TD and Charles Schwab have agreed an amended Insured Deposit Account (IDA) Agreement. Schwab and TD have amended their existing deal to reflect the current market and interest rate environment. In comparison to the existing agreement, the revised agreement extends the term by three years to 1 July 2034. Specifically, it provides for lower deposit balances in its first six years and for higher balances in the latter years.
Until September 2025, the aggregate amount of fixed rate obligations will serve as the floor. Thereafter, the floor will be set at S$60bn up from $50bn in the existing agreement.
TD describes the revised agreement as ‘robust’. It provides TD with greater certainty around future deposit balances. At the same time, it provides Schwab additional flexibility and strengthens TD’s partnership with Schwab.
“We are pleased to further extend our agreement with Schwab,” said Bharat Masrani, Group President and CEO, TD Bank Group. “Our relationship with Schwab, one of the leading investment services firms in the US., delivers strategic and financial value to TD and our shareholders.”
TD holds 13% stake in Schwab; YTD Schwab share price -38%
Back in 2019, Schwab acquired TD Ameritrade in an all-stock transaction valued at approximately $26bn. As a result, Schwab acquired approximately 12 million client accounts, $1.3trn in client assets and $5bn in annual revenue. TD holds a 13.4% stake in Schwab as a result of the Ameritrade deal. It has forecast that it expects Schwab’s first quarter earnings to translate into around C$241m of reported equity in net income in TD’s second quarter earnings.
But the Schwab share price has been under pressure since the current US banking crisis kicked off. For the year to date, the Schwab share price is down by around 38%. Investors have stressed over potential unrealised bond losses that could wipe out much of the firm’s tangible common equity if it ever had to sell them to cover deposit outflows.