Proactive Investors - Toronto-Dominion Bank (TSX:TSX:TD) shares traded lower following media reports the Canadian bank faces restrictions in the form of an asset cap on its expansion in the US and a US$3 billion fine to settle charges related to anti-money laundering (AML) failings.
The $3 billion in combined penalties will be paid to US banking regulators, the Justice Department, and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), according to reports which cited sources with knowledge of the matter.
The Justice Department will reportedly take the majority of the penalties of $1.8 billion, with FinCEN getting $1.3 billion.
The bank has put aside more than US$3 billion over the last few quarters, including US$2.6 billion in Q3, to cover any fines related to the AML probe, but the reported restrictions on the growth of its US business surprised analysts and investors alike.
“We believe that the market was becoming increasingly comfortable with the thought that there would not be any growth restrictions placed on TD,” Jefferies analysts wrote in a note to clients.
“While we await the details from the regulator, TD will need to find a new avenue for growth from its traditional reliance on US retail banking.”
The analysts have a ‘Hold’ rating on the stock and a C$80 price target, implying an 8% decrease from TD’s stock price at the time of writing.
TD did not comment on the media reports.
The settlement is expected to be formally announced as soon as Thursday.
Shares of TD traded down 3.9% at about US$60. Its Canadian-listed shares fell 3.6% to C$83.