TD to Exit Remaining Stake in Schwab Amid Strategic Review

The Toronto-Dominion Bank TD has agreed to offload its remaining 10.1% equity stake in Charles Schwab Corporation SCHW. Subject to the fulfilment of customary closing conditions, the sale is anticipated to be completed on Feb. 12, 2025.TD Bank will sell roughly 165.4 million shares through a registered offering for $79.25 per share. Out of these, Schwab will acquire nearly 19.2 million shares for a total purchase price of $1.5 billion.Consequently, TD will no longer have two members on Schwab’s board. Nonetheless, TD’s insured deposit account agreement will remain unaffected by this deal.Further, Schwab will acquire these shares under a repurchase agreement with TD in a private transaction after the completion of the public offering. This repurchase will be funded by Schwab’s cash on hand. SCHW expects to have $7.2 billion remaining under its authorized program following the completion of repurchase.TD acquired a 13.5% stake in SCHW in 2020 in an all-stock deal to sell its interest in online brokerage TD Ameritrade Holding Corp. to Schwab. Last August, it sold 40.5 million shares of SCHW, reducing its stake to 10.1% from 12.3%.Here’s Why TD is Selling its Stake in SchwabThe divestment is expected to offer meaningful capital and liquidity flexibility while realizing a significant return on TD’s investment. Further, the deal is also expected to be accretive to 2025 earnings per share by approximately 1%.The deal is anticipated to yield net proceeds of around C$20 billion post-accounting for taxes and underwriting fees, resulting in C$15 billion in CET1 capital generated or a 247 bps increase in CET1 capital.TD plans to use C$8 billion to repurchase about 100 million shares over the next 12 months, subject to regulatory approval. The remaining amount is expected to be deployed to advance strategic review and accelerate organic growth plans.The sale by TD is part of a strategic review that was announced last year following a fine of $3.1 billion. Also, the bank received an order to limit the expansion of its U.S. retail banking business by U.S. regulators for failing to monitor money laundering activities at its branches.Strategic Review Plans by TDToronto-Dominion’s strategic review aims to find ways to reallocate capital, optimize costs, simplify its portfolio, and invest in new technology that can support organic growth. The review is expected to be completed by the second half of the year.Last week, Bloomberg reported, citing people with knowledge of the matter, that TD plans to offload a portfolio of residential mortgage loans worth $9 billion to Bank of America Corp. BAC to restructure its balance sheet. The deal with BAC hasn’t been finalized yet.TD is reducing its U.S. retail assets by roughly 10% by restructuring its balance sheet to adhere to the $434 billion limit set by U.S. regulators amid AML concerns. Further, the company has strengthened its first- and second-line AML staff and hired in risk and audit areas.TD’s shares have risen 4.8% over the past year, while SCHW’s shares have surged 32.7% in the same period.Currently, TD carries a Zacks Rank #4 (Sell), while SCHW carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report The Charles Schwab Corporation (SCHW): Free Stock Analysis Report Toronto Dominion Bank (The) (TD): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks