Toronto-Dominion Bank (TD.TO)

Very difficult couple of years, bounced back nicely after Q3 results. Last week's announcement of new CEO cleared some of the overhang of concern as to who would take over the reins. Also gave confidence that money-laundering fines and penalties would soon be in rearview mirror. Yield is 4.8%.

Franchise has been tarnished by wrongdoings in US, but not irreparably. Its roots pre-date Confederation. Will regain lustre. While waiting for regulatory clouds to part, rare opportunity to buy it at a discount on PE and price-to-book ratios compared to peers. Re-rating will happen.

Money laundering issues have not gone away. Seems well on track to paying the fines. Bigger risk is a cap on US growth. That would really hinder it, as most growth is in the US. He sold. Financial position is solid. Speculation on management succession. 

He wouldn't buy anew. If you already own, hold, as a lot of bad news is already priced in.

Likes it. One of the better banks in Canada and always has been. Built a US business that mirrored the Canadian, to be the "most convenient bank". Money laundering issue, though significant, is just about over. Fine will be about $3B, they can handle it.

Once fine is paid, they'll either get an order restricting further acquisitions, or they won't. If not, it's extremely over-capitalized and can invest in the US. If they do, they'll buy back stock.

Is experiencing significant, but transitory issues. NA will do well overall.  For the next decade, NA has a smaller base to grow than TD, but their earning power will outstrip TD. That said, he would suggest only selling TD marginally to buy NA.

It has set aside $2.6 billion for the money laundering issues and this would be for the worse case scenario. This means that the uncertainty over the payout has gone which has caused the stock to rally. Also the U.S. regulatory board may constrict expansion in the U.S. but this could be good for TD since it would need to focus more in Canada.

Yes, if you have a very long time horizon of 5 years. Usually trades at a premium, now at less than 9x earnings because of AML issues. Those issues will get resolved. Premium ~over 11x will return, but not for a while. (Median for big banks is ~10x.) She read that at these valuations, it's like getting the US operations for free. Both Canadian and US operations posting solid numbers.

Took on extra provisions to pay fine. We don't know if growth will be capped by regulators.

Will hold onto it. They're in the penalty box for a while, but it's a chance for them to focus on finding the best people and technology, which will improve their multiple. Also, not buying any businesses will force them to improve their U.S. business, and integrate Cowen. TD is fine to hold now. Their core business is doing well.

He recently sold BMO to buy this. Last week, TD offered a lot of clarity by warning of potential losses from the their US money-laundering issue.

Q3 was broadly in line with expectations today, setting aside the 1-time charge to settle the anti-money-laundering mess. Has indicated this overhang should be gone by end of year. Bank has some explaining to do, needs further management changes. Shored up capital ratios by selling SCHW, a good move.

They'll get through this. Shares are adequately discounted. Fixing compliance. Canadian unit is doing well. Integrating Cowan acquisition well. Big insurance settlements re wildfires. Short-term headwinds should dissipate and it will continue trajectory of high single-digit or low double-digit returns. He's keeping the faith.

In the news a lot, creating lots of noise and uncertainty. On straight valuation, trading at attractive levels of 9/10. Fundamentals are 8/10. She'd need to see a lot of turnaround. Regulatory compliance will take some time. Be cautious. Only 6-7% upside, risk/reward just not there.

Her preference is RY.

He'd still buy today. Trading at a discount to peers. Taking lots of steps to correct things.

He doesn't know what penalty they will pay over money-laundering charges in the US, but TD has a ton of free cash flow that they could use to buy more shares and operations are very good.

Regarding the money laundering scandal TD has booked $450 million in fines but most think there is more to come. The bigger picture is the growth in Canada by targeting immigrants with new products. It is at a good entry point.

The lapse in compliance is fixable. Lots of capital. The overhang on the stock is how big is the cheque for the fine going to be? Once that cheque's written, it should be fine. Will force them to be a better bank. Being prevented from acquiring means they can put $$ to use on strengthening what they have.

Added it a month or so ago. US money-laundering overhang, depressing the valuation to 8-9x from the gold standard in Canada of Royal Bank's 12-13x. Hoping for clarity in the fall of the monetary fine, which will clear the decks and provide room for multiple expansion.

Huge concern if they're told they can't purchase US assets for a time, but at least people will know where they stand. He's equally bullish on both names, for different reasons.