Charles Schwab Shares Drop Over 4% After-Hours As TD Bank Cuts Stake Following $2.6B Anti-Money Laundering Fine Provision

Charles Schwab Corporation SCHW shares fell by over 4% in after-hours after Toronto-Dominion Bank TD reduced its stake in the Texas-based stock broker. It also announced that it is setting aside a further $2.6 billion to cover potential fines related to deficiencies in its anti-money laundering program.

What Happened: The additional provision for potential fines is part of TD Bank’s ongoing efforts to reach a global resolution of the civil and criminal investigations into its U.S. Bank Secrecy Act/anti-money laundering program by its U.S. prudential regulators, the Financial Crimes Enforcement Network, and the U.S. Department of Justice.

The bank has also sold 40.5 million shares of Schwab’s common stock, reducing its ownership interest in Schwab from 12.3% to 10.1%. TD has agreed not to sell any additional Schwab shares for 45 days.

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“We recognize the seriousness of our U.S. AML program deficiencies and the work required to meet our obligations and responsibilities is of paramount importance,” TD CEO Bharat Masrani said in a statement. “Our remediation program is well underway. TD has strengthened its U.S. AML program.”

Why It Matters: Schwab recently reported a significant rise in core net new assets for July 2024, reaching $29 billion, a substantial increase from the $13.7 billion recorded in July 2023. This sale reduces TD Bank’s ownership in Schwab from 12.3% to 10.1%, potentially impacting its future earnings from this investment.

Price Action: Toronto-Dominion Bank’s stock closed at $59.76 on Wednesday, up 0.56% for the day. In after-hours trading, the stock edged up by an additional 0.15%. Year to date, the stock has declined by 7.02%.

Meanwhile, Charles Schwab Corporation’s stock finished the day at $64.57, down 0.42%. After hours, the stock saw a more significant drop of 4.04%. Year to date, Charles Schwab’s stock has decreased by 6.56%, according to data from Benzinga Pro.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote