TD Bank Stock to Re-Invest in Canadian Operations

Toronto-Dominion Bank’s or TD Bank Stock Canadian operations and capital markets franchise will be priorities under new chief executive Raymond Chun, who will soon have a stockpile of cash to spend after exiting the lender’s stake in Charles Schwab Corp. The sale of TD’s 10.1 percent interest in Schwab will net the Canadian bank US$13.9 billion after taxes and fees, executives said on Tuesday’s investor call.

That amounts to about $20 billion, and TD plans to use $8 billion for share buybacks. The move takes advantage of TD’s lower stock price, which sunk after sweeping United States probes into the bank’s failure to catch money laundering at several American branches. In October, TD agreed to pay almost US$3.1 billion to settle those allegations and faces a cap on the size of its U.S. retail banking business.

TD Bank Stock Shares

TD Bank Stock shares rose as much as 0.9 percent in Toronto, while Schwab shares rose as much as 2.4 percent. Against that backdrop, Chun said he’s looking for other places to deploy capital for organic growth. He noted that pursuing acquisitions now would “distract” from TD’s primary goal of remediating its money-laundering controls.

“In Canada, the single largest opportunity for TD is to deepen our relationships with more than 14 million customers. There are significant organic growth opportunities in Canada,” said Chun, who took over as CEO on Feb. 1.

He said TD’s investment bank is “undersized” and another area where Chun plans to spend money. The lender closed its acquisition of U.S. investment bank Cowen Inc. in 2023 and doesn’t face limits on growing capital markets or wealth-management services in the U.S. expenses, he said, adding that cost-cutting last year led to about $800 million in annual savings. Chun said TD expects to complete the $8 billion buybacks by early 2026. After that, if the bank still has excess capital to deploy, it would consider further share repurchases.

Pricing details

Canada’s second-largest bank revealed plans to sell its Schwab stake Monday. Plus, the two firms announced the pricing of the secondary share sale early Tuesday morning.

TD agreed to sell the shares at US$79.25 each, a 2.4 percent discount to Monday’s closing price of US$81.17. The firms said the secondary offering is expected to close on Wednesday. In a private transaction, Schwab will repurchase US$1.5 billion of its common stock directly from TD. This will be at the same price per share, less the underwriting discount.