TD Surpasses RBC as Canada’s Largest Bank by Assets

Toronto-Dominion Bank (TD) surpassed Royal Bank of Canada as the country’s largest lender by assets for the first time after a decade-long expansion in U.S. consumer lending.

Toronto-Dominion reported C$862.5 billion ($814.2 billion) in total assets as of Oct. 31, according to financial statements, compared with C$860.8 billion at Royal Bank, which held the top spot for most of the last century. Both companies are based in Toronto.

“The change is largely dictated by the different strategies of the banks,” John Aiken, an analyst at Barclays Plc in Toronto, said in an interview. “TD has been focusing on retail banking, which typically involves lending and assets that fall onto the balance sheet, whereas Royal’s strategy has been more on expanding wealth management and capital markets, which are not driven by assets to the same degree.”

Toronto-Dominion Bank’s climb ascension has been fueled by acquisitions, including its takeover of Canada Trust parent CT Financial Services Inc. in 2000 and a U.S. expansion that began in 2004 when the lender agreed to buy a 51 percent stake in Portland, Maine-based Banknorth Group Inc. Chief Executive Officer Ed Clark, 66, who joined Toronto-Dominion with the Canada Trust takeover, led the U.S. push during his tenure.

Market Value

“The Canada Trust merger just changed the bank completely and now they have more branches in the U.S. than they do in Canada,” said John Kinsey, who helps oversee about C$1 billion at Caldwell Securities Inc. in Toronto. “It has really undergone quite a transformation.”

Ali Duncan Martin, a spokeswoman for Toronto-Dominion, declined to comment on the change in rankings, while Royal Bank’s Jason Graham said the firm doesn’t comment on other lenders. “I can tell you that we continue to deliver organic growth in Canadian banking of at least 25 percent premium to the market,” Graham said.

Royal Bank shares fell 1.3 percent to C$68.45 at 4:02 p.m. in Toronto and Toronto-Dominion declined 0.8 percent to C$95.18. Royal Bank remains the No. 1 lender -- and Canada’s largest company -- based on market value. Royal Bank had a market capitalization of C$98.6 billion, compared with C$87.5 billion for Toronto-Dominion.

New Leaders

Royal Bank became Canada’s largest lender shortly after World War I, leapfrogging Bank of Montreal following a series of mergers and expansions that saw it develop from a Halifax, Nova Scotia-based merchant bank to a national institution, said John Turley-Ewart, who has a PhD in bank history from the University of Toronto. Canadian Imperial Bank of Commerce briefly challenged Royal Bank for No. 1 in the late 1990s.

“Royal Bank has really been the leading bank in Canada since the 1920s, and that’s why the Bank of Canada’s first governor was from the Royal Bank,” Turley-Ewart, a former Royal Bank employee, said in a telephone interview. “It emerged as the biggest bank.”

Toronto-Dominion, an amalgamation of the Bank of Toronto and Dominion Bank, hadn’t held the title before its recent growth in the U.S., he said.

Canadian Imperial took the No. 1 spot for five quarters starting in 1998 until Royal Bank reclaimed it in the second quarter of 1999, according to company filings.

Both Royal Bank and Toronto-Dominion will have new leaders next year. Royal Bank CEO Gordon Nixon, 56, said on Dec. 5 that he’s retiring in August and will be succeeded by David McKay, 50, currently head of personal and commercial banking. Toronto-Dominion’s Clark said in April that he’ll retire in November 2014, with Chief Operating Officer Bharat Masrani, 57, assuming the CEO role.

“Clark was very instrumental and the culture will change at TD,” Kinsey said. “It’s really quite amazing what he’s done.”

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Peter Eichenbaum at peichenbaum@bloomberg.net

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