TD Bank risks 'lost decade' in money-laundering scandal, Jefferies says
A veteran Canadian bank analyst says Toronto-Dominion Bank’s role in an alleged money-laundering scheme has made the “worst-case scenario” more likely — a huge fine and strict limits on the lender’s U.S. growth.
The U.S. Department of Justice is investigating the bank over its ties to a US$653 million drug money-laundering case in New York and New Jersey, a person familiar with the matter told Bloomberg last week. The probe is focused on how Chinese crime groups used Toronto-Dominion and other banks to hide money from U.S. fentanyl sales, the Wall Street Journal reported on May 2.
That’s in addition to another case in which one of the bank’s New Jersey branch employees was charged with accepting bribes to facilitate the laundering of drug money.
“With the bank allegedly a focal institution in a drug money-laundering scheme, the worst-case scenario has become more likely with TD potentially entering a lost decade,” Jefferies analyst John Aiken said in note to clients Monday. “Growth in the U.S. will likely be constrained and the timeline for a fix is extended by several years.”
Toronto-Dominion plunged into the U.S. regional banking market nearly two decades ago when it acquired a majority stake in Banknorth Group, and it has been a serial acquirer since, focusing on markets in the eastern U.S. But the bank has been sidelined by its regulatory woes. A year ago, it abandoned a proposed acquisition of Memphis, Tennessee-based First Horizon Corp. because it couldn’t get timely regulatory approval.
The bank announced an initial US$450 million provision for regulatory penalties last week and said there’s more to come. The “simple math” implies Canada’s second-largest bank will have to pay US$2 billion, Aiken said.
“However,
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