Bharat Masrani, chief executive officer of TD Bank Group, walks outside the bank offices in downtown Toronto, on Sept. 3 2020.Fred Lum/The Globe and Mail
Toronto-Dominion Bank TD-T named Raymond Chun as its next chief executive officer, leaning on a relatively unknown insider to pull Canada’s second-largest financial institution out of its U.S. regulatory crisis.
Currently the head of Canadian personal banking, TD’s most profitable division, Mr. Chun will become chief operating officer effective Nov. 1 and then take over as CEO at the bank’s next annual general meeting in April.
Mr. Chun’s ascent caps a period of executive change at the bank. Over the past three years a growing number of executives have departed TD, and the changes have complicated the bank’s succession plans. This time last year, Mr. Chun was not a top contender to be CEO, but former Canadian banking head Michael Rhodes left last December and that created an opening that Mr. Chun filled.
TD Bank’s next CEO is not a known commodity on Bay Street
Canadian bank CEOs tend to retire after a decade and current chief executive Bharat Masrani has been in the role for 10 years. However, TD has been embroiled in a major money laundering scandal in the United States and recently set aside US$3-billion to cover financial penalties.
The bank is under investigation by three separate U.S. regulators, as well as the U.S. Department of Justice, and TD has said it also expects non-financial penalties, the details of which should be announced by the end of 2024.
TD has also suffered from a cultural erosion that has stifled financial performance, The Globe and Mail reported last month. Inside the bank, conservatism has dominated and dense layers of bureaucracy have hindered decision-making – all of which contributed to a number of respected leaders leaving TD.
Through it all, the bank’s board of directors and Mr. Masrani have tried to exhibit calm, but regulators have been pressing for changes and shareholders grew frustrated. TD’s stock market performance used to be neck and neck with arch-rival Royal Bank of Canada, but over the past two years TD lost its premium valuation and fell to the middle of the pack.
Raymond Chun has been announced as TD Bank's next CEO and will officially take over the role at the Bank's annual meeting of shareholders on April 10, 2025.Supplied
As the bank lost its shine, institutional investors and analysts started to wonder whether TD was willing to make the changes necessary to reinvigorate the lender, and on Bay Street there were calls for an outsider to take that on. TD’s board appears to have heard the desire for change, naming a successor for Mr. Masrani before the regulatory matters have been settled, but decided on a hard-charging insider instead of an external change agent.
In a speech during an internal conference of senior leaders in Toronto on Thursday, Mr. Masrani described Mr. Chun as someone with “brains, drive, ambition,” adding that in the past year Mr. Chun has “turbo-charged” the Canadian personal banking division.
Mr. Chun is now tasked with re-energizing employees, who have grown paralyzed by TD’s decision to add layer after layer of legal and management approvals to everything it does. He must also find a way to deliver solid returns in the U.S., even though TD will likely remain under the thumb of regulators for some time.
During his own remarks at the Toronto conference, Mr. Chun said he went through a roller coaster of emotions when he was told the board had appointed him CEO – “excited, proud, honoured” – and then felt the enormous responsibility of leading such a major Canadian institution.
“As the evening progressed,” he added, “I had a third thought: The work ahead.” Mr. Chun went on to say that fixing the AML program is his number one priority.
Because Mr. Chun isn’t all that well-known externally, it will take time for investors and analysts to assess his strategy, but they seemed encouraged that the board showed a willingness to shake things up. TD’s shares rose 2.4 per cent on Thursday.
“Investors had been calling for a change in CEO and now that change is being delivered,” CIBC World Markets analyst Paul Holden wrote in a note to clients. “It is hard to know how much investor communication and strategy will change, but given how negative sentiment had become it feels like there is only upside.”
Raymond Chun’s appointment as TD Bank’s next CEO takes some by surprise
TD also announced Thursday that it is shuffling its executive suite and bank veteran Riaz Ahmed, who currently runs TD Securities, will retire early next year. Mr. Ahmed was a trusted lieutenant to TD’s current CEO and to former CEO Ed Clark, and he was a leading candidate to succeed Mr. Masrani. However, at 61, his age was a limiting factor.
TD’s third internal CEO contender, Leo Salom, who currently runs the U.S. retail banking arm, will remain in that role.
After Mr. Ahmed retires in January, Tim Wiggan, who currently runs wealth management, will take over TD Securities. Mr. Wiggan has spent most of his career in TD Securities, but was named wealth management and insurance head last December.
To help fill Mr. Wiggan’s current role, TD is promoting Paul Clark to senior executive vice-president. As for Canadian banking, Sona Mehta will take over from Mr. Chun, extending the division’s turnover. In the second half of 2023, arguably the top three executives in Canadian banking all left, including the division head, the chief operating officer and the head of TD’s mortgage business.
Mr. Masrani, the outgoing CEO, will serve as an adviser to TD until Oct. 31, 2025, which is the bank’s fiscal year end. “Bharat helped to build TD over almost four decades, and as CEO led the bank through a period of profound change in our industry,” TD’s board chair Alan MacGibbon said in a statement, adding that Mr. Masrani accelerated TD’s transformation in the digital age and steered it through complexity with a steady hand.
In the same statement, Mr. Masrani addressed the AML woes that have plagued the bank. “The anti-money laundering challenges we face took place on my watch as CEO and I take full responsibility. In the coming months, I will continue to advance and direct the critical remediation program required to meet our obligations and responsibilities and strengthen our risk and control foundation.”