About three weeks ago, we heard stirrings that Toronto-Dominion Bank (TSE:TD) had an eye toward getting out from under its stake in Charles Schwab (SCHW). There were pluses and minuses to such a strategy, but TD Bank seems to be going with it after all. The plan sent shares soaring up over 3% in Monday morning’s trading.
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Reports note that TD Bank is out to raise around $14 billion in cash selling off its stake in Charles Schwab, which reports are calling part of a “corporate overhaul.” TD held, or rather holds, for now, 184.7 million shares of Schwab, which is about 10.1% of the entire company. But TD Bank found a ready buyer in Schwab itself, which plans to buy back $1.5 billion of those shares itself.
If the deal goes through, reports note, it will represent the largest stock sales since Boeing (BA) launched a sale last October that raised $24 billion. TD Bank landed the Schwab shares back in 2020, when it sold its TD Ameritrade brokerage operation to Schwab.
What It Does With the Cash is Even Better
TD Bank stands to land plenty of cash as a result of the sale, but what will it do with that money? The latest reports note that TD Bank plans to buy back as many as 100 million common shares, which it will cancel when it receives the shares.
The move will likely buy new CEO Raymond Chun a lot of political capital with shareholders, vital given the state of TD Bank so far. The recent fines it suffered from a lack of money laundering measures likely hurt it, but Chun buying back shares—and the likely rise in share prices that will come with it, and has already arrived to some extent—will likely also prove helpful. Throw in the recent sale of $9 billion worth of mortgage loans to Bank of America (BAC) and that only helps improve TD’s cash position.
Is TD a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TD stock based on five Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 12.74% rally in its share price over the past year, the average TD price target of C$85.93 per share implies 0.55% upside potential.
