Toronto-Dominion Bank (TD) has taken a significant step back from its investment in Charles Schwab Corporation (SCHW). The Canadian bank announced it is reducing its ownership interest in the Texas-based stockbroker from 12.3% to 10.1% by selling 40.5 million shares of Schwab’s common stock. This move follows news that TD is setting aside an additional $2.6 billion to cover potential fines related to deficiencies in its anti-money laundering program.
This hefty provision is part of TD’s ongoing efforts to resolve civil and criminal investigations into its U.S. Bank Secrecy Act/anti-money laundering program by U.S. prudential regulators, the Financial Crimes Enforcement Network, and the U.S. Department of Justice. The bank has also committed to not selling any additional Schwab shares for the next 45 days.
TD CEO Bharat Masrani acknowledged the seriousness of the situation, stating, “We recognize the seriousness of our U.S. AML program deficiencies and the work required to meet our obligations and responsibilities is of paramount importance.” He added that TD’s remediation program is already underway and the bank has strengthened its U.S. AML program.
This news comes at a time when Schwab recently reported a significant rise in core net new assets for July 2024, reaching $29 billion – a substantial increase from the $13.7 billion recorded in July 2023. The sale of TD’s stake could potentially impact its future earnings from this investment.
Following the announcement, Schwab shares fell by over 4% in after-hours trading. TD’s stock, on the other hand, edged up slightly in after-hours trading, but remains down by 7.02% year-to-date.
