amount.

The bank’s market capitalization has suffered a significant loss of about $10 billion (US$7.3 billion) since the allegations were reported. Despite a slight recovery in its share price, the scandal has raised questions about the bank’s management and compliance practices. TD’s CEO Bharat Masrani acknowledged the shortcomings in the bank’s anti-money laundering program and stated that substantial investments have been made to enhance controls and hire new staff.

Analysts from Keefe Bruyette & Woods and the Bank of Nova Scotia have provided mixed outlooks, with some suggesting that the recent sell-off was excessive, while others caution that the stock may face ongoing challenges.

As of May 7, 2024, TD’s stock was trading at $75.13, up 0.44% from the previous close, reflecting the market’s response to the unfolding situation.

Source: Bloomberg News, comments from Jefferies analyst John Aiken, and statements from Toronto-Dominion Bank.