portfolio manager – BNN Bloomberg

One portfolio manager says Toronto Dominion Bank is still far from an attractive investment opportunity after the lender pleaded guilty to failing to prevent money laundering by criminals in the U.S.

Bloomberg News reported on Thursday that two U.S. branches of the bank pleaded guilty before a U.S. federal judge in New Jersey. In response to the allegations, the U.S. Department of Justice, the Federal Reserve and the Office of the Comptroller of the Currency issued statements terminating the agreement with the lender. TD Bank will pay nearly $3.1 billion in fines and penalties following multiple investigations into the bank’s failure to detect money laundering and other financial crimes at its U.S. branches.

Grant White, an investment advisor and portfolio manager at IA Private Wealth, said in an interview with BNN Bloomberg on Thursday that he had doubts about TD’s stock pick.

“This is coming because we were afraid it might be imposed. “The penalty is a fine and we were expecting as much as $3 billion, and maybe even if it was a little bit larger, we might have some short-term concerns there,” White said.

“But at the end of the day, we were concerned about limiting the value of assets in this company. And it looks like that’s what mattered here, making it very difficult for us to consider TD as an investment option for much of this year.

Addressing the anti-money laundering allegations, White said it would “create a lot of red tape around economic growth” and the lender would now face much greater compliance and regulatory oversight.

“It’s never fun for a company to go through this, so I can only imagine the headaches it will cause for TD’s management and senior management team, as well as shareholders who would like to see an opportunity to move this matter forward,” he said.

White added that he believed the “dividend would be safe” in the process, but TD would face challenges in growing it.

“When you compare the options available, I see plenty of other options that don’t have the same regulatory burdens, so I think it’s still a long way from being an attractive investment opportunity,” he said.

In a press release on Thursday, the bank’s chairman and group CEO, Bharat Masrani, apologized for the wrongdoing that occurred under his leadership.

“We have accepted full responsibility for the failures of our U.S. AML program and are making the investments, changes and improvements necessary to meet our commitments. This is a difficult chapter in the history of our bank. These failures occurred during my time as CEO and I apologize to all of our stakeholders.”

Last month, TD announced that Masrani would step down as CEO in April 2025 and retire. He will be succeeded by Raymond Chun.

“I want to thank our colleagues who continue to demonstrate their commitment and play an important role in preventing criminal activity,” Masrani said.