TD and BMO stumble while CIBC rises to cap big bank earnings season
TD Bank on Thursday warned of a challenging 2025 and suspended its medium-term earnings forecast as Canada’s second-biggest lender works through its anti-money laundering remediation program following a U.S. regulatory probe.
Shares of TD, which faces an asset cap and a $3 billion penalty following a probe by U.S. regulators last year into its anti-money laundering program, were down about 5% after it said it would only update its targets in the second half of 2025.
TD also said it would hold a strategic review of opportunities, as it would take at least four years for it to complete its audit and regulatory reviews.
“For fiscal 2025, it will be challenging for the bank to generate earnings growth as it navigates a transition year,” TD said in a statement as it works through its anti-money laundering remediation with investments in its risk and control infrastructure.
TD ran into problems with U.S. regulators for shortfalls in its risk and compliance program that provided ground for a host of illicit activity, from fentanyl and narcotics trafficking to terrorist financing.
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Waiting another half a year or more for management to disclose the longer-run implications of its U.S. consent order “leaves the stock without a proper anchor,” Scotiabank analyst Meny Grauman said.
Contrasting earnings from BMO, CIBC
TD issued its updates after the lender and Bank of Montreal, two of Canada’s biggest banks, missed analysts’ estimates for quarterly profit, reflecting weakness in their U.S. businesses and bigger-than-anticipated funds to cover potential loan losses.
In contrast, the smallest of the country’s big five banks – Canadian Imperial Bank of Commerce – reported a fourth-quarter profit that surpassed estimates, helped by smaller-than-expected loan loss provisions and strength at its Canadian retail arm.
BMO and TD have expanded in the U.S. through a series of acquisitions over the years, as they sought growth opportunities outside of Canada, catering to scores of clients on the West and East Coasts.
However, the businesses ran into problems.
BMO has also faced credit issues as some loan books have weakened due to clients struggling to repay their loans. TD disclosed the U.S. regulatory probe shortly after it terminated its $13.4 billion acquisition of Tennessee-based lender First Horizon last year, a deal that would have given it more ground in the Southeast U.S. The probe followed investigations at its retail branches that occurred as early as 2021.
TD’s adjusted net income fell 8% to C$3.21 billion in the fourth quarter. On a per-share basis, TD earned C$1.72, which was 10 Canadian cents lower than analysts’ average expectation, according to LSEG data.
“We are less disappointed with the quarter itself … and more disappointed with the updated guidance provided by the bank, or lack thereof,” Scotiabank’s Grauman said.
BMO earned C$1.90 per share in the fourth quarter, missing analysts’ average estimate of C$2.41.
CIBC earned C$1.91, beating the average estimate of C$1.79.
BMO’s shares were down nearly 1.7% in early trading on the Toronto Stock Exchange, while CIBC’s shares rose 3.9%.
The results wrap up fourth-quarter earnings for the Canadian banks with mixed results and cautious optimism headed into fiscal 2025.