TD to pay US$3 billion, face U.S. growth cap in money-laundering case

financialpost.com:

Toronto-Dominion Bank is facing a cap on future asset expansion in the United States and is being fined about US$3 billion for failing to monitor activities linked to money laundering, according to the U.S. Department of Justice and other regulators.

The Toronto-based lender has put aside more than US$3 billion for the fines in the past few quarters, but the reported restriction in the growth of its U.S. retail business took some analysts by surprise.

“This would represent a negative surprise to our base case review, especially given TD’s high level of regulatory cooperation, significant anti-money laundering investments and recent CEO succession announcement,” Matthew Lee, an analyst at Canaccord Genuity Group Inc., said in a note on Thursday.

The market was becoming “increasingly comfortable with the thought that there would not be any growth restrictions placed on TD,” Jefferies Securities Inc. analyst John Aiken said in a note, so the latest development is a “negative surprise.”

TD declined to comment, but it will be hosting a conference call with investors on Thursday.

Talks about the outcome regarding the investigation against TD have dominated Bay Street this year. The bank reported a rare loss in its last quarterly results as it had to keep aside US$2.6 billion to cover any expected fines from the anti-money laundering probe. That is on top of the US$450 million it set aside in April.

This was followed by TD announcing a successor last month for current chief executive Bharat Masrani, who accepted full responsibility for the anti-money laundering challenges that TD faces. Raymond Chun, TD’s group head of Canadian personal banking, will lead the bank from April onwards.

Details about the extent of the asset cap on