TD Bank Profits Decline Amid U.S. Sanctions and Strategic Overhaul

Toronto-Dominion (TD) Bank announced a 10% drop in its adjusted earnings per share for the fourth quarter, missing analyst expectations on Thursday, December 5th. The decline, attributed to weakness in its U.S. retail business and sanctions imposed by U.S. regulators, prompted the bank to suspend medium-term financial targets and initiate a comprehensive strategic review.

The sanctions, levied in October 2024, included a $3.1 billion fine and restrictions on TD’s expansion of its U.S. retail operations. These penalties followed accusations of failing to monitor money-laundering activities. TD has since earmarked funds to cover the fine and plans to sell 10% of its U.S. assets to bolster liquidity. Despite these measures, TD leadership anticipates 2025 to be a “transition year” with limited earnings growth.

Fourth-quarter net income stood at $3.6 billion, up from $2.9 billion a year earlier, but adjusted net income dropped to $3.2 billion from $3.5 billion. U.S. retail banking profits fell significantly, from $1.27 billion to $863 million. Total revenue increased to $14.9 billion, up from $13.2 billion in the same period last year, while provisions for credit losses rose to $1.1 billion.

TD Bank’s Chief Operating Officer, Raymond Chun, emphasized the bank’s commitment to a “broad and detailed review” of its business strategies, including profitability and risk-adjusted returns. Chun, who will take over as CEO next year, stated, “Everything is on the table,” signaling potential divestitures and investments to improve the bank’s performance.

The sanctions have forced TD to prioritize fixing its anti-money-laundering systems. Outgoing CEO Bharat Masrani noted that lessons from the U.S. would be applied globally to strengthen compliance. However, analysts expressed concerns over the lack of immediate growth guidance, with some urging TD to provide clearer directions for investors.

While TD grapples with the fallout from U.S. sanctions and a challenging operating environment, the bank’s strategic review aims to rebuild investor confidence. The results of this review, expected in late 2025, will determine TD’s path forward as it navigates economic headwinds and regulatory scrutiny.