‘All eyes on TD’ and U.S. probes as Canadian bank earnings begin
Toronto-Dominion Bank and its U.S. money-laundering woes are set to dominate the start of Canadian bank earnings season this week.
It’s “all eyes on TD,” Bank of America Securities analysts led by Ebrahim Poonawala said in a note, adding that investors may be more willing to buy up the bank’s much cheaper stock if they can get clarity on the potential impact of Toronto-Dominion’s troubles in the United States.
The bank faces an investigation by the U.S. Department of Justice as well as three U.S. regulatory agencies. It’s already taken a US$450-million provision tied to one of those regulatory probes, while the Justice Department is investigating the bank over its ties to a US$653-million drug money-laundering case, allegedly including the proceeds of fentanyl sales.
Toronto-Dominion has said that it’s already invested more than $500 million to upgrade its anti-money laundering controls and that it hopes to soon reach a “global resolution” of the probes. Analysts have forecast that total fines could be in the range of US$2 billion and some have warned that the bank could also face restrictions on its U.S. growth.
It’s expected to post adjusted earnings per share of $1.85 when it reports second-quarter financial results on Thursday, according to average estimates in a Bloomberg survey. That’s down from $1.91 in the same period last year.
With interest rates still stubbornly high and credit conditions worsening, investors will again be keeping a wary eye on loan losses at all of Canada’s big lenders. Toronto-Dominion’s provisions for potentially bad loans are likely to be in the range of $1 billion, analysts forecast, about the same as what the bank reported in the first quarter.
And it could see a small decline in the
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