TD Bank, Canada's second-largest financial institution, is undergoing a significant strategic transformation. The bank announced its decision to exit its 10.1% stake in Charles Schwab, valued at approximately $15.4 billion. Newly appointed CEO Raymond Chun, who took over the helm on February 1, revealed the plans as part of a strategic review following recent regulatory challenges. This move marks a notable shift for TD, which emerged as Schwab's largest shareholder after acquiring the stake through the $26 billion purchase of TD Ameritrade in 2020.
The decision to divest from Charles Schwab comes on the heels of TD's landmark settlement with U.S. regulators. In October, TD became the largest bank in U.S. history to plead guilty to violations of federal anti-money laundering laws, resulting in over $3 billion in penalties. The repercussions of this have prompted TD to reassess its capital allocation strategies.
"As part of our strategic review, we have been evaluating capital allocation and have made the decision to exit our Schwab investment," said Raymond Chun.
TD's strategic review aims to address the challenges highlighted in December when the bank warned of a difficult 2025. The review also includes suspending its medium-term earnings forecast while implementing an anti-money laundering remediation program. Selling its 184.7 million shares of Schwab's common stock aligns with these broader objectives and provides the financial flexibility needed for future growth.
The proceeds from the sale will be strategically reinvested. TD plans to use approximately C$8 billion ($5.58 billion) for share buybacks, enhancing shareholder value. The remaining funds will be directed towards boosting performance and accelerating organic growth across TD's business units.
TD's exit from Schwab not only signifies a reallocation of resources but also reflects a commitment to strengthening its core operations. With Chun now at the helm, replacing long-standing chief Bharat Masrani, TD is poised to navigate these strategic changes with a focus on sustainable growth and market resilience.