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Rating Action:

Moody's affirms Toronto-Dominion Bank (The) ratings following Schwab acquisition of TD Ameritrade; maintains stable outlook

26 Nov 2019

NOTE: On December 23, 2019, the press release was corrected as follows: In the list of Outlook Actions, outlooks were added for the following issuers: TD North America L.P. and Toronto Dominion Bank (London). Revised release follows.

Toronto, November 26, 2019 -- Moody's Investors Service ("Moody's") has affirmed the short-term and long term debt and deposit ratings, the issuer ratings, the Counterparty Risk Ratings, the Counterparty Risk Assessments and standalone baseline credit assessments (BCAs) of The Toronto-Dominion Bank (TD), and its affiliates, including TD Group US Holdings LLC. The outlook on the relevant ratings remains stable.

Affirmations:

..Issuer: Toronto-Dominion Bank (The)

.... Adjusted Baseline Credit Assessment, Affirmed a1

.... Baseline Credit Assessment, Affirmed a1

.... Long Term Counterparty Risk Assessment, Affirmed Aa1(cr)

.... Short Term Counterparty Risk Assessment, Affirmed P-1(cr)

.... Long Term Counterparty Risk Rating, Affirmed Aa1

.... Short Term Counterparty Risk Rating, Affirmed P-1

.... Issuer Rating, Affirmed Aa3, Stable

.... Short Term Deposit Rating, Affirmed P-1

.... Long Term Deposit Rating, Affirmed Aa1, Stable

.... Commercial Paper, Affirmed P-1

.... Junior Subordinated Regular Bond/Debenture, Affirmed A2(hyb)

.... Junior Senior Unsecured Medium-Term Note Program, Affirmed (P)Aa3

.... Junior Senior Unsecured Regular Bond/Debenture, Affirmed Aa3, Stable

.... Senior Unsecured Medium-Term Note Program, Affirmed (P)Aa1

.... Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Aa1

.... Subordinate Medium-Term Note Program, Affirmed (P)A2

.... Backed Subordinate Medium-Term Note Program, Affirmed (P)A2

.... Other Short Term, Affirmed (P)P-1

.... Backed Other Short Term, Affirmed (P)P-1

.... Pref. Stock Non-cumulative, Affirmed Baa1(hyb)

.... Senior Unsecured Regular Bond/Debenture, Affirmed Aa1, Stable

.... Subordinate Regular Bond/Debenture, Affirmed A2

.... Deposit Note/CD Program, Affirmed (P)Aa1

.... Deposit Note/CD Program, Affirmed Aa1, Stable

.... Subordinate Shelf, Affirmed (P)A2

.... Senior Unsecured Shelf, Affirmed (P)Aa1

.... Junior Senior Unsecured Shelf, Affirmed (P)Aa3

.... Pref. Shelf Non-Cumulative, Affirmed (P)Baa1

..Issuer: TD Capital Trust IV

.... Pref. Stock, Affirmed Baa1(hyb)

..Issuer: TD Group US Holdings LLC

.... Issuer Rating, Affirmed A2, Stable

..Issuer: TD Bank US Holding Company

.... Issuer Rating, Affirmed A2, Stable

..Issuer: TD Bank, N.A.

.... Adjusted Baseline Credit Assessment, Affirmed a1

.... Baseline Credit Assessment, Affirmed a2

.... Long Term Counterparty Risk Assessment, Affirmed Aa3(cr)

.... Short Term Counterparty Risk Assessment, Affirmed P-1(cr)

.... Long Term Counterparty Risk Rating, Affirmed A1

.... Short Term Counterparty Risk Rating, Affirmed P-1

.... Issuer Rating, Affirmed A2, Stable

.... Short Term Deposit Rating, Affirmed P-1

.... Long Term Deposit Rating, Affirmed Aa2, Stable

..Issuer: TD North America L.P.

.... Senior Unsecured Regular Bond/Debenture, Affirmed Aa1, Stable

..Issuer: Toronto Dominion Bank (London)

.... Long Term Counterparty Risk Assessment, Affirmed Aa1(cr)

.... Short Term Counterparty Risk Assessment, Affirmed P-1(cr)

.... Long Term Counterparty Risk Rating, Affirmed Aa1

.... Short Term Counterparty Risk Rating, Affirmed P-1

.... Subordinate Medium-Term Note Program (Foreign Currency), Affirmed (P)A2

.... Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)Aa1

.... Other Short Term, Affirmed (P)P-1

.... Long Term Deposit Note/CD Program, Affirmed (P)Aa1

.... Short Term Deposit Note/CD Program, Affirmed (P)P-1

.... Commercial Paper, Affirmed P-1

..Issuer: Toronto Dominion Global Finance

.... Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Aa1

.... Backed Other Short Term, Affirmed (P)P-1

..Issuer: Toronto Dominion Holdings (U.S.A.), Inc.

.... Backed Commercial Paper, Affirmed P-1

..Issuer: Toronto-Dominion Bank, New York Branch

.... Long Term Counterparty Risk Assessment, Affirmed Aa1(cr)

.... Short Term Counterparty Risk Assessment, Affirmed P-1(cr)

.... Long Term Counterparty Risk Rating, Affirmed Aa1

.... Short Term Counterparty Risk Rating, Affirmed P-1

.... Long Term Deposit Rating, Affirmed Aa1, Stable

Outlook Actions:

..Issuer: TD Bank US Holding Company

....Outlook, Remains Stable

..Issuer: TD Bank, N.A.

....Outlook, Remains Stable

..Issuer: TD Group US Holdings LLC

....Outlook, Remains Stable

..Issuer: Toronto-Dominion Bank (The)

....Outlook, Remains Stable

..Issuer: Toronto-Dominion Bank, New York Branch

....Outlook, Remains Stable

..Issuer: TD North America L.P.

....Outlook, Remains Stable

..Issuer: Toronto Dominion Bank (London)

....Outlook, Remains Stable

RATINGS RATIONALE

The ratings affirmation results from Moody's unchanged credit assessment for TD following the recently announced agreement between TD, TD Ameritrade Holding Corporation ("TD Ameritrade"), of which TD is a major shareholder, and The Charles Schwab Corporation ("Schwab") related to the acquisition of TD Ameritrade by Schwab. Under the terms of the agreement, TD will exchange its ownership stake in TD Ameritrade for shares of Schwab. TD and Schwab have also agreed to enter into a new Stockholders' Agreement and a revised and extended Insured Deposit Account (IDA) agreement.

"This transaction allows Toronto-Dominion Bank to continue to participate in the evolving wealth industry in the US through a meaningful stake in a new industry leader with enhanced scale and breadth of product offerings. We expect the value of this equity stake and the related contribution to TD earnings to grow over time." said David Beattie, Senior Vice President at Moody's Investors Service in Toronto.

TD expects the transaction to reduce its reported earnings for approximately three years post-closing based on Schwab estimates of integration charges, reduced earnings under the IDA agreement and TD incremental amortization of intangibles. However, TD expects these negative factors to be offset over time by expected cost synergies at Schwab as well as minimal capital impact at closing.

Under the new IDA the current $103 billion of IDA deposits can be reduced by $10 billion a year to a floor of $50 billion until the expiration of the agreement in 2031.

Moody's believes TD's exposure to environmental risks is low, consistent with its general assessment for the global banking sector. The bank's exposure to social risks is moderate, consistent with Moody's general assessment for the global banking sector. As well, governance risks are largely internal rather than externally driven. Moody's does not have any particular governance concerns for TD at this point.

The outlook remains stable reflecting the strong fundamentals of the bank and management's proven track record of profitable operations.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Given TD's very high ratings, positive rating pressure is unlikely, however a reduction of exposure to Canadian consumer credit card and auto finance debt would be positive for the BCA and the ratings.

The ratings could be downgraded if the bank significantly increased reliance upon capital markets earnings, or income contribution from US operations, where it does not enjoy the same franchise strength as in Canada, increased exposure to unsecured Canadian consumer debt or experienced risk management and governance failures that result in increased earnings volatility. The ratings could also be downgraded due to a reduction in Moody's assumptions regarding expected issuance of junior senior debt, resulting in lower protection for senior creditors.

The principal methodology used in these ratings was Banks Methodology published in November 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

David Beattie
Senior Vice President
Financial Institutions Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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