The Liberal Party retained power in the recently concluded federal elections following a record voter turnout. Also, Canada’s primary stock market gained +1.3% during election week. However, the financial services sector advanced (+2.88%) the most in five days. Some market analysts say it is because the new prime minister is a former banker.
CIBC analyst Ian de Verteuil believes financial stocks are likely winners with the ascension of Mark Carney. Canada’s 24th prime minister is an economist and ex-Central banker. For Sid Mokhtari, the chief market technician for CIBC Capital Markets, the recent market volatility could boost banks and other financials that act as trading intermediaries.
As of this writing, only Toronto-Dominion Bank (TSX:TD) out of the Big Six Canadian bank stocks has bucked the tariff chaos. At $88.18 per share, the year-to-date gain is +18.33%, while the dividend yield is 4.75%. Given TD’s remarkable rebound to start the year and +92.34% overall return in five years, you can double your money by 2030 if you invest today.
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Strong momentum
Canada’s second-largest bank paid U.S. regulators a hefty penalty in December 2024 after admitting negligence in implementing proper anti-money laundering measures. Nevertheless, despite the US$3.1 billion settlement, TD reported better-than-expected financial results in Q1 fiscal 2025.
TD Bank Group’s president and CEO, Raymond Chun, said, “TD started the year with strong momentum and record revenue across many of our businesses. While expenses remain somewhat elevated, we delivered solid earnings, which positions us well as we begin the new fiscal year.”
In the three months ending January 31, 2025, total revenue rose 2% to $14 billion versus the first quarter (Q1) of fiscal 2024, while net income dipped 1% year over year to $2.8 billion. TD’s provision for credit losses (PCL) during the quarter increased 21% to $1.2 billion from a year ago.
The net income of the Wealth Management and Insurance segment climbed 23% year over year to $680 million, while Wholesale Banking’s profit jumped 46% to $299 million versus Q1 fiscal 2025. However, due to the impact of the AML failure, the net income of the U.S. Retail Banking dropped 61% to $342 million from a year ago. Nonetheless, personal deposit growth grew for the fifth consecutive quarter.
Multi-pronged approach
According to Chun, U.S. anti-money laundering (AML) remediation remains the bank’s top priority. TD is working to regain investors’ and regulatory trust. Management commits to actively implementing a comprehensive remediation program, strengthening internal oversight and accountability. An overhaul of its U.S. AML leadership is also underway.
TD has likewise reduced the compensation of its top U.S. executives as part of a broader effort to reshape the bank’s leadership and financial recovery. Meanwhile, U.S. expansion efforts have stalled because of the US$434 billion asset cap imposed by regulators on retail banking operations. Still, TD could earn ample interest income with the slow pace of the U.S. Fed’s rate-cutting cycle.
Stock performance
TD is approaching its 52-week high of $88.55 and has gained +18.31% in the last six months. It’s the best performance among Canada’s Big Six banks during the period. Despite the regulatory challenges, some market analysts believe TD is a good long-term play. Furthermore, the current share price is relatively cheap, especially for income-focused investors.
