It is hard to believe that, somewhere, someone has too much money. But that seems to be the case at Toronto Dominion Bank, (TSE:TD), as it prepares for a potential mortgage sale as it closes in on an asset cap. The news proved oddly welcome to investors, who sent shares up fractionally in Tuesday morning’s trading.
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A Bloomberg report noted that TD Bank is looking to sell $9 billion in residential mortgage loans to other potential holders. This is to help keep TD Bank’s assets under a recently-imposed asset cap, which came from United States regulators as part of TD’s plea agreement over the money laundering failures.
The report noted that the loans in question are known as “jumbo mortgages,” which are generally the province of United States homebuyers that have among the best credit scores. While much of this is still confidential, and thus some details are unavailable, the report noted that TD Bank will start taking bids for the $9 billion bloc next week.
The Schwab Payoff
Earlier, we heard the notion that TD Bank should sell off its position in Charles Schwab (SCHW), and use the cash for stock buybacks. With TD Bank owning around $13 billion in Schwab, that makes for quite a bit of shares. But it turns out, noted a Marketwatch report, that that stake is making its own payouts happen.
The latest forecasts noted that the Schwab stake will produce C$231 million in the fiscal first quarter in net income. Adjusted equity in net income, meanwhile, will work out to around C$257 million, once amortization is tossed out. At that rate, that would work out to around C$1 billion annually, and that may make some reconsider the notion of selling off the Schwab stake.
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 6.13% rally in its share price over the past year, the average TD price target of C$85.46 per share implies 3.9% upside potential.
