Charles Schwab's investment portfolio to be acquired by TD
TD Bank has announced its decision to sell its entire investment in Charles Schwab, expected to fetch approximately $14 billion. This move marks the bank's first major action under new CEO Raymond Chun, who took office on February 1.
The bank currently held 184.7 million shares of Schwab's common stock, a 10.1% economic ownership that it originally acquired in 2020. In August last year, TD sold 40.5 million Schwab shares, reducing its stake.
According to Chun, the sale is part of a strategic review, and the bank will use C$8 billion ($5.6 billion) of the proceeds to repurchase its own stock. The remaining proceeds will be invested back into TD’s business to support customers and clients, drive performance, and accelerate organic growth.
Charles Schwab has agreed to repurchase $1.5 billion of its shares from TD, contingent on the completion of a registered offering. The remaining balance from the sale will not be used for purchasing licensing rights for any specific business or service, as TD has not yet disclosed any such plans.
TD's strategic reason for selling its investment in Charles Schwab is part of a broader capital allocation review aimed at exiting the Schwab investment to generate strong returns and refocus on TD’s core growth opportunities. The bank aims to optimize its capital allocation and focus on its growth and infrastructure development, as stated by CEO Raymond Chun.
The sale does not mean the end of TD's business relationship with Schwab. The bank intends to maintain its business relationship with Schwab through the Insured Deposit Account (IDA) Agreement, suggesting that while the equity ownership is ending, some strategic collaborations will continue.
In October, TD agreed to pay more than $3 billion in penalties in connection with its anti-money laundering (AML) woes. As a result, TD must now operate under a $434 billion asset cap for its U.S. retail operations due to its AML issues. Improving AML practices is a priority for TD, as stated by CEO Raymond Chun.
[1] Source: TD Bank's official statement [5] Source: TD Bank's strategic review under CEO Raymond Chun
- TD Bank, under the leadership of CEO Raymond Chun, plans to invest part of the $14 billion proceeds from selling its investment in Charles Schwab back into TD's business, aiming to support customers and clients, drive performance, and accelerate organic growth.
- The selling of TD Bank's investment in real-estate giant Charles Schwab is part of a broader capital allocation review, with the bank intending to refocus its resources on its core growth opportunities in finance and business, while maintaining its business relationship with Schwab through the Insured Deposit Account (IDA) Agreement.
