UPDATE: This article includes additional background on Chun as well as reaction from analysts.

TD Bank Group's president and CEO is stepping down next year after a decade at the helm, the latter stages of which have been marred by regulatory woes that have hampered growth.

Bharat Masrani, who joined the Toronto-based bank nearly 40 years ago, plans to retire on April 10, 2025, the bank announced Thursday. He will pass the torch to Raymond Chun, who has climbed the ladder at TD since joining its management training program in 1992, and currently serves as the head of Canadian personal banking.

While the bank has undergone a digital transformation and continued its stateside expansion during Masrani's 10-year tenure, TD has recently faced heavy scrutiny, as failures in its U.S. anti-money-laundering program have come to light. The bank expects to pay more than $3 billion in fines related to the compliance snafu, and it had to abandon a planned acquisition of Tennessee-based First Horizon that would've been a boon to its U.S. growth.

"We have a strong bench of senior leaders and will execute a smooth and seamless CEO transition," Masrani said Thursday in a prepared statement. "The anti-money laundering challenges we face took place on my watch as CEO and I take full responsibility. In the coming months, I will continue to advance and direct the critical remediation program required to meet our obligations and responsibilities and strengthen our risk and control foundation."

In a prepared statement, Alan MacGibbon, chair of TD's board, said Masrani "led the bank through a period of profound change in our industry." MacGibbon said the board extends "its deep appreciation" for Masrani's contributions to the bank.

"[Masrani] accelerated our transformation in the digital age, enhanced the competitiveness of our businesses, nurtured one of the world's most valuable brands, and steered TD through complexity with a steady hand," MacGibbon said.

Chun will take on the chief operating officer role and join the company's board of directors on Nov. 1 before transitioning to the CEO job next spring. Following his retirement, Masrani will continue as an advisor to TD until Oct. 31, 2025.

TD's stock price rose by 2.9% following the leadership announcements, trading at $64.41 on the New York Stock Exchange when the market closed.

John Aiken, an analyst at Jefferies, wrote in a note following the announcement that Masrani's retirement was "not a surprise given his tenure and the impact that the U.S. regulatory issues have had on TD."

Chun had been flagged as a contender for TD's next CEO, Aiken added, and his lack of direct ties to the U.S. retail banking operations and its AML problems "probably moved him up the list."

TD's succession plan had been the subject of investor scrutiny for a while, but the bank's recent AML woes added import to the question of who would take the reins. In recent weeks, Masrani had said that succession planning was important to TD, but implied that he planned to stay on to see the bank through its regulatory troubles.

Last month, Masrani said that the bank expects to have a "global resolution" of the AML situation, including monetary and non-monetary penalties, by the end of this year. The bank has set aside some $3 billion for fines, which led to an earnings loss last quarter. TD has also invested some half a billion dollars into compliance, and it expects to spend hundreds of millions dollars more.

Chun will inherit an institution that hasn't had a stable runway for success recently, especially with regard to its ambitious American goals.

The bank's remediation of its risk management issues will be a focus for the foreseeable future, said Carl De Souza, a sector lead for North American financial institutions ratings at Morningstar DBRS.

Both Masrani and Chun emphasized on a Thursday morning conference call that getting TD's regulatory framework in check is a prime concern. But the fixes, while necessary, can distract from growth strategies and the bank's big-picture go-forward plan, De Souza said.

If the bank wasn't up against a pricey compliance overhaul and potentially stagnated growth, De Souza said, people "wouldn't have batted an eye" at the CEO announcement. TD's pick wasn't surprising, as Chun brings extensive familiarity with the bank, he said, but the company's regulatory shortcomings have raised the question of whether TD should have chosen an external candidate.

"With these issues in the AML, and Masrani formerly running the U.S. business, sometimes you do want to see a change and get a fresh breath of air," De Souza said. "But that doesn't necessarily mean that it will be better. So time will tell whether this was the right selection."

Masrani said on the Thursday call that the timing of his retirement was chosen to line up with TD's annual leadership meeting in Toronto, where 2,500 bank executives are currently gathered. Chun was chosen as next-in-line after a "lengthy and competitive process," which included external contenders, Masrani said.

"In the coming months, I will continue to advance and direct the critical remediation program required to meet our obligations and responsibilities, and strengthen our risk and control foundation, supporting [Leo Salom and Chun] in that endeavor," Masrani said.

Salom, the president and CEO of TD's U.S. subsidiary based in Cherry Hill, New Jersey, had once seemed like a reasonable heir to Masrani, but the compliance troubles have pumped uncertainty into TD's U.S. strategy. Salom will report to Chun, effective Nov. 1.
Although Chun comes from TD's Canadian business line, the company is still focused on its presence in the U.S., where it markets itself as "America's Most Convenient Bank," Masrani said. He added that Chun and Salom have a strong working relationship, and he doesn't expect additional changes to the executive team.

Chun, on the conference call, said that Masrani has been a "steady hand guiding us forward" and thanked him for his support through "a tough period." The incoming CEO added that he is "energized by the opportunity" to lead the bank forward, and is focused on fixing its risk management south of the border.

"TD has so many advantages: a powerful balance sheet, terrific talent, high-performing businesses and leading franchises in Canada and the U.S.," Chun said on the conference call. "We also have a significant challenge in front of us. … We have the team in place to strengthen our foundations, overcome the current challenges and write the next chapter of TD's story."

Before heading up the bank's home-country personal banking strategy, a job Chun has only held since December, he served in roles leading direct investing, insurance and wealth management.

Chun said on Thursday's call that during his career at TD he has led all of the bank's product areas on both sides of the balance sheet, and has worked closely with teams focused on compliance, data, analytics and digital and mobile channels. When asked about his experience handling AML fumbles, he spoke of broad compliance exposure he's gained in his career.

"When you're running these large, complex businesses that I've run, running into complexity and dealing with regulators and mapping out complex strategies as we move forward has all been in my experience," Chun said.

The bank also announced that Riaz Ahmed, president and CEO of TD Securities and head of wholesale banking, will retire at the end of next January following nearly three decades at the bank. TD's head of wealth management and insurance, Tim Wiggan, will move into Ahmed's former post, effective Nov. 1.

Sona Mehta, who leads real estate secured lending, everyday banking and saving and investing, was named as Chun's successor, leading Canadian personal banking.