Bank of America (BofA) analysts on Friday upgraded Toronto-Dominion Bank (TD.TO) (TD) to a “buy” rating, citing “increasing confidence” in the bank's leadership. .
BofA Securities joins several other financial institutions that have identified upside potential for TD stock after a turbulent year in 2024 defined primarily by U.S. anti-money laundering issues and associated penalties.
BofA analyst Ebrahim H. Poonawalla wrote in a note to investors that the upgrade was “driven by growing confidence that new leadership under CEO Raymond Chung can fix the U.S.” are. [anti-money-laundering] We will continue to solve problems while improving franchise profitability compared to current projections. ”
BofA raised its price target for TD to $92 per share from $78. Canada's second-largest bank's Toronto-listed shares rose 4.61 per cent to $83.26 as of 12:45 p.m. Friday.
Mr. Poonawalla said TD's 2025 price-to-earnings ratio of 10.2x is well below the median for Royal Bank of Canada (RY.TO) and other major Canadian banks. He pointed out that (11.7 times). “Stock prices are well discounting downside risk, but they are giving little credit to improved execution,” he said.
TD announced today that Chun's appointment date will be brought forward from April to February 1. The changes and the addition of new directors “will be well received by investors who have been demanding more accountability from TD's management,” Poonawalla wrote.
At BofA, Poonawalla said there were concerns that Chung, as a “TD driver,” would not be able to “bring about the cultural changes that the bank needs.” But after a recent meeting with the incoming CEO, BofA was “more inclined to view him as an activist within the company.”
A separate meeting with TD's U.S. bank CEO Leo Salom provided reassurance about TD's anti-money laundering (AML) strategy, Poonawalla wrote. BofA is more confident that TD management is “ringing off the AML issue with a clear understanding of what it will take to get to the other side and lift retail bank asset limits.” He says he has. Additionally, 70 percent of U.S. businesses are not subject to asset caps, allowing U.S. capital markets to “act as a growth engine,” Poonawalla said.
BofA's upgrade follows upgrades for BMO ('outperform') on December 19th and Jefferies ('buy') on December 12th.
