Speaking of things that are down for no reason (and in-line with RJO's Canada trade idea above):
🚢 Top Trade Alert: Toronto-Dominion Bank (TD)
A great bank still trading like it's serving a sentence — but the sentence is almost up
The Setup
This is the classic PSW pattern: a fundamentally strong business punished for a real, knowable, and dateable event that the market hasn't fully forgiven even as the evidence of recovery keeps arriving. TD is one of Canada's largest banks, trading at roughly 12.5x earnings[web:526] — a meaningful discount to peer Royal Bank of Canada's 17.4x[web:494] — and the entire gap traces back to one clean, identifiable cause.
What Actually Happened
In October 2024, TD pleaded guilty to Bank Secrecy Act violations after a Justice Department investigation found the bank's anti-money-laundering program had failed catastrophically — employees were bribed with gift cards to look the other way while drug-trafficking organizations laundered money through TD accounts, and regulators found the bank had failed to monitor 92% of total transaction volume flowing through its systems[web:521][web:529][web:531].
The total damage: roughly $3.09 billion in combined penalties — $1.8 billion to the DOJ, $1.3 billion to FinCEN and $123.5 million to the Federal Reserve[web:521][web:528]. As part of the resolution, the Fed imposed an asset cap on TD's U.S. retail operations, a binding constraint on U.S. growth that remains in place today.
That's the single biggest compliance failure and penalty in U.S. banking history for a depository institution[web:521] — a genuinely serious, embarrassing, and costly episode. It is also, by now, a known and bounded one.
Why The Recovery Is Already Showing Up In The Numbers
Q2 2026 adjusted EPS came in at $2.38 versus $2.25 expected — a 5.8% beat and 21% growth year-over-year[web:526]. Reported net income was $8.29 billion for the quarter[web:527].
