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(Bloomberg) -- Toronto-Dominion Bank will consider the fate of its 10.1% stake in Charles Schwab Corp. as part of a strategic review stemming from the Canadian bank’s US money-laundering scandal, incoming Chief Executive Officer Raymond Chun said.
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Chun, who is chief operating officer and will take over as CEO from Bharat Masrani in April, said Tuesday he is weighing several options for the lender, which faces regulatory limits on growing its US retail-banking operations. The bank suspended its medium-term financial targets and announced the review of company strategy and spending in December.
“If you think about the Schwab investment, that is part of the capital-allocation review that we are doing as part of the strategic review,” Chun said, speaking in Toronto at RBC Capital Markets’ Canadian bank CEO conference. Toronto-Dominion has said Chun will provide updates on quarterly calls and that it will hold an investor day in the second half of this year.
Chun said Toronto-Dominion’s ownership of Schwab shares is separate from its agreement with the firm to make sweep-deposit accounts available to Schwab clients. With sweep programs, uninvested cash in brokerage accounts is automatically transferred into higher-interest accounts.
“Regardless of what we decide to do with the Schwab investment, the deposit agreement would continue on a go-forward basis,” he said.
Toronto-Dominion sold 40.5 million Schwab shares in August, trimming its previous 12.3% stake to raise about $2.5 billion to help cover the cost of fines in a series of US anti-money-laundering investigations. In October, it formalized a global settlement with the US Department of Justice and bank regulators and agreed to pay almost $3.1 billion in total.
Canada’s second-biggest bank acquired its ownership stake in 2020 as part of a transaction to sell its interest in online brokerage TD Ameritrade Holding Corp. to Schwab.
US Commitment
“We are 100% committed to our franchise in the US,” Chun said when asked about the prospect of Toronto-Dominion exiting its American business, noting that with 10 million clients, it’s one of the 10 largest banks in the country.
To comply with the asset cap, Toronto-Dominion is restructuring its US balance sheet, he said, which includes exiting certain loan portfolios and repositioning its bond holdings. He expects that process to be complete by the end of fiscal 2025.