TD Bank Group knows what went wrong with its anti-money-laundering controls, which have been the subject of regulatory probes in the U.S. and Canada, CEO Bharat Masrani said Thursday.
Masrani said the Toronto-based company is working to fix its AML issues but declined to share details on what those problems are. He added that TD is making "comprehensive enhancements" and progress toward fixing the problem every day.
"I know there are questions relating to the bank's investments in our risk and control infrastructure, including in our AML program," Masrani said on the bank's first-quarter earnings call. "We will continue to mobilize the required resources to strengthen our capabilities."
Masrani said the bank is accelerating investments in risk and controls, including by hiring more leaders of anti-money-laundering efforts, bringing on "hundreds" of employees in the segment over the past two quarters, tapping external advisors and putting money in technology, training and process redesign.
Last fall, TD announced that it was cooperating with a probe by the U.S. Justice Department into its compliance practices. In January, The Globe and Mail reported that the bank was also
Masrani said he couldn't share how long it would take to fix the bank's AML challenges nor how much it would cost, though he implied it will take hundreds of millions of dollars.
To shore up expenses,
Unanswered questions about the AML snafu overshadowed the Toronto bank's relatively solid earnings for its first quarter, which ended Jan. 31. The bank brought in adjusted net income of $3.6 billion for the quarter, down 12% from the previous year. While quarterly revenue rose 5% from 2023 due to higher fee income, the company also reported a 12% increase in noninterest expenses from the previous year, and recorded higher provisions for credit losses in its consumer and commercial lending portfolios.
TD incurred $291 million CAD of charges related to its restructuring plan, mostly in severance, along with real estate "optimization."
Mike Rizvanovic, an analyst at Keefe, Bruyette & Woods, wrote in a note that the earnings were "mixed" with elevated expenses, but the firm was keeping its "outperform" rating for TD due to "strong top-line growth, in-line credit costs and moderately better results in most segments."
Jefferies analysts, who maintained a hold rating on the company, wrote that TD's potential increase in value hinges on regulatory certainty, and a firmer outlook to its U.S. operations.
"TD reported solid results in the quarter, but our focus remains on the uncertainty stemming from the pending regulatory charges on both sides of the border and the impact that the revamp of its risk and control infrastructure will have on expenses and, importantly, management focus," the note said.
The
Still, when pressed by analysts for more information, Masrani said the bank has "robust succession plans across the bank," but he declined to share more information.
"Every day I wake up, I'm focused on strengthening the bank," Masrani said. "Serving our customers, of course, is a top priority, as is creating value for our shareholders. And hopefully, I'm doing that."
