Toronto-Dominion Bank TD-T is shoring up capital to invest in its Canadian businesses as it offsets regulatory restrictions on expansion in the U.S. prompted by the lender’s anti-money-laundering failings.

TD is selling its stake in U.S.-based investment dealer Charles Schwab Corp. for about $20-billion, a major step in the bank’s strategic review as it manages the asset cap set by U.S. authorities. TD chief executive officer Raymond Chun said the bulk of the proceeds will go toward internal growth opportunities – largely competing for more business in Canada – while rejigging its U.S. balance sheet.

“In Canada, the single largest opportunity for TD is to deepen our relationships with our more than 14 million customers,” Mr. Chun said during a Tuesday conference call with analysts. “We have strong momentum across our businesses, and through the strategic review we are identifying opportunities to accelerate that momentum.”

Mr. Chun, who took on the top job only last week, after previous CEO Bharat Masrani and board chair Alan MacGibbon said they would step down earlier than planned, has been crafting a new strategy to address the limitations set by U.S. regulators while repairing the bank’s reputation with investors frustrated with the hit it has taken to its share price.

In October, TD pleaded guilty to conspiracy to commit money laundering after a lengthy investigation by U.S. regulators and the Department of Justice. Authorities levied several rare penalties, including a US$434-billion asset cap on TD’s U.S. retail arm, limiting its ability to expand that business. The bank has been paring back its U.S. balance sheet to avoid exceeding the cap.

TD is selling its entire equity investment in Charles Schwab – 184.7 million shares of common stock, a 10.1-per-cent stake – at US$79.25 per share, with the stock up 121 per cent since TD acquired the stake in 2020, according to chief financial officer Kelvin Tran.

The bank announced the pricing of the deal Tuesday and said the transaction is expected to close Wednesday.

Of the $20-billion sale proceeds, $12-billion has been earmarked for investing in TD’s existing businesses.

While Mr. Chun expects to release the final strategic review later this year, he told analysts that the plan will include rebalancing the bank’s business structure and capital allocation, simplifying its loan portfolio by exiting businesses it believes are not beneficial to its operations, reducing costs, and upgrading technology and digital platforms.

To help bolster its share price, the bank is allocating $8-billion from the sale to repurchase some of its stock.

“The bank’s current share price valuation does not reflect management’s expectation for TD’s future performance,” Mr. Chun said. “We have confidence in our strategy and in our ability to execute against it.”

TD already has a dominant position in the Canadian market. It is the second-largest bank in the country and provides financial services to one in every three Canadians.

But expanding in Canada is a challenging endeavour. The market is saturated by the country’s six largest lenders, and convincing customers to transfer their financial portfolios and start fresh with a new bank is a tall order.

Competing for business more aggressively could require providing customers with lower-cost products, which would squeeze profit margins.

Mr. Chun said the bank’s large scale in Canada will help it expand its business without competing on pricing or taking on customers outside its risk appetite.

“It does come down to execution and investing in certain capabilities that we’ll need to drive that execution in deepening those relationships,” Mr. Chun said in response to an analyst’s question. “We’ll be always mindful of profitability.”

He said the bank is not considering acquisitions as part of its growth plan because it is focused on remediating its anti-money-laundering gaps and addressing requirements set by U.S. regulators.

“Any sort of an M&A at this point would distract us from the AML remediation,” he said. “As we get into the strategic review, we are seeing significant opportunities here within Canada and also within our wholesale business, to not only be an integrated North American dealer but have some reach across on a global basis.”

TD acquired its stake in Charles Schwab in 2020, when the Texas-based firm bought TD Ameritrade. The deal included an agreement that allows the Canadian bank to manage cash and collect fees on some deposits.

Mr. Chun said he is still in favour of the arrangement and TD will revisit the deal as the contract comes up for renewal in 2034.