Morningstar DBRS Comments on TD Announcement that Ray Chun will Succeed Bharat Masrani as TD Bank Group's President and CEO

DBRS Limited (Morningstar DBRS) notes that on September 19, 2024, The Toronto-Dominion Bank (TD or the Bank; rated AA (high) with a Stable trend) announced that Bharat Masrani, TD Bank Group President and Chief Executive Officer (CEO), will retire on April 10, 2025, and will be succeeded by Raymond Chun, currently Group Head, Canadian Personal Banking. Prior to taking over as President and CEO, Chun will be appointed to the Board of Directors and become Chief Operating Officer, effective November 1, 2024, and will take accountability for all of TD's business lines.

Masrani has been with the Bank for 38 years, including more than a decade as President and CEO. His retirement announcement comes amid months of rampant speculation that a new CEO would be appointed and follows numerous executive departures and a senior executive team shuffle on December 11, 2023. TD is well under way in its extensive overhaul of its anti-money laundering (AML) program and controls (see June 13, 2024, Morningstar DBRS commentary, "TD's Anti-Money Laundering Deficiencies Pose Increasing Concerns" at https://dbrs.morningstar.com/research/434467). Additionally, the Bank has already recorded $3.05 billion in provisions as its current estimate of total fines related to its AML investigations and anticipates a global resolution of these matters by the end of calendar 2024 (see August 22, 2024, Morningstar DBRS commentary, "Morningstar DBRS Comments on TD's Large, Additional $2.6 Billion Provision Related to AML Program Deficiencies That Indicates Total Potential Fines Likely at High End of Expectations" at https://dbrs.morningstar.com/research/438266). The timing of the announcement is surprising considering the full details of the AML investigations are still to come and the AML program remediation continues to be the Bank's top priority. However, Masrani will provide some continuity serving as an advisor to the Bank until October 31, 2025, and the announcement of a new President and CEO of the Bank puts the accountability for the AML issues on Masrani while allowing Chun to take the helm with a clean slate.

Chun joined TD in 1992 and prior to his current role, he served as Group Head, Wealth Management and Insurance and has held various leadership roles across the Bank (i.e., including Personal Banking Products, Branch Banking, TD Waterhouse Private Client Group, and TD Direct Channels Sales). Chun was rumoured to be a candidate to succeed Masrani, particularly after the departure of Michael Rhodes (former Group Head, Canadian Personal Banking) in December 2023. The Board considered both internal and external candidates as part of the selection process, but ultimately selected Chun who has extensive experience within the Bank leading critical business segments, regions, and product areas. Nonetheless, we view the appointment of a new President and CEO as an opportunity for the Bank to have potentially brought in an external candidate, particularly since TD has recently made several changes to its senior executive team with some of the business line heads, including Chun, being relatively new in their respective roles. With the ongoing attention and focus on AML remediation efforts, Chun will take over the Bank at a challenging time with a revamped senior executive team while having to also maintain adequate oversight over the Bank's core business lines. This includes TD's U.S. franchise and retail operations, which operate in a very competitive and fragmented market, where the Bank may be facing restrictions that could potentially limit/restrict its key U.S. growth strategy.

As part of the Bank's announcement, TD also indicated that Riaz Ahmed, Group Head, Wholesale Banking and President and CEO of TD Securities, will retire at the end of January 2025, and will be succeeded by Tim Wiggan (currently Group Head, Wealth Management and Insurance and formerly the Vice Chair, TD Securities and Co-Head of Global Investment Banking). Wiggan has more than 25 years at TD and has held progressively senior leadership roles. Other senior executive team changes announced and effective on November 1, 2024, include Paul Clark becoming Senior Executive Vice President, Wealth Management (currently Executive Vice President, Private Wealth Management and Financial Planning) and Sona Mehta becoming Group Head, Canadian Personal Banking (currently Executive Vice President, Real Estate Secured Lending, Everyday Banking, Saving and Investing).

Notes:
All figures are in U.S. dollars unless otherwise noted.

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