TD took its first loss in decades, with a large provision for its money-laundering issues. Adjusted EPS was $2.05, vs $2.07 estimates. Revenue of $12.59B missed estimates of $12.70B. The FEDs anti-money-laundering investigation into TD Bank -- which it says may be complete by year-end -- remains an overhang. TD set aside $3.1B, but it could still pay amounts above the current billion provision and see non-monetary penalties, which may determine the US banking unit's growth prospects amid plans to hold a lower Schwab position of 10%. Canadian net interest margin could decline in fiscal 4Q, and gain in the US. Wholesale banking fees may stay healthy. TD has completed its restructuring program, at a steep cost of C$929 million, but it sees a higher-cost savings run-rate of C$800 million starting in 2025. Investments may drive up expenses in the high-single vs. prior mid-single-digit guidance, likely putting 2024 operating leverage out of range. TD's provisions could stay near the top of 40-50 bps of 2024 guidance. So, there remains some uncertainty. But the big question is 'mostly' resolved, and we think investors will start looking forward. The very low valuation of 9X earnings we think reflects a lot of concerns already, and we think buyers can slowly step in here.
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