TD Bank accelerates leadership transition, cuts pay for outgoing CEO and 40 others
Financial institutions in the financial district of Toronto · Reuters

By Nivedita Balu and Manya Saini

(Reuters) - Canada's TD Bank Group said on Friday CEO-designate Raymond Chun will take charge on Feb. 1, more than two months earlier than initially planned, and that it slashed outgoing CEO Bharat Masrani's annual salary by 89%.

TD said 40 other senior executives, some no longer with the bank, took pay cuts in 2024 totaling C$30 million to reflect anti-money laundering failures that cost the Canadian company billions in penalties and business restrictions in the U.S., its biggest growth market.

All other members of the senior executive team will face a reduction of at least 25% in their 2024 compensation, which typically is a mix of salaries and bonuses, TD said.

Long-time CEO Masrani, whose annual 2024 compensation was reduced to C$1.5 million, with no cash or equity compensation, from C$13.3 million in 2023, has taken full responsibility for the failures in TD's risk and compliance program that allowed criminals to launder millions in proceeds from fentanyl and narcotics trafficking. A U.S. investigation found that drug traffickers were able to bribe TD employees in some U.S. branches.

The Canadian bank last month warned of a challenging 2025 and suspended its medium-term earnings forecast as it works through its anti-money laundering remediation program following a U.S. regulatory probe and said it would hold a strategic review.

At a banking conference in Toronto in January, marking his first public appearance as TD's incoming CEO, Chun addressed the bank's strategic review, which could include the sale of its stake in Charles Schwab and exit from some loan portfolios. Chun, who had previously been expected to take over as CEO on April 10, also said an investor day will likely be held later this year.

"Ray has moved quickly and decisively to launch a review of our strategy, operations, and investments," said Alan MacGibbon, who took over as chair of TD's board of directors in 2023. MacGibbon will step down by the end of 2025.

Chun, currently TD's chief operating officer, will be tasked with boosting growth at the bank while it meanders through challenges at its U.S. segment, including installing a government-approved monitor.

"We view it (the announcements) positively as it infers that the bank remains committed to its remediation plans and puts current CEO, Bharat Masrani, and the lingering overhang further into the background," said John Aiken, an analyst at Jefferies.

TD's shares were up 2.6% in mid-morning trading on the Toronto Stock Exchange on Friday.