Toronto-Dominion Bank

S&P Global Ratings' stable outlook reflects its expectation that over the next two years, TD Bank will strengthen its AML operational risk management processes and controls as it works to meet the requirements imposed by U.S. regulators in a timely manner. We also expect TD Bank will maintain its commitment to the U.S. while taking steps to mitigate the impact the asset cap may have on the strength of its franchise. At the same time, we forecast the bank will maintain overall good profitability, asset quality, and capital. We could lower the ratings if: TD Bank doesn't improve its AML deficiencies, fails to meet the requirements imposed by U.S. regulators, or faces further sizable regulatory fines or actions. The asset

...AML investigations have pointed to weaknesses in risk management and controls. In our view, Toronto-Dominion Bank's (TD Bank's) management failed to live up to standards expected of one of the world's highest rated banks when the bank's AML programs failed. The bank has taken several steps to address the deficiencies identified at its U.S. subsidiary banks, but we think it will take time to improve the risk management culture across the group, overhaul practices, strengthen the organizational structure, and demonstrate the effectiveness of these measures. Recent profitability has weakened due to hefty AML provisions. Reported return on equity (ROE) has fallen to 6.4% compared with the peer average of 10.7% as hefty AML investigations provisions (US$3.1 billion) and restructuring charges (C$566 million year to date) hurt profitability. We expect ROE will improve closer to historical levels (between 2020-2022, ROE was in the range of 13.6%-18.0%) over time, given the strength of the franchise,...

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