(Bloomberg) -- Toronto-Dominion Bank’s Canadian operations and capital-markets franchise will be priorities under new Chief Executive Officer Raymond Chun, who will soon have a stockpile of cash to spend after exiting the lender’s stake in Charles Schwab Corp.
The sale of Toronto-Dominion’s 10.1% interest in Schwab will net the Canadian bank $13.9 billion after taxes and fees, executives said on an investor call Tuesday.
That works out to about C$20 billion, and TD plans to put C$8 billion of that toward share buybacks. The move takes advantage of its lower stock price, which sunk after sweeping US probes into the bank’s failure to catch money laundering at several American branches. TD agreed to pay almost $3.1 billion to settle those allegations in October and faces a cap on the size of its US retail banking business.
Toronto-Dominion shares rose as much as 0.9% in Toronto, while Schwab rose as much as 2.4%.
Against that backdrop, Chun said he’s looking for other places to deploy capital for organic growth, noting that pursuing acquisitions at this time would “distract” from TD’s primary goal of remediating its money-laundering controls.
“In Canada, the single largest opportunity for TD is to deepen our relationships with our more than 14 million customers. There are significant organic growth opportunities in Canada,” said Chun, who took over as CEO on Feb. 1.
Toronto-Dominion’s investment bank is “undersized” and another place Chun plans to spend, he said. The Canadian lender closed its acquisition of US investment bank Cowen Inc. in 2023 and doesn’t face limits on growing capital-markets or wealth-management services in the US.
The bank is also considering a fresh round of restructuring to bring down expenses, he said, adding that cost-cutting last year led to about C$800 million in annual savings.
Toronto-Dominion expects to complete the C$8 billion in buybacks by early 2026. After that, if the bank still has excess capital to deploy, it would consider further share repurchases, Chun said.
Pricing Details
Canada’s second-largest bank revealed plans to sell its Schwab stake Monday and the two firms announced pricing of the secondary share sale early Tuesday morning.
TD agreed to sell the shares at $79.25 each, a 2.4% discount to Monday’s closing price of $81.17 apiece. The secondary offering is expected to close on Wednesday, the firms said. Schwab will repurchase $1.5 billion of its common stock directly from TD in a private transaction at the same price per share, less the underwriting discount.
The transaction is the biggest sale of existing shares since Prosus NV raised about $14.7 billion from selling part of its Tencent Holdings Ltd. stake in 2021, according to data compiled by Bloomberg.
--With assistance from David Morris.
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