TD Bank Group, which is mired in a money-laundering scandal in the U.S., said Raymond Chun will replace chief executive Bharat Masrani, who is retiring next year.
Chun, who stepped into the role of head of Canadian personal banking last December, will become chief operating officer on Nov. 1 before taking over the top job when Masrani officially steps down on April 10.
The leadership shakeup was announced Thursday, and also includes several other executive changes. It comes as the bank works to resolve investigations into deficiencies in its anti-money-laundering program in the U.S., which allegedly allowed hundreds of millions of dollars of illicit drug profits to flow through the bank.
Masrani, in announcing his retirement after 38 years at the bank and a decade in charge, said the shortcomings in the program were his to bear.
“This took place on my watch as CEO, and I take full responsibility,” he said on a conference call.
“I will continue to advance and direct the critical remediation program required to meet our obligations and responsibilities and strengthen our risk and control foundation.”
The investigations have been a major overhang for the bank and helped scuttle its proposed $13.4-billion US acquisition of U.S. bank First Horizon in May last year.
Chun said on the call that remediation is the top priority as the bank looks to write its next chapter.
“TD is a critical part of our financial system and economy.… We also have a significant challenge in front of us.”
After a major U.S. investigation, TD admitted it failed to stop criminals from using its branches to launder money. The Canadian-owned bank is one of several under investigation by the U.S. government and financial regulators.
Timing of leadership change a surprise to some
Some analysts said both the timing and the naming of Chun, who has mostly Canadian experience, was a surprise.
“We believe some investors were open to the possibility of TD selecting an external CEO candidate, one with deep U.S. banking sector experience (and experience with U.S. regulators) given the bank’s (anti-money laundering) issues,” said National Bank analyst Gabriel Dechaine in a note.
The bank has taken more than $3 billion US in charges related to the investigations, and has said it expects a global resolution of those probes by the end of the year. But Dechaine said there are worries that regulators will impose financial restrictions on the bank that could stretch well beyond then.
“We note that, aside from regulatory fines, these issues could have long-term operational impacts on TD’s U.S. bank,” he said.
TD Bank is at the centre of a U.S. Department of Justice probe into a massive global money laundering scheme. Andrew Chang breaks down what we know from court documents and inside sources to explain how the scheme unfolded and the red flags analysts say should have been caught.
The conference call with analysts turned into something of a job interview for Chun, with questions about what sort of problems he has had to solve, what experience has prepared him for the top job, and why he was the right pick for the role.
Masrani said Chun is the right leader at the right time, while Chun himself said he has a range of experience across business lines.
“Running into complexity, and dealing with regulators, and mapping out complex strategies as we move forward has all been sort of in my experience,” Chun said.
Canaccord Genuity analyst Matthew Lee saw Chun’s appointment as a potentially positive sign on the investigations’ progress, as the incoming CEO has also served in leadership roles TD’s direct investing, insurance and wealth management branches, in over three decades at the bank.
“The firm was unlikely to appoint a new CEO without a clear road map on an (anti-money-laundering) resolution and, as such, the selection of Mr. Chun (who has primarily Canadian experience) may suggest that the firm is comfortable with both its fines and non-monetary penalties,” Lee said in a note.
More shuffling among executives
TD also announced Thursday that Riaz Ahmed, group head of wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
Other changes in the executive ranks taking effect Nov. 1 include the promotion of Sona Mehta, currently executive vice-president of real estate secured lending, everyday banking, saving and investing, to become group head of Canadian personal banking. Tim Wiggan, group head of wealth management and insurance, will become group head of wholesale banking and president and CEO of TD Securities.
Paul Clark, currently executive vice-president of private wealth management and financial planning, will become senior executive vice-president of wealth management.
The executive changes were announced as 2,500 members of TD’s senior management gathered in Toronto for their annual conference.