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TD Bank reports Q3 loss as it takes US$2.6B charge on anti-money laundering probe

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TORONTO – TD Bank Group swung to a rare loss in its latest quarter as it took a US$2.6-billion charge related to ongoing U.S. investigations into its anti-money laundering program.

The charge led to a reported quarterly loss of $181 million, the first for the bank since 2003, but it also provided clarity on the expected total cost of the investigations after some speculation it could go even higher.

“The US$2.6-billion provision we just announced, combined with the US$450-million provision announced last quarter, represents our current estimate of the total fines to be paid related to these matters,” chief executive Bharat Masrani told financial analysts on a conference call Thursday to discuss the company’s latest results.

TD also added it expects a global resolution of the issues will be finalized by the end of the calendar year.

“While we are not through the tunnel yet, we can see the light at the end of this journey,” Masrani said.

The anti-money laundering investigation has been a major overhang for TD for some time. The investigation helped scuttle its US$13.4-billion acquisition of U.S. bank First Horizon Corp. in May last year, while the bank disclosed last August it expected U.S. regulators to impose penalties because of deficiencies in the program.

Earlier this year, the bank admitted serious deficiencies in its program after media reports that criminals had laundered at least US$653 million in proceeds from illicit drugs through the bank.

“As I’ve said before, the failures were serious,” Masrani said Thursday. “We own it, we know what the issues are and we are fixing them.”

The bank said the expected resolution will include both the monetary penalties it outlined, along with non-monetary ones. Analysts have been concerned those penalties could include restrictions on growing its balance sheet, but Masrani declined to provide any details on what non-monetary penalties could entail.

“You know, there might be compliance requirements, there can be various other requirements, hard to speculate. We are in the middle of this, negotiations, investigations, so we just want to make sure that we give you a fulsome disclosure when it’s appropriate.”

Along with announcing the provision, the bank said it had sold 40.5 million shares of the Charles Schwab Corp., worth about US$2.6 billion.

Analysts questioned the need for the sale, but Masrani said it was about keeping capital levels high.

“It’s prudent to have capital. There is still a lot of volatility and economic conditions are not as predictable as one would like.”

The need for capital came as the loss in its latest quarter stood in sharp contrast to a profit of $2.88 billion a year ago. The loss amounted to 14 cents per diluted share for the quarter ended July 31 compared with a profit of $1.53 per diluted share a year ago.

Revenue in the quarter totalled $14.18 billion, up from $12.91 billion a year ago.

On the credit question that will be a key focus for other banks, TD reported provisions for credit losses amounted to $1.07 billion, up from $766 million in the same quarter last year, though essentially flat from the previous quarter.

On an adjusted basis, TD said it earned $2.05 per diluted share in its latest quarter compared with an adjusted profit of $1.95 per diluted share in the same quarter last year.

The adjusted profit fell a little short of the $2.07 analysts on average had expected, according to LSEG Data & Analytics.

One of the big reasons for the miss was a big pullback in earnings from TD’s insurance unit because of extreme weather events.

Insurance earnings of $15 million were down significantly from the $145 million last quarter after it saw $186 million in claims during the quarter from the Toronto area flooding and the Alberta wildfires. The bank has also seen a rise in claims from hailstorms in Calgary and flooding in Montreal this month.

“We’ve seen an increase in the frequency of weather events,” said Masrani.

However, analysts were more focused on the anti-money laundering issue than the slight miss, noting the clarity is welcome.

“It doesn’t answer all the outstanding questions, but it does provide some important clarity on the ultimate timeline for a full resolution of the bank’s U.S. AML issues, as well as a clearer picture of the total monetary penalty,” said Scotiabank analyst Meny Grauman in a note.

While the approximately US$3 billion in total penalties is at the upper end of some forecasts, Grauman noted that some were expecting as high as US$4 billion.

He said the real issue in his view are the potential non-monetary penalties and the lack of details on them, but he’s not as worried as the market.

“We continue to believe that the market is pricing in a worst-case scenario that does not really have a precedent.”

National Bank analyst Gabriel Dechaine said the bank’s long-term outlook is challenged by the potential restrictions on U.S. asset growth, along with a multi-year increase to compliance costs.

He said the clarity on the total monetary penalties removes an overhang on the bank, while also clearing the way for a potential CEO succession.

“CEO succession at TD would have been topical if only because current chief Bharat Masrani has been at the helm for a decade. Succession questions have become even more intense because of the bank’s U.S. regulatory issues.”

Investors will have to wait longer to find out the full fallout from the affair, but Masrani said he’s keen to lay out the full picture.

“I look forward to providing additional clarity as soon as I can.”

This report by The Canadian Press was first published Aug. 22, 2024.

Companies in this story: (TSX:TD)

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Canada’s response to Trump deportation plan a key focus of revived cabinet committee

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OTTAWA, W.Va. – U.S. president-elect Donald Trump’s promise launch a mass deportation of millions of undocumented immigrants has the Canadian government looking at its own border.

Deputy Prime Minister Chrystia Freeland said Friday the issue is one of two “points of focus” for a recently revived cabinet committee on Canada-U.S. relations.

Freeland said she has also been speaking to premiers about the issue this week.

“I do want Canadians to know it is one of our two central points of focus. Ministers are working hard on it, and we absolutely believe that it’s an issue that Canadians are concerned about, Canadians are right to be concerned about it,” Freeland said, after the committee met for the first time since Trump left office in 2021.

She did not provide any details of the plan ministers are working on.

Public Safety Minister Dominic Leblanc, whose portfolio includes responsibility for the Canada Border Services Agency, co-chairs the committee. Freeland said that highlights the importance of border security to Canada-U.S. relations.

There was a significant increase in the number of irregular border crossings between 2016 and 2023, which the RCMP attributed in part to the policies of the first Trump administration.

The national police service said it has been working through multiple scenarios in case there is a change in irregular migration after Trump takes office once again, and any response to a “sudden increase in irregular migration” will be co-ordinated with border security and immigration officials.

However, Syed Hussan with the Migrant Rights Network said he does not anticipate a massive influx of people coming into Canada, chalking the current discussion up to anti-migrant panic.

“I’m not saying there won’t be some exceptions, that people will continue to cross. But here’s the thing, if you look at the people crossing currently into the U.S. from the Mexico border, these are mostly people who are recrossing post-deportation. The reason for that is, is that people have families and communities and jobs. So it seems very unlikely that people are going to move here,” he said.

Since the Safe Third Country Agreement was modified last year, far fewer people are making refugee claims in Canada through irregular border crossings.

The agreement between Canada and the U.S. acknowledges that both countries are safe places for refugees, and stipulates that asylum seekers must make a refugee claim in the country where they first arrive.

The number of people claiming asylum in Canada after coming through an irregular border crossing from the U.S. peaked at 14,000 between January and March 2023.

At that time, the rule was changed to only allow for refugee claims at regular ports of entry, with some specific exemptions.

This closed a loophole that had seen tens of thousands of people enter Canada at Roxham Road in Quebec between 2017 and 2023.

In the first six months of 2024, fewer than 700 people made refugee claims at irregular crossings.

There are 34,000 people waiting to have their refugee claims processed in Canada, according to government data.

In the first 10 months of this year, U.S. border officials recorded nearly 200,000 encounters with people making irregular crossings from Canada. Around 27,000 encounters took place at the border during the first 10 months of 2021.

Hussan said the change to the Safe Third Country Agreement made it less likely people will risk potentially dangerous crossings into Canada.

“Trying to make a life in Canada, it’s actually really difficult. It’s more difficult to be an undocumented person in Canada than the U.S. There’s actually more services in the U.S. currently, more access to jobs,” Hussan said.

Toronto-based immigration lawyer Robert Blanshay said he is receiving “tons and tons” of emails from Americans looking at possibly relocating to Canada since Trump won the election early Wednesday.

He estimates that about half are coming from members of the LGBTQ+ community.

“I spoke to a guy yesterday, he and his partner from Kansas City. And he said to me, ‘You know, things weren’t so hunky-dory here in Kansas City being gay to begin with. The entire political climate is just too scary for us,'” Blanshay said.

Blanshay said he advised the man he would likely not be eligible for express entry into Canada because he is at retirement age.

He also said many Americans contacted him to inquire about moving north of the border after Trump’s first electoral victory, but like last time, he does not anticipate many will actually follow through.

This report by The Canadian Press was first published Nov. 8, 2024



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Surrey recount confirms B.C. New Democrats win election majority

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VANCOUVER – The British Columbia New Democrats have a majority government of 47 seats after a recount in the riding of Surrey-Guildford gave the party’s candidate 22 more votes than the provincial Conservatives.

Confirmation of victory for Premier David Eby’s party comes nearly three weeks after election night when no majority could be declared.

Garry Begg of the NDP had officially gone into the recount yesterday with a 27-vote lead, although British Columbia’s chief electoral officer had said on Tuesday there were 28 unreported votes and these had reduced the margin to 21.

There are ongoing recounts in Kelowna Centre and Prince George-Mackenzie, but these races are led by John Rustad’s B.C. Conservatives and the outcomes will not change the majority status for the New Democrats.

The Election Act says the deadline to appeal results after a judicial recount must be filed with the court within two days after they are declared, but Andrew Watson with Elections BC says that due to Remembrance Day on Monday, that period ends at 4 p.m. Tuesday.

Eby has said his new cabinet will be announced on Nov. 18, with the 44 members of the Opposition caucus and two members from the B.C. Greens to be sworn in Nov. 12 and the New Democrat members of the legislature to be sworn in the next day.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.



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Port of Montreal employer submits ‘final’ offer to dockworkers, threatens lockout

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MONTREAL – The employers association at the Port of Montreal has issued the dockworkers’ union a “final, comprehensive offer,” threatening to lock out workers at 9 p.m. Sunday if a deal isn’t reached.

The Maritime Employers Association says its new offer includes a three per cent salary increase per year for four years and a 3.5 per cent increase for the two subsequent years. It says the offer would bring the total average compensation package of a longshore worker at the Port of Montreal to more than $200,000 per year at the end of the contract.

“The MEA agrees to this significant compensation increase in view of the availability required from its employees,” it wrote Thursday evening in a news release.

The association added that it is asking longshore workers to provide at least one hour’s notice when they will be absent from a shift — instead of one minute — to help reduce management issues “which have a major effect on daily operations.”

Syndicat des débardeurs du port de Montréal, which represents nearly 1,200 longshore workers, launched a partial unlimited strike on Oct. 31, which has paralyzed two terminals that represent 40 per cent of the port’s total container handling capacity.

A complete strike on overtime, affecting the whole port, began on Oct. 10.

The union has said it will accept the same increases that were granted to its counterparts in Halifax or Vancouver — 20 per cent over four years. It is also concerned with scheduling and work-life balance. Workers have been without a collective agreement since Dec. 31, 2023.

Only essential services and activities unrelated to longshoring will continue at the port after 9 p.m. Sunday in the event of a lockout, the employer said.

The ongoing dispute has had major impacts at Canada’s second-biggest port, which moves some $400 million in goods every day.

On Thursday, Montreal port authority CEO Julie Gascon reiterated her call for federal intervention to end the dispute, which has left all container handling capacity at international terminals at “a standstill.”

“I believe that the best agreements are negotiated at the table,” she said in a news release. “But let’s face it, there are no negotiations, and the government must act by offering both sides a path to true industrial peace.”

Federal Labour Minister Steven MacKinnon issued a statement Thursday, prior to the lockout notice, in which he criticized the slow pace of talks at the ports in Montreal and British Columbia, where more than 700 unionized port workers have been locked out since Nov. 4.

“Both sets of talks are progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved,” he wrote on the X social media platform.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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