TD Bank fails to meet expectations as U.S. sanctions sting

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Toronto-Dominion Bank on Thursday reported a fourth-quarter profit, but couldn’t meet analyst expectations in its first financial release since being sanctioned in the United States for failing to monitor money laundering activities.

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Net income for the three-month period ending Oct. 31 was $3.6 billion compared to $2.9 billion during the same period last year and a loss of $181 million in the previous quarter. This resulted in net earnings per share of $1.97.

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Adjusted for certain conditions, the bank earned $3.2 billion, which is lower than the $3.5 billion earned a year ago, resulting in earnings per share of $1.72. Analysts had expected TD to earn $1.81 per share.

The miss was primarily due to a decline in TD’s retail business in the U.S., which had net income of $863 million compared to $1.27 billion a year ago.

TD reported adjusted total revenue of $14.9 billion, up from $13.2 billion during the same period last year.

“Despite a challenging quarter, we are pleased with the bank’s underlying fundamentals, which were reflected in our revenue growth,” Bharat Masrani, the bank’s chief executive who is set to leave his post next year, said in a statement. “This quarter, we delivered higher fee income in our markets-related businesses, volume growth in Canada, and stable deposits in the U.S.”

This is the TD’s first quarterly report after the bank was fined about US$3.1 billion and ordered to cap the expansion of its retail banking business in October by the U.S. Department of Justice and other regulators for failing to monitor money laundering activities at its branches.

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The fine was expected — TD had kept aside the money beforehand — but the cap was a bit of a surprise.

After the charges were announced, TD unveiled a number of steps to mitigate the impact of the curbs, describing 2025 as a “transition” year. It said it would sell about 10 per cent of its U.S. assets to create liquidity and support the financial needs of its customers, as well as introduce measures to improve return-on-equity metrics in the near term.

“Remediation is our No. 1 priority, and we continue to make meaningful progress in addressing the failures,” Masrani said.

As a result of the strategic review, the bank on Thursday said it would be “challenging” to generate earnings growth and suspended its medium-term financial targets of seven per cent to 10 per cent earnings per share growth and 16 per cent return on equity. It will update its targets in the second half of 2025.

“TD faced challenges in 2024, but we have a strong bank,” Raymond Chun, TD’s chief operating officer who is set to succeed Masrani, said in the statement. “Our anti-money laundering remediation is our top priority, and we remain focused on strengthening our risk and controls to meet our obligations.”

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He said he was “confident” the bank would use a fresh strategy in the year ahead to drive change and deliver for shareholders.

TD’s total provisions for credit losses (PCL) — the amount of money banks keep aside to tackle potentially bad loans — increased to $1.1 billion from $878 million a year ago.

The bank announced a quarterly dividend of $1.05 for the upcoming quarter.

• Email: nkarim@postmedia.com

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