Toronto-Dominion Bank (TSX:TD) suffered reputational damage after regulators found it violated U.S. anti-money laundering (AML) rules. No one expected that Canada’s second-largest bank would admit to negligence, if not wrongdoing, but it did.
In October 2024, the Department of Justice and other banking regulators meted record-breaking fines totalling US$3.09 billion. Operational restrictions came with the hefty financial penalty. The Office of the Comptroller of the Currency (OCC) imposed a hard asset cap, where the combined assets of all TD subsidiaries cannot exceed US$454 billion.
TD’s plan to open more branches is likewise on hold. Understandably, the bank stock took a hit due to the guilty plea and the unexpected asset cap and growth restrictions.
Best buy in December
Believe it or not, but as 2025 comes to a close, TD still emerged as the best buy among the giant lenders in December. As of this writing, the year-to-date gain is 72.2%. None of its big bank peers have positive returns of 50% or more. The current share price is $125.78, up 60% from $78.48 on October 11, 2024.
A leadership change followed immediately, with Raymond Chun taking over as CEO effective November 1 in place of Bharat Masrani. Chun said AML remediation is the top priority. TD also announced other changes at the senior management level as it prepares to implement major compliance overhauls.
Relief rally
Some market analysts say the stock’s remarkable rebound was a relief rally. Chun announced a strategic review, including reassessment of growth opportunities and productivity initiatives, as well as investment or divestment. Moreover, the operational restrictions were not all bad news to investors.
The $213 billion bank had ample cash after paying the fine and selling its US$15-billion stake in The Charles Schwab Corporation. On December 4, 2025, Chun announced a stock buyback of up to $7 billion to be completed by the first quarter (Q1) of fiscal 2026.
“Throughout 2025, we remained sharply focused on our U.S. anti-money laundering remediation program. We achieved several important milestones this year and have a clear roadmap for the work ahead. This remains our top priority,” he added.
Fiscal 2025 results
In Q4 fiscal 2025, net income declined 10% year over year to $3.3 billion. However, in the 12 months ending October 31, 2025, net income jumped 132% to $20.5 billion, up from fiscal 2024. The “uncapped” businesses in the domestic market delivered record results.
Because of strong trading volumes and successful integration of TD Cowen, Wholesale Banking reported a 77% year-over-year increase in adjusted net income in Q4 fiscal 2025. Surprisingly, in the same quarter, the U.S. retail segment reported a 29% increase in net income to US$520 million in Q4 fiscal 2025 versus Q4 fiscal 2024.
TD announced a 3% dividend hike, which Chun said reflects the board’s confidence in the bank’s future growth and earnings power. Moreover, dividend review is now semi-annual instead of annual. If you invest today, the yield is 3.43% (36.33% payout ratio). Note that TD’s dividend track record is 168 years.
Compelling buy
TD encountered a perfect storm, but it still stands out as a compelling December buy. The big bank reported strong profit growth despite operational restrictions in the U.S.
