Mar 13, 2017
TD shares regain some ground after 'PR nightmare' sales target report
TD Bank’s CEO says his company is committed to "doing the right thing" after aggressive sales tactics came to light in a recent CBC report.
TD (TD.TO) shares regained some lost ground on Monday after they plunged on Friday by the most since 2009 amid anonymous claims by past and present employees, some of whom claimed to have put clients in products without their consent.
“We pride ourselves on building an organization that provides an exceptional place to work and is highly focused on doing the right thing for our customers,” Chief Executive Officer Bharat Masrani said in a statement Sunday evening. “For the twelve month period ended January 31, 2017, of the many interactions with our millions of Canadian personal banking customers, we received only a few hundred such complaints related to sales practices compliance. These were investigated and handled in accordance with our procedures.”
TD has thus far refused to confirm whether any of its employees have been fired as a result of the situation.
“It’s a PR nightmare for TD Bank,” said Todd Johnson, portfolio manager at BCV Asset Management, in an interview with BNN. “This is not fun at all. They’re definitely going to have to launch an investigation … [But] I don’t think this is going to be a massive scandal. I think the worst part of it is actually probably over. The investigation will come, this news report will slowly die away.”
Canada’s top bank regulator, the Office of Superintendent of Financial Institutions, said in a statement to BNN Friday that it is “aware of the issue.”
“The senior management and board of directors of a financial institution are ultimately responsible for ensuring compliance with the applicable legislation and guidance, and for the day-to-day operations of the bank,” OSFI added in its statement, while declining to comment on TD specifically. “When OSFI identifies potential issues, it intervenes at an early stage and requires financial institutions to implement remedial measures specific to each situation.”
ANALYST ACTIONS
Two analysts downgraded TD to Sector Perform on Monday.
Darko Mihelic at RBC Capital Markets lowered his recommendation from Outperform and cut his price target to $68 from $73. “We see opportunities in owning other stocks in our coverage with similar U.S./International exposure and less reputational risk at stake over the near term,” he wrote in a report to clients.
And Gabriel Dechaine at National Bank noted in his downgrade that there’s “a cloud of controversy that could depress TD’s multiple for several months.” Dechaine also reduced his price target to $69 from $74.
BMO Capital Markets Analyst Sohrab Movahedi, however, wasn’t in the downgrade crowd. He’s holding his Outperform and $72 price target, writing in a report to clients on Monday that he’s in the “concerned but not panicked” category.
“The market’s rush to judgment, while understandable, may have been an over-reaction.”
WEIGH IN
