11:53 AM EDT, 05/01/2024 (MT Newswires) -- TD on Tuesday said it is taking an initial US$450 million pre-tax provision in connection with discussions with one of three U.S. regulators for issues surrounding its Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) compliance program in the U.S.

Discussions with regulators remain ongoing and the bank expects additional monetary penalties.

RBC Capital Markets on Wednesday said it is leaving its estimates unchanged for now, but analyst Darko Mihelic calculates the provision would have a negative C$0.26 per share impact on his Q2/24 EPS estimate and a negative 10 basis-point impact on his Q2/24 CET 1 ratio estimate, decreasing it to 13.6%. He also expects the "final" impact on risk-weighted assets (RWA) to be slightly higher because once the fines are finalized and assessed, TD's operational RWA will likely rise.

"We view this announcement as negative because it does not provide clarity on all of our concerns but certainly suggests that

the minimum cost of the problem is higher than the minimum estimated range (according to the Globe and Mail) has suggested."

As long as the worst case scenario is averted, RBC sees "significant" upside potential for the stock relative to its peers

once the full cost of the fine and non-monetary penalties are revealed.

TD is rated Outperform, with an C$87 target.

Price: 81.25, Change: -0.42, Percent Change: -0.51