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Bank of America (BofA) analysts upgraded Toronto-Dominion Bank (TD.TO)(TD) to a “Buy” rating on Friday, citing “increased confidence” in the bank’s leadership.
BofA Securities joins several other institutions that have identified upside in TD’s stock after a year of turmoil in 2024 defined largely by anti-money-laundering issues in the U.S. and consequent penalties.
In a note to investors, BofA analyst Ebrahim H. Poonawala writes that the upgrade is driven by “increased confidence new leadership under CEO Raymond Chun … can fix the U.S. [anti-money-laundering] issues while driving the franchise toward improved profitability relative to our current forecast.”
BofA raised its price target for TD from $78 to $92 per share. Toronto-listed shares of Canada's second-largest bank were up 4.61 per cent to $83.26 as of 12:45 p.m. Friday.
Poonawala notes that TD is trading at 10.2 times the 2025 price-to-earnings ratio (P/E), well below that of Royal Bank of Canada (RY.TO — which trades at 13.3x) and the median for other major Canadian banks (11.7x). “We believe the stock is more than adequately discounting downside risks, while giving little credit for improved execution,” he writes.
TD announced today that Chun’s start date would move forward from April to February 1. That change, as well as the addition of new directors, is “likely to be received positively by investors who have sought more accountability from TD leadership,” Poonawala writes.
There had been concerns at BofA that Chun, as a “TD lifer” would be unable to “bring the cultural change that the bank needed,” Poonawala says. But after a recent meeting with the incoming CEO, BofA is “more inclined to see him as an internal activist.”
Another meeting, with TD’s U.S. bank CEO Leo Salom, offered reassurances around TD’s anti-money-laundering (AML) strategies, Poonawala writes. BofA is more confident that TD management “has the AML issue ring fenced with a clear understanding of what is needed to get to the other side and exit the asset-cap on the retail bank,” he says. Furthermore, 70 per cent of the U.S. operations are not subject to the asset cap, Poonawala says, so U.S. capital markets can “serve as a growth engine.”
The BofA upgrade follows upgrades from BMO on December 19 (to “Outperform”) and Jefferies on December 12 (to “Buy”).
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