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TD Bank CEO says anti-money laundering probe ongoing, addressing weakness

FILE PHOTO: TD Bank Group president and CEO Masrani speaks during the bank's annual meeting of shareholders in Toronto

TORONTO (Reuters) -Canada's TD Bank was working on its anti-money laundering (AML) compliance program, CEO Bharat Masrani said on Thursday, acknowledging that it was not up to the mark and that the U.S. Justice Department's was still probing.

"We are in discussions with our regulators. Regretfully, our AML program was not where it needed to be, and we are addressing it," Masrani told shareholders at TD's annual meeting.

"We are working diligently to strengthen our program. We have onboarded globally recognized talent and leadership, and invested in technology, process redesign, training and other activities," he said.

Masrani said he could not disclose any additional details given the confidential nature of regulatory discussions.

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TD Bank last year had said it expects fines and "non-monetary" penalties related to investigations by U.S. authorities, including in connection with an investigation by the U.S. Department of Justice.

Analysts have forecast the fine could be anywhere between $500 million to $1 billion, a sum it could comfortably afford at its strong capital position but risks reputation damage.

The bank, which has more retail branches in the U.S. than at home, has launched new training platforms to educate its staff about AML compliance, Masrani said.

The bank, Canada's second largest, has rapidly expanded in the past few years as it seeks growth opportunities in the United States, where it has about 10 million customers.

Its ambitious $13.4 billion acquisition of U.S. regional lender First Horizon was also called off before the AML probe was disclosed, citing delay in regulatory approvals.

Masrani, addressing a shareholder's question on the stock's laggard performance, acknowledged a lack of clarity related to its issue in the US and said there was pressure, but asked shareholders to "be patient" until the bank can share more details.

The stock has fallen roughly about 30% since its peak in early 2022 and was one of the worst performers among the big six Canadian banks last year.

It trades roughly about 10 times its earnings, compared with bigger rival Royal Bank of Canada's 12 times, according to LSEG data.

(Reporting by Nivedita Balu in Toronto; Editing by Chizu Nomiyama and Josie Kao)