Proceeds of the sale will allow TD to repurchase shares and strengthen its balance sheet, CEO says
Toronto-Dominion Bank will divest its 10.1% stake in US-based Charles Schwab Corp. for approximately CA$15.4 billion (US$14 billion) as it moves to restructure its operations and comply with restrictions imposed by US regulators.
The bank is selling 184.7 million shares of Schwab common stock, completely divesting from the company. The decision is part of a broader strategic review by newly appointed CEO Raymond Chun, who is seeking to reposition the bank amid regulatory challenges in the US.
“As part of our strategic review, we have been evaluating capital allocation and have made the decision to exit our Schwab investment,” Chun said in a statement Monday. “We are very pleased with the strong return we are generating on the Schwab shares we acquired in 2020. We are confident in TD’s growth opportunities and long-term potential.”
TD is also in talks to sell a US$9 billion portfolio of jumbo mortgages to Bank of America (BofA), according to sources familiar with the matter. The negotiations remain ongoing, and a final agreement has not yet been reached.
Regulatory pressure behind the sale
TD’s decision to sell its Schwab stake follows an October 2024 guilty plea to conspiracy to commit money laundering, which resulted in severe penalties from US authorities. Among them was a US$434 billion asset cap imposed on TD’s US retail operations, limiting its ability to expand.
During a January investor conference, Chun told shareholders that TD was considering multiple options, including selling its Schwab shares and offloading portions of its jumbo mortgage and auto loan portfolios in the US.
This is not the first time TD has reduced its stake in Charles Schwab. In August 2024, the bank sold 40.5 million shares to help cover regulatory fines, bringing its previous 12.3% stake down to 10.1%.
TD’s plans for the sale proceeds
TD expects to generate CA$20 billion (US$14 billion) from the sale, with a significant portion earmarked for share buybacks and internal investments.
“In just under five years, this investment has generated a very strong return, and we believe this is the right time to reallocate the capital,” Chun said in an internal memo. “We expect to generate considerable proceeds for TD – roughly US$14 billion or CA$20 billion.”
The bank plans to repurchase 100 million common shares, representing 5.7% of its issued and outstanding stock. It will also reinvest proceeds into business growth initiatives and efforts to enhance its anti-money laundering (AML) programs, a priority following its regulatory settlement.
“The actions and investments we announced today, along with our ongoing efforts to strengthen infrastructure and prioritize AML program enhancements, reflect our confidence in TD’s long-term potential,” Chun added.
Despite the full divestment, TD and Charles Schwab will continue their existing deposit agreement, which allows TD to manage client cash and collect fees on certain Schwab deposits.
Meanwhile, Schwab has agreed to repurchase US$1.5 billion worth of its shares, a move that aligns with TD’s sale. TD Securities and Goldman Sachs are handling the transaction as joint bookrunning managers.
Industry experts say the sale makes sense for TD given its regulatory constraints, but they also acknowledge the bank is losing a highly valuable asset.
Read more: Canadian banks continue feeling the pain from US banking volatility
Before the official announcement, National Bank analyst Gabriel Dechaine called the sale a “no-brainer” given TD’s situation but cautioned that Schwab had been “an investment that has created tremendous value over the years” and would likely continue to deliver strong earnings growth.
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