NEW YORK — Toronto-Dominion Bank Chief Executive Officer Edmund Clark faced investor doubts when he announced in 2004 he was buying a U.S. consumer lender, challenging larger rivals such as Bank of America in the world’s largest financial market.
“Every analyst said ‘You see, another dumb Canadian trying to go into the U.S.,” Clark said Wednesday in an interview at Bloomberg’s headquarters in New York. “They don’t know how to do it. They don’t have the guts. They’re too conservative.”
The southward move began in 2004 with a foray into Maine, when the Canadian bank bought 51 percent of Portland-based Banknorth Group for $3.5 billion.
More than seven years later, Canada’s second-largest bank is one of the 10 biggest lenders in the U.S. by assets, and may soon have the third-most branches in New York City, a banking market almost as big as Canada’s.
By sticking to consumer lending and avoiding high-risk subprime loans and structured products, the Canadian lender posted profit of almost C$3 billion ($3 billion) in U.S. consumer banking over the past three years, while bigger banks such as Bank of America and Citigroup required government bailouts.
“When we went into the United States, we refused to do subprime lending,” Clark said. “We said, ‘I don’t care what the spreads are, we are not going to do that.’”
Shareholders have rewarded Clark’s ability to weather the financial crisis while expanding earnings on both sides of the border. Toronto-Dominion now has more branches in the United States than in Canada. It’s also one of the only banks with an Aaa credit rating from Moody’s Investors Service.
Toronto-Dominion shares have gained 42 percent in the five years ended Dec. 31, 2011. That’s the best performance among Canada’s five largest banks over that period, and compares with a drop of 87 percent for Charlotte, North Carolina-based Bank of America.
“We have had a philosophical view all along that people were changing banks from being built around customers and clients, to being built around traders,” said Clark, 64. “And that was not a good thing for society and it wasn’t a good thing in the end for the banking system.”
The lender posted record annual profit in 2011 of C$6.05 billion, or C$6.43 a share, according to International Financial Reporting Standards. Since Clark became CEO in December 2002, Toronto-Dominion has increased earnings 18 percent on a compounded annual basis.
Bank of America CEO Brian Moynihan, 52, has spent the last two years atoning for ill-fated acquisitions made by his predecessor, Kenneth Lewis. The 2008 takeover of Countrywide Financial, the biggest home lender during the U.S. housing bubble, saddled the firm with so many liabilities from shoddy mortgages that last year it weighed putting the unit into bankruptcy.
Jerry Dubrowski, a Bank of America spokesman, declined to comment.
Toronto-Dominion and other Canadian lenders avoided subprime lending and structured products during the worst financial crisis since the Great Depression. Canada’s banking system has been ranked the world’s soundest for four straight years by the World Economic Forum, and avoided government bailouts.
“I’m a big believer that you should run an institution and become capable of understanding any part of the institution that you run,” Clark said. “The moment you’re saying ‘No, no, no, but I have a third vice president that does,’ look out. I like to keep institutions a little narrow in their focus.”
A year after TD bought Banknorth in Portland, the bank sold TD Waterhouse to TD Ameritrade Holding, making it the largest shareholder in the Omaha, Neb.-based discount brokerage.
By 2007, Toronto-Dominion had acquired the rest of Banknorth for $3.19 billion. In March 2008, the bank bought Cherry Hill, N.J.-based Commerce Bancorp for about $8.33 billion. Toronto-Dominion added South Financial Group for $191.6 million and now has about 160 branches in Florida.
“You look eight years ago, TD really had no U.S. retail banking presence,” said John Aiken, an analyst at Barclays Capital Inc. in Toronto. “Fast forward to today and they’re a top-10 lender in the U.S., which is hugely impressive.”
Toronto-Dominion purchased auto lender Chrysler Financial from Cerberus Capital Management in 2010 for about $6.3 billion. Clark said a year ago that the bank will become a top- 10 auto lender in the U.S. within three to four years.
Toronto-Dominion was said to be in discussions to buy Florida lender BankUnited Inc. last month before the bank decided to remain independent, according to people with knowledge of the situation. Clark declined to comment on the potential sale, and said the bank doesn’t need acquisitions to grow.
The U.S. economy is showing signs of a turnaround, he said.
“There is a mood shift here,” he said. “Consumers are more optimistic, businesses are more optimistic.”
The bank’s next goal is to become a “top three” bank in New York, Clark said. He said the city’s deposit base is about $750 billion, compared with C$1 trillion for all of Canada. Toronto-Dominion needs to add 60 or 70 more branches to become third largest in the city, Clark said.
“We are now the fifth-largest bank in greater New York City and we’ve set a goal to be the third largest,” Clark said. “So over a 15-year period, we’ll go from zero to third largest.”
With assistance from Laura Marcinek and Hugh Son in New York and Doug Alexander in Toronto.
http://bigthink.com/
Imagine that, focusing on the customer. What a radical idea. Maybe the government should take note?
The government took note, and found in court that the bank was enabling a ponzi scheme rip-off of customers. A federal district court jury issued a $67 million award against TD Bank.
Here’s the link to the January 19, 2012 story:
http://www.reuters.com/article/2012/01/19/us-tdbank-ponzi-idUSTRE80I1W020120119
I imagine this BDN article, picking up a press release from the bank, is part of the bank’s public relations damage control after the court’s finding.
Interesting…
A bank that’s build around consumers and not gambling! Wow, what a radical concept.
I dumped TD Bank years ago. The reason they make so much profit is because when they clear transactions they put the biggest one through first. That puts you 5 cents in the hole in your account, THEN they put through all your other transactions (deposits last of course) and nail you $35 for every one that they pay when your account is “in the negative”. Bunch of rip off artists.
Stop writing bad checks and you won’t be hit with a fee.
Did you even read runnybabbit’s comment? The money is there, but the transactions are re-ordered by size instead of chronologically.
Did you read his comment? There were indeed insufficient funds. His complaint is about the order in which they cleared the transactions. He wants them to clear the smallest transactions first, then only the largest would bounce and get hit with a fee.
At no point did he mention chronological order, BTW.
I did read it. I assumed he meant chronologically because that is generally how transactions are dealt with in almost every aspect and field.
BTW, no where in the comment was there mention of smallest transactions first either — so where are you getting that from? Seems like you’re trying to knock someone without basis.
“The reason they make so much profit is because when they clear transactions they put the biggest one through first.”
His complaint is that they put the largest transaction 1st. Ergo, he would prefer the smallest be processed first. It is not a secret that you have no control over the order in which items are cleared. TD Bank’s overdraft policy states:
http://www.tdbank.com/exc/pdf/RegE_ModelA.pdf
“Transactions will not be processed in the order in which they occurred. The order in which they are processed may affect the total amount of overdraft fees incurred.”
This is a very simple scenario. Let us say he had $75 in the account. He writes a check for $70, another for $15, and draws $10 from the ATM.
If the bank clears the $15 check and the $10 ATM first, then only the $70 check gets hit with the overdraft fee.
Instead, TD Bank will clear the $70 check first, then the smaller transactions… thereby hitting him up for 2 overdraft fees.
And, yes, TD Bank has a program where they will honor ATM withdrawals even when there is no money in the account… for a fee, of course.
Simple solutions to the problem include not withdrawing more than you have, or hoping your deposits beat the withdrawals in time. (Hint: There is no float in the system anymore!) Or, you can an institution that covers insufficient funds in less expensive ways. At the University Credit Union, for example, you can get a line of credit that backs your checking account. No fees, only interest charges. (About 15% APR)
I don’t know why you’re making that assumption, there is no suggestion or implication of the sort in the original comment. Most places deal with transactions in the order they arrive in. That’s it.
Not at all true. That’s how they make their money. Keep enough on hand so the problem doesn’t happen.
I disagree. Having worked for two major national and regional banks, I can tell you that banks have different policies in how they process received items. And those policies are clearly spelled out in the customer agreement.
TD Bank has stated (where, I don’t remember) that they clear the largest items first because they are more likely to be the most important. Is that true? Maybe. Do they structure they way they clear items so that they maximize fee-income? Maybe. Is there any way to avoid this? Yes-just keep track of your funds! (When there are commercials from banks advertising a service that will text you when your balance is low, you have to wonder what the heck people are doing with their bank accounts in that they don’t ALREADY know their balance is low???)
That’s exactly what I was told – “we assume your biggest check is the most important”. Nevermind that I just handed them $400 cash that day, before they did all their posting of checks/debits that night. They refused to post my cash deposit because their courier had already come and taken their deposits for the day. BS. Cash is cash and should be available immediately in my account.
We weren’t writing bad checks. TD Bank was refusing to post my CASH deposits because I put them in after 3pm.
That’s a practice most banks did, just as allowing debit-card purchases go through when funds weren’t available. It’s not good, but TD Bank wasn’t the only one.
Calls its branches “stores”, is open on Veteran’s Day and 4th of July among other holidays. TD Bank has refused customers access to their money when their computer systems are down. TD Bank does nothing wrong and it is always the customers fault if anything goes wrong. A line of credit to be used like a credit card (moneyline) on a checking account becomes a naughty/ overdraft fee-ed account by just sending a letter out, changing the whole nature of it and charging $5 per transaction. Good luck trying to change the image you’ve created for yourselves.
Ive never had any trouble with then
How long have you been their customer? It may make a difference in how you perceive the bank regarding your situation.
8 years ive been with them
42 years, was there before they were
I appreciate them being open 7 days a week and on most holidays. I’m not going to call in question their patriotism when other places of business are also open on those days. As for “stores,” banks have been calling their branches that for over 20 years.
I’m not sure what you’re referring to about this letter.
But I do know that I have made mistakes with my accounts over the years and they have been very very willing to help. They have reversed fees that I incurred due to bonehead-style checkbook keeping. They have quickly helped me when my iTunes account linked to my TD Bank debit card was hacked, resulting in the disappearance of $600 (and because of that, I don’t ever use debit cards anymore-only ATM cards like in the olden days). They have great customer service and are always friendly. (Something I don’t hear much about other big banks).
I have been with them since they were People’s Heritage bank, about 10 years or so.
Having worked in a bank, I know first hand that there are some customers who blame the bank for their own mistakes. Good luck trying to get help from the bank with that attitude.
Traders = traitors. Well its starting to feel that way at least.
This is pretty funny. Nice marketing strategy.
And by the way I’m a girl, thanks :)