Toronto-Dominion Bank Suspends Growth Targets as It Reviews Business — Update

By Adriano Marchese

Toronto-Dominion Bank said it would be difficult to grow earnings over the next year and scrapped its financial-growth targets, weeks after settling U.S. charges that it failed to properly monitor money laundering.

The Canadian bank said Thursday that part of the challenges to its finances would be the spending needed to strengthen its risk and controls following a settlement with regulators and prosecutors that involved money laundering by drug cartels and other criminal groups. The bank is upgrading its anti-money-laundering infrastructure in the U.S. and is looking at ways to improve across its entire business as well.

"We do need to improve and strengthen our enterprise-wide program," departing Chief Executive Bharat Masrani said. "It's critical that we do so and we will."

The company pulled its targets after logging a decline in fourth-quarter profit, which fell below market expectations. Shares slipped 5.4%, to 74.33 Canadian dollars (US$52.82).

For the past year, the Canadian financial institution has been operating while under investigation in the U.S. The bank pleaded guilty to multiple charges in October, agreeing to pay US$3.09 billion in fines, and accepted limits on growth in the U.S. as well.

In fiscal 2024, TD Bank said it didn't meet its medium-term financial targets following the settlement. Ray Chun, who is set to succeed Masrani as CEO in April, said the company for the past month has been in the process of a "broad and detailed review of the bank's strategies and investment priorities to best position TD to compete over the medium and longer term."

Chun didn't elaborate if the review would include any disposals, particularly on the U.S. side where it has a large presence in retail banking. "Everything is on the table," Chun said.

The bank aims to reintroduce financial targets in the second half of 2025 after the review is completed.

For the fourth fiscal quarter, which ended on Oct. 31, TD reported a profit of C$3.64 billion, or C$1.97 a share, compared with C$2.87 billion, or C$1.48 a share, in the comparable quarter last year.

On an adjusted basis, stripping out exceptional and one-off costs, earnings came to C$1.72 a share. According to FactSet, analysts were expecting C$1.82 a share.

Total revenue reported was C$15.51 billion, up from C$13.18 billion. Analysts expected a decline to C$12.47 billion.

The company's U.S. retail banking segment, one of its largest, fell 32%, to C$863 million, while in Canada, personal and commercial banking rose by 9%, to C$1.82 billion.

Wealth management also fell, declining 29%, to C$349 million.

Provision for credit losses, which estimates the potential losses of the bank due to bad loans, rose to C$1.11 billion from C$878 million.

Common equity tier 1 ratio, which measures a bank's capital against its risk-weighted assets such as loans and mortgages, fell to 13.1% from 14.4%.

Write to Adriano Marchese at adriano.marchese@wsj.com

Corrections & Amplifications

This item was corrected at 12:52 p.m. ET to show that Toronto-Dominion Bank reported fourth-quarter net income of 2.87 billion Canadian dollars (US$2.04 billion) in fiscal-year 2023. An earlier version incorrectly reported the figure in U.S. dollars.

(18:06 GMT) Correction to Toronto-Dominion Bank Suspends Growth Targets Article

Toronto-Dominion Bank reported fourth-quarter net income of 2.87 billion Canadian dollars (US$2.04 billion) in fiscal-year 2023. "Toronto-Dominion Bank Suspends Growth Targets as It Reviews Business — Update," at 12:44 p.m. ET, incorrectly said it reported net of $2.87 billion.