Not any more

TD’s retail network in U.S. now bigger than Canadian base

In Canada on October 3, 2010 at 18:04

After a string of acquisitions this year, TD Bank TD-T retail operations are now bigger in the United States than in Canada. But even if the pace of deals begins to slow in 2011, the bank’s U.S. expansion will not, TD’s chief executive officer says.

Canada’s second-largest bank expects to continue expanding in the U.S. by adding the equivalent of one small-scale bank a year through new branches TD plans to open itself.

TD will open between 30 and 50 new branches annually, roughly the size of a small U.S. bank network, for the next few years in the states where it operates. The new branches will be on top of the 1,300 U.S. branches TD now has, following the $191.6-million (U.S.) cash and stock purchase of South Financial Group Inc., which closed on Friday.

South Financial has 176 branches, mostly in North Carolina, South Carolina and Florida. Given that TD had virtually no retail footprint in the U.S. as recently as six years ago, chief executive officer Ed Clark called the deal’s closing a significant milestone for the Canadian bank.

TD, which has 1,000 branches across Canada, now has an American footprint stretching from Maine to Florida and is one of the 15 largest commercial banks in the U.S.

It purchased three small banks in Florida this year in a deal struck with the Federal Deposit Insurance Corp. (FDIC), which finds buyers for struggling financial institutions in the U.S. Mr. Clark said TD will look at similar deals to buy small banks should more come up for sale in FDIC auctions. But if it’s cheaper for TD to open new branches itself, he prefers that strategy.

“There will be over the next few years small banks … that will come up,” Mr. Clark said in an interview. “We always look at these small deals and say: Would I build a branch in those areas? And, is it cheaper to buy this than to build?”

The purchase of Riverside National Bank of Florida, First Federal Bank of North Florida and AmericanFirst Bank through the FDIC sale process this year gave TD 69 more branches in that state. That is comparable to the number of new branches TD plans to open on its own in the U.S over the next two years.

Mr. Clark said TD is unlikely to seek a major acquisition until he has more clarity on what new global banking rules and forthcoming U.S. banking regulations mean to the sector. Global banking rules will be finalized at G20 meetings in Seoul in November, but the U.S. picture is less certain, since the new legislation is not complete.

However, concerns that the U.S. government would introduce punitive laws against banks in an effort to prevent another crisis in its banking sector appear to be abating, Mr. Clark suggested.

“My sense is that there already is a mood in the United States and in the regulators to say, ‘Okay we made the point, now we better work with the banking system.’ Because if the banking system does not work in the United States, the economy will not recover,” Mr. Clark said. “So I think you can already feel today it is a more positive mood than it was even a few months ago.”

He remains positive of a comeback in the U.S. economy, which Mr. Clark expects will fuel growth in lending at TD’s operations. As the Toronto-based bank looks to expand its branch network south of the border, TD said this summer it will look for ways to limit costs, including building branches in old fast food outlets. Such sites are ideal to be converted into banks, since many come with parking and space for drive-through banking, TD executives have said.

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