Today TD Bank stock fell by more than 5%. The report by CBC stated that the bank had pressured its staff to switch their clients into higher fee accounts and into increasing the credit limits on both overdraft protection and credit cards without the clients’ permission, in order to meet unachievable sales targets. While these practices are most likely not unique to TD and occur more frequently than one would think, the bank was caught with their pants down and will have to suffer the consequences if the claims can be substantiated.
This allegation is eerily similar to what transpired with Wells Fargo and some of its staff about 18 months ago. The bank was ultimately fined $185 million, saw its share price decline by almost 20% and its reputation suffer long lasting consequences.
In addition to CBC’s report, a class action lawsuit is about to be brought against TD Bank by disgrunted clients who had their accounts tampered with.
While Wells Fargo’s share price ultimately recovered over the last eighteen months, the damage to its reputation remains a real issue.
Furthermore its share price has continued to underperform its peers.
Taking all these factors into account, I am removing TD Bank from my sample portfolios and replacing the position entirely with Royal Bank.