Toronto-Dominion Bank (TD), Canada’s second-largest lender, may expand wealth-management operations in the U.S. as it seeks a broader market for mutual funds and investment advice.
“We’ve got lots of strengths we can deploy,” Mike Pedersen, the bank’s head of wealth management and insurance, said yesterday in a telephone interview. “We’re thinking through what we want to do with the U.S.”
Toronto-Dominion, led by Chief Executive Officer Edmund Clark, 64, built a network of more than 1,300 branches across the Eastern U.S. during the past seven years, spending more than $25 billion to open retail outlets and purchase lenders including Portland, Maine-based Banknorth Group Inc. and Commerce Bancorp Inc., based in Cherry Hill, New Jersey.
“They tend to be located in disproportionately urban, high-growth, affluent areas,” said Pedersen, 51. “There’s obviously a wealth opportunity there.”
The company currently offers products and investment advice in the U.S. through TD Ameritrade Holding Corp. (AMTD), the Omaha, Nebraska-based brokerage in which the lender owns a 45 percent stake, more than any other shareholder. TD Ameritrade advisers typically serve the bank’s clients with less than $750,000 to invest, while Toronto-Dominion would serve customers with a higher net worth.
Plans for Toronto-Dominion’s U.S. branches would be executed over the “medium-to-long term,” Pedersen said.
Wealth management, which combined with the bank’s insurance unit in November, posted record profit of C$1.31 billion ($1.3 billion) in fiscal 2011 under International Financial Reporting Standards. That represents 22 percent of the lender’s total net income for the year ended Oct. 31.
“We view both of these businesses as potential growth drivers for the bank in the next few years,” said Pedersen, who worked at London-based Barclays Plc and Canadian Imperial Bank of Commerce before joining Toronto-Dominion in 2007. He became head of wealth management in November 2010.
Pedersen said acquisitions aren’t a focus for either part of the unit, which had assets under management of C$189 billion at the end of October.
The bank will have more than 2,000 wealth advisers in Canada by the end of this year, up from 1,970 in 2011, giving the company “critical mass,” Pedersen said.
Toronto-Dominion also has made “significant investments” in technology and infrastructure for the business, he said.
‘Lower Risk Appetite’
The bank disclosed on Jan. 26 that its insurance business earned C$541 million last year. The firm offers home, auto, life and health insurance across Canada, and acquires clients mainly through direct channels and affinity groups instead of through insurance brokers. There are opportunities to sell insurance to wealth-management clients, according to Pedersen.
“We have a lower risk appetite than most insurance businesses,” Pedersen said. “This is an insurance business that is owned and operated by a bank, and a fairly conservative bank at that. So we just won’t take some of the risks that many insurance companies take.”
Toronto-Dominion rose 0.4 percent to C$77.46 in trading yesterday on the Toronto Stock Exchange. The shares have climbed 4 percent in the past year, compared with a 4.4 percent decline for the 42-company S&P/TSX Financials Index (STFINL).
To contact the reporter on this story: Sean B. Pasternak in Toronto at firstname.lastname@example.org