TD Names Chun CEO With Bank Facing US Investigation

(Bloomberg) — Toronto-Dominion Bank said Chief Executive Officer Bharat Masrani will retire in April and Raymond Chun will take the top job, as the bank grapples with investigations by the Department of Justice and financial regulators into lapses of money-laundering controls at its US branches.

Chun, 55, who’s currently head of TD’s Canadian retail division, will join the board and become chief operating officer on Nov. 1, Canada’s second-biggest bank said in a statement Thursday. He’ll officially become CEO on April 10. 

Masrani, 68, has worked for Toronto-Dominion for decades and became CEO in 2014, but the end of his tenure has been marred by last year’s unraveling of the $13.4 billion deal to acquire US regional bank First Horizon Corp., the anti-money laundering probes and a slumping share price. 

The core allegations are that Toronto-Dominion failed to catch money laundering and other financial crimes at several branches in the US, a division Masrani himself used to run. Numerous executives in legal and compliance roles have left the bank amid the fallout, and speculation that Masrani would also announce his exit has swirled for months.    

Toronto-Dominion said last month it hopes to reach a global settlement of the US probes by the end of the year and anticipates paying total fines of about $3 billion. It could also face limits on its growth in the US.  

“We have a strong bench of senior leaders and will execute a smooth and seamless CEO transition,” Masrani said in a statement. “The anti-money laundering challenges we face took place on my watch as CEO and I take full responsibility,” he said, adding that he will continue to advance a critical remediation program to strengthen risk and control. Masrani will also continue as an advisor to TD until the end of October next year.

Shares in TD rose 1.89% to C$86.87 at 11:12 a.m., outpacing the S&P/TSX financials index.

Chun has also been with the bank for more than 30 years but his rise to CEO candidate began more recently. He took the job as head of Canadian retail banking in December after the departure of Michael Rhodes, who had been considered a strong possibility for the top job before leaving to become CEO of Discover Financial Services and later Ally Financial Inc. Before taking the retail banking role, Chun ran the lender’s wealth management division and he also did stints running direct investing and the insurance business.

“I am committed to the work ahead,” he said in on a conference call with analysts, adding that he’s “energized by the opportunity to lead this outstanding bank into the future.” 

Chun called the need to remediate the bank’s US anti-money laundering program its “top priority” and said the firm has “the team in place to strengthen our foundations, overcome the current challenges and write the next chapter of TD’s story.”

Toronto-Dominion’s board considered outside as well as internal candidates in its search for a CEO successor, Masrani said on the call. Chun is “the right leader at the right time,” he said. 

The bank also announced other executive changes Thursday, including that Riaz Ahmed, TD’s former chief financial officer and current head of its capital markets division, will retire at the end of January. 

Tim Wiggan, who currently leads the wealth business, will take over at the capital markets division. 

And two executive vice presidents are getting promotions to the bank’s senior executive committee: Paul Clark will become head of wealth and Sona Mehta will take over the Canadian retail banking division. 

The bank is also holding an annual gathering Thursday for 2,500 of its senior leaders at the Metro Toronto Convention Centre. 

(Updates with shares, comments from conference call starting in seventh paragraph.)

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