Schwab won’t drag down TD

Article Excerpt

TORONTO-DOMINION BANK $81 is a buy. The lender (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.8 billion; Market cap: $145.8 billion; Price-to-sales ratio: 3.0; Dividend yield: 4.8%; TSINetwork Rating: Above Average; www.td.com) merged its 43%-owned U.S. online brokerage firm TD Ameritrade Holding Corp. (Nasdaq symbol AMTD) with rival Charles Schwab Corp. (New York symbol SCHW) in October 2020. TD now owns 12.0% of the combined firm. Schwab is also a bank, and investors fear that unrealized losses on its bond portfolio could spur depositors to withdraw their funds, similar to the conditions that led to the collapse of Silicon Valley Bank. As a result, Schwab’s shares are down 37% since the start of 2023, while TD has dropped 7%. Based on current prices, TD’s stake is now worth $11.3 billion U.S. (10% of its market cap). However, a writedown of this investment seems unlikely as Schwab’s liquidity and capitalization ratios remain strong. Moreover, its wealth management and trading operations continue to…