Moment of reckoning for TD fails to lift cloud of uncertainty, analysts say

financialpost.com:

The US$3.1-billion fine levied against Toronto-Dominion Bank by U.S. authorities this week came as no surprise to those who have followed the bank’s anti-money-laundering troubles. But a decision to cap the Canadian lender’s growth south of the border came as a shock, one that analysts say will ensure the scandal’s shadow lingers over the bank, clouding its long-term outlook.

On Thursday, TD attempted to do damage control, describing 2025 as a “transition” year and unveiling a host of steps it will take in an attempt to mitigate the impact of the curbs on its personal and commercial banking businesses. Those steps include selling about 10 per cent of its U.S. assets to create liquidity and support the financial needs of its customers, alongside measures to improve return on equity metrics in the near term.

Despite those efforts, Jefferis Inc. analyst John Aiken said that it’s going to be an “absolute nightmare” to forecast TD’s earnings in the coming quarters.

“TD laid out its pan, but we don’t know the specifics,” he said. “We don’t know what’s going to happen when. We don’t know what the unintended consequences (of the caps) are going to be. This is an incremental level of uncertainty that was not generally expected.”

National Bank of Canada analyst Gabriel Dechaine, in a note to clients on Thursday, described TD’s long-term outlook as “murky.”

There seems to be more than what meets the eye as far as the monetary and non-monetary conditions that TD accepted to resolve its anti-money laundering issues in the United States, his note suggested.

Aside from the fine and a cap on TD’s assets in personal and commercial banking, conditions include remediating TD’s anti-money laundering programs and allowing third-party