TORONTO — TD Bank shares sank on Friday as the company defended itself against reports quoting unnamed employees who alleged they broke the law in order to meet sales targets and keep their jobs.
A CBC story published earlier this week said three of the bank’s employees reported feeling pressured to sign up customers for products and services they don’t need in order to boost profits.
In a followup story on Friday, CBC reported that hundreds of current and former employees at the bank wrote to the broadcaster, with some alleging they broke the law in order to earn points towards sales targets they are required to meet in order to stay employed.
TD Bank (TSX:TD) denied the reports, saying in a statement that it takes ethics and integrity seriously and that the environment described in the report is “at odds” with how it runs its business.
TD’s shares lost 5.55 per cent, or $3.88, finishing the day at $66.00.
Barclays analyst John Aiken said investors are concerned the fallout could be similar to what happened at Wells Fargo last year.
The U.S. bank paid large penalties and issued an apology after regulators said its employees opened millions of unauthorized accounts and credit cards.
“There is very little that TD itself can do in the near term to disprove the allegations and the full overhang is not likely to dissipate until a full investigation is concluded, which could take months,” Aiken said in a note to clients.
TD said in a statement that its code of ethics instructs employees not to put business results before the interests of clients.
“While we believe that having metrics and goals helps us to manage our business, we also believe that we will only achieve our goals by doing the right thing for our customers,” the company said.
TD also said that it has an anonymous whistleblower hotline where employees and customers can raise concerns, and that all reports are investigated.
“We also strive to make sure employees feel empowered to escalate any concerns about unethical practices to their manager’s manager,” spokeswoman Daria Hill said in a statement.
Ratings agency DBRS said it doesn’t expect any rating changes for TD, but that it will be monitoring the situation and how severe any damage to the bank’s reputation will be.
“Given its relatively high rating level and the importance of the Canadian retail-banking sector to TD, DBRS has limited tolerance for any adverse impact to TD’s franchise strength and/or earnings power, both of which are key underpinnings of the Bank’s credit profile and overall credit ratings,” DBRS said in a statement.
The ratings agency said it also expects regulators to review sales practices, whistleblower procedures and incentive compensation at all Canadian banks.