Toronto-Dominion Bank (TD.TO)

In a tough spot, media has made it the whipping boy. Every single US bank has problems with money laundering, it's so pervasive. The fine came at the best time, as it was sitting on the most capital of any Canadian bank. Everyone knew what was coming, stock's been drifting lower for quite some time.

He owns it for the income, not the growth. He'd plug your nose and buy here, knowing it could go a bit lower. No one wants it on their books so there's been indiscriminate selling, which creates the value for you.

Compare this to WFC, which was in a whole heap of trouble due to problematic sales practices. Return since then is ~150%. The TD scenario is different. In these mature type of businesses, you'll get your dividend and a small bit of earnings growth. TD now has the lowest multiple of any Canadian bank, but will that be the case in 5 years? They all re-rate, and he thinks this will end up being quite a good return.

Has mixed thoughts. It's his favourite Canadian bank stock. The market had expected a $3 billion fine, but the 10% plunge in share price the last two days is reacting to TD not allowed to grow its core banking business in the US. Wells Fargo was hit with a similar fine and those shares have done little for 5 years. TD will probably recover back to $87 over the next little while. It will bounce, but will underperform several years compared to Canadian peers.

Great bounce off lows. With change like a new CEO, often the first quarters can be a bit bumpy. He prefers the cleaner stories of RY, CM and NA. 

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.