On Thursday, Barclays (LON:BARC) issued a downgrade for Toronto-Dominion Bank (TSX:TD:CN) (NYSE: TD), adjusting its rating from Equalweight to Underweight. The firm also revised its price target to C$79.00 from the previous C$80.00. The decision comes after TD recently resolved an investigation regarding its BSA/AML compliance measures.
Barclays expressed concerns that the imposed asset cap and the anticipated additional expenses necessary for enhancing the bank's compliance programs will likely impact the bank's fundamental performance and investor sentiment in the near term. Furthermore, heightened regulatory oversight in both the United States and Canada is expected to persist for the Canadian banking institution.
Despite the downgrade, Barclays acknowledged TD's current valuation, noting that it trades at a discount compared to its peers with a price-to-book (P/Book) ratio of just 1.4 times. This metric is often used by investors to gauge a bank's market valuation relative to its book value.
The price target adjustment to C$79.00 represents a slight decrease from the previous target, reflecting the firm's anticipation of potential challenges ahead for Toronto-Dominion Bank. This change in valuation is intended to account for the financial implications of the additional compliance-related expenditures and the limitations set by the asset cap.
Toronto-Dominion Bank has not publicly responded to the downgrade at this time. Investors and market watchers will be closely monitoring the bank's performance and regulatory developments to assess the impact of these factors on its stock value.
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