Toronto-Dominion Bank (TSX:TD) posted a surprise loss for the fiscal third quarter as it set aside billions of dollars for expected fines over its anti-money laundering (AML) failings, sending its shares lower.
The bank said it has put aside US$2.6 billion to address fines related to the Department of Justice’s probe into its AML program.
It posted a loss of C$181 million, compared to a profit of C$2.88 billion in the year-ago quarter.
Adjusted earnings per share (EPS) were C$2.05, missing estimates of C$2.08.
Revenue was C$14.24 billion, up from C$13.15 billion in the year-ago quarter.
Meanwhile, the company noted in its insurance segment it incurred higher claims costs due to severe weather events in the Greater Toronto Area and Alberta wildfires, as well as increased claims severity.
Analysts at Jefferies lowered their price target on TD post earnings from C$82 to C$80. They have a ‘Hold’ rating on the stock.
“Unfortunately, weather-related claims in its insurance operations and higher provisions in capital markets offset strong results in both of TD's retail segments,” they wrote in a note to clients.
“While the contributions from insurance will be pressured again in the fourth quarter from weather events, we anticipate that this should ebb, improving profitability in 2025.”
Analysts see the clarity provided regarding AML as a positive, as investors now have a much better idea of the timing of the investigation’s conclusion and the value of the fines.
What remains unclear is whether any restrictions to growth (non-monetary penalties) will be included in the pending consent order, they highlighted.
“Despite the strength in TD’s underlying earnings, this uncertainty provides an overhang on the bank’s outlook, in our view,” they wrote.
“That said, the debate is whether the decline in TD's valuation to date is a sufficient offset. We anticipate that additional clarity will provide relief, but much is contingent on the regulators' conclusions based on their investigations.”
TD’s Toronto-listed shares were down 3% at C$78 on Thursday morning.