TD Bank to Sell $15.4 Billion Stake in Charles Schwab Amid Strategic Shift
Toronto-Dominion Bank (TD), Canada’s second-largest lender, announced plans to divest its 10.1% stake in US financial services firm Charles Schwab.
The stake, valued at approximately $15.4 billion based on the latest market close, represents 184.7 million shares of the investment company.
The move comes as part of a strategic review following a significant US regulatory fine related to anti-money laundering (AML) violations. TD’s newly appointed CEO Raymond Chun emphasized that the decision is aimed at optimizing capital allocation and enhancing growth opportunities.
“As part of our strategic review, we have been evaluating capital allocation and have made the decision to exit our Schwab investment,” Chun said on Monday.
TD plans to allocate 8 billion Canadian dollars ($5.6 billion) from the sale toward share buybacks, with the remaining proceeds invested in business performance improvements and organic growth initiatives.
Jefferies analyst John Aiken commented on the development, stating:
“We believe this will simplify TD’s US operations. Whether this sets TD up for a different strategy in US wealth management will be seen when its strategic review is complete.”
Charles Schwab confirmed in a separate statement that it had agreed to repurchase $1.5 billion worth of shares from TD in a private transaction.
The sale follows TD’s legal troubles in October when it became the largest bank in US history to plead guilty to violating federal AML laws. The bank agreed to pay over $3 billion in penalties and faced the imposition of an asset cap and operational restrictions as part of the settlement.
Bharat Masrani, who had led TD for a decade, announced his retirement following the regulatory fallout. Chun, previously the bank’s Chief Operating Officer, assumed the role of CEO earlier this month.
The bank’s December earnings report hinted at a challenging year ahead as TD continues to address AML remediation and restructuring within its US operations. Chun, however, expressed confidence in the long-term growth potential of the bank’s core segments in Canada and its commitment to the US market.
As part of its response to regulatory scrutiny, TD recently appointed Jacqueline Sanjuas as Global Head of Financial Crime Risk Management and Stephen Joyce as Interim Head of Financial Crime Risk Management for non-US operations.
