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TD details US growth plans, M&A appetite after First Horizon termination

Toronto-Dominion Bank was mum on details regarding the termination of its acquisition of First Horizon Corp., but the company outlined its US growth plans and did not shut the door on future M&A.

"While we are not at liberty to address confidential discussions with our regulators, we are confident the mutual termination was the right decision, given the uncertainty in timing of regulatory approvals," Group President, CEO and director Bharat B. Masrani said on a call May 25 to discuss second-quarter earnings.

The termination had raised questions about potential regulatory issues, and a later Wall Street Journal report suggested the issues stemmed from regulators' concerns about TD's anti-money laundering practices.

In response to a question from an analyst about whether TD will "have to spend money" to resolve US regulatory issues, Masrani said, "When the time is right, we will talk more about it." The company will provide information on how it will spend funds and at what levels at its upcoming US investor day, Masrani added.

In a May 19 note, BofA Securities analyst Ebrahim Poonawala said "investors will need comfort on whether there are any restrictions on TD's US growth and/or capital management."

The First Horizon deal was set to greatly bolster TD's US operations and presence. Since the deal was nixed, the company is pivoting back to organic growth in the US, with plans to open 150 stores by 2027. That total includes 18 in 2023, five of which are "already up and running," including its first store in Charlotte, NC, Masrani said.

When asked about future M&A plans, Masrani did not completely shut the door to the possibility.

"It's difficult to say where because these opportunities present themselves when market conditions allow them," the CEO added. "But as you've seen in Canada, whenever there is an opportunity, TD looks at it very seriously, given our size, scale and the number of customers we have. ... Just because we have the capital, we don't want to chase everything that's out there. It has to make strategic sense. It has to make financial sense."

Potential deals must also be within TD's risk appetite and "be culturally aligned," Masrani added.

In the meantime, TD is integrating New York-based Cowen Inc., an acquisition it closed in March.

TD reported that it does not expect it will meet its medium-term adjusted EPS target growth range of between 7% and 10% for fiscal 2023 due to the First Horizon termination and macroeconomic environment.