Expert warns investors to steer clear of TD as it navigates a weakened outlook and trust issues
Grant White, a portfolio manager and investment advisor with iA Private Wealth, told BNN Bloomberg he plans to “steer clear” of Toronto-Dominion (TD) Bank for now.
He cited concerns over the fallout from a multi-billion-dollar money laundering fine in the US and a weakened growth outlook.
White explained that TD’s disappointing fourth-quarter results reflect the broader difficulties the bank has faced over the past year.
“This highlights the year that TD has had… we’ve been feeling negatively about TD this whole time,” he said in an interview on Thursday.
He noted that while some investors view the situation as a value opportunity, he believes the earnings report and the bank’s strategic outlook justify his decision to avoid TD as an investment.
TD's fourth-quarter earnings release on Thursday announced the suspension of its medium-term financial targets, including earnings growth, return on equity, and operating leverage.
The bank attributed the decision to an ongoing review of its overall strategy.
Incoming CEO and current COO Raymond Chun stated during a conference call that TD is reassessing its “business mix, including profitability and risk-adjusted return on capital, and where we need to invest and divest to improve,” as reported by Bloomberg News.
TD reported adjusted earnings of $1.72 per share for the quarter, missing Bloomberg-tracked analyst estimates of $1.83. The bank’s shares dropped more than five percent on Thursday afternoon, extending a decline of nearly 14 percent since early October.
The stock's slide began after US authorities fined TD over US$3bn following the bank’s guilty plea on money laundering charges.
White highlighted the challenges TD faces in rebuilding trust among investors and the public after the scandal.
“When you go through issues that they’ve gone through… where you get these systemic issues that go from one level, and it seems like a very baseline level, but then it goes right up through the top, you have to wonder where those things end up,” he said.
While acknowledging TD's efforts to restore trust, he cautioned that the process will take time, adding, “This is one that I would steer clear of for a while as an investor because we just don’t know how far it goes, we don’t know how long it’s going to take, and there’s a lot of work to do there.”
Despite his current concerns, White expressed optimism for TD’s long-term prospects.
He suggested that the bank will likely recover but noted the need for clearer direction from the new management team under Chun, who is set to replace long-time CEO Bharat Masrani in April.
“In the short term, I expect this to be a bumpy ride for TD, but at some point, this does become a value opportunity. At some point, this bank turns it around,” White stated.
However, he does not foresee significant improvement in the next three to six months, predicting a potential recovery by late 2025.
