TD Bank to Sell Stake in Charles Schwab

By Manya Saini and Nivedita Balu

(Reuters) – Canada’s Toronto-Dominion Bank (TSX:TD) announced plans to sell its entire 10.1% stake in U.S. financial services firm Charles Schwab (NYSE:SCHW) for approximately $14.6 billion, as part of a strategic review following a significant U.S. fine.

Share Details

TD currently holds 184.7 million shares in Charles Schwab and will sell 165.4 million shares at $79.25 each, totaling about $13.1 billion, reflecting a nearly 5% discount from Schwab’s closing price on Friday.

Additionally, Schwab will purchase the remaining shares from TD for $1.5 billion.

Regulatory Challenges

U.S. regulators imposed an asset cap of $434 billion on TD, limiting its growth in the U.S. market, where the bank had focused for more than a decade. This was part of the consequences of a guilty plea for money laundering failures.

New CEO Raymond Chun, who took charge this month, stated that the bank would allocate C$8 billion ($5.58 billion) of the proceeds for share buybacks, with the remainder directed towards performance and organic growth.

Chun emphasized that “everything is on the table” regarding the strategic review and that the bank might exit some loan portfolios.

Recent Legal Issues

In October, TD became the largest bank in U.S. history to plead guilty to violating a federal anti-money laundering law, agreeing to pay over $3 billion in penalties.

Jefferies analyst John Aiken noted, “We believe this will simplify TD’s U.S. operations.” The impact of this move on TD’s strategy in U.S. wealth management will be assessed upon the completion of its strategic review.

Analysts estimate that TD will free up capital ranging from C$10-12 billion, strengthening its already robust capital levels that facilitated its U.S. expansion.

TD previously planned to acquire Tennessee-based First Horizon (NYSE:FHN) until the investigation was disclosed.