Charles Schwab(US:SCHW) ZACKSยท2025-02-12 17:55Core Viewpoint - Toronto-Dominion Bank (TD) is divesting its remaining 10.1% equity stake in Charles Schwab Corporation (SCHW) to enhance capital and liquidity flexibility while realizing a significant return on its investment [1][4]. Group 1: Transaction Details - TD will sell approximately 165.4 million shares at $79.25 per share, with Schwab acquiring nearly 19.2 million shares for a total of $1.5 billion [1][2]. - The sale is expected to be completed on February 12, 2025, subject to customary closing conditions [1]. - Following the sale, TD will no longer have representation on Schwab's board, but its insured deposit account agreement will remain unaffected [2]. Group 2: Financial Implications - The divestment is projected to yield net proceeds of around C$20 billion after accounting for taxes and underwriting fees, resulting in C$15 billion in CET1 capital generated, equating to a 247 basis points increase in CET1 capital [4]. - The deal is anticipated to be accretive to TD's earnings per share by approximately 1% in 2025 [4]. Group 3: Strategic Review and Future Plans - The divestment is part of a broader strategic review initiated after a $3.1 billion fine and regulatory limitations on TD's U.S. retail banking expansion due to money laundering concerns [6][9]. - TD plans to utilize C$8 billion from the proceeds to repurchase about 100 million shares over the next 12 months, pending regulatory approval, with the remaining funds aimed at advancing strategic initiatives and organic growth [5][7]. - The strategic review aims to optimize costs, simplify the portfolio, and invest in new technology, expected to be completed in the second half of the year [7]. Group 4: Market Context - TD is restructuring its U.S. retail assets by approximately 10% to comply with a $434 billion limit set by U.S. regulators amid anti-money laundering concerns [9]. - Over the past year, TD's shares have increased by 4.8%, while Schwab's shares have surged by 32.7% [9].