Toronto-Dominion CEO Says ‘Uncertainty’ Is Canada’s Biggest Risk

From trade talks and scrapped deals to elections and government infighting, “uncertainty" has emerged as the biggest obstacle for Canada, according to the head of the nation’s largest lender.

“It’s all this uncertainty we’re looking at," Toronto-Dominion Bank Chief Executive Officer Bharat Masrani said in a BNN Bloomberg interview when asked what’s the biggest risk to his bank’s Canadian business. “The more certainty we can create in the economy, the better off we are."

Canada faces a plethora of issues potentially clouding the nation’s future. Those include fallout from Canada rejecting a Chinese takeover of construction firm Aecon Group Inc., bridging differences between British Columbia, Alberta and Justin Trudeau’s federal government on Kinder Morgan Canada Ltd.’s Trans Mountain pipeline, and ongoing talks with the U.S. and Mexico to renew the North American Free Trade Agreement.

"My own belief is that at the end of the day we will get a sensible deal on Nafta, but in the meantime there’s lots of uncertainty and that does drive investment decisions that are not optimal sometimes," Masrani said. “We have within Canada our own issues, between B.C. and Alberta, which is not helpful -- so overall there is always some headwinds here we have to manage through."

Canada’s decision this week to kill a proposed Chinese takeover of Toronto-based Aecon may bring further uncertainty, with China warning of an investment chill to the country.

“The global macro and geopolitical risks are a lot different today than they were five years ago, 10 years ago," Masrani said, while declining to comment specifically on the Aecon decision. “So in a way to some extent it’s not surprising given how the world has evolved, but on the other hand that’s another uncertainty now going forward."

Masrani also cited elections, such as the June vote in Ontario, Canada’s most populous province, as adding to uncertainty. One area Toronto-Dominion’s chief executive is less worried about is rising levels of consumer indebtedness.

"We don’t have a housing finance market that is not prudent, and a lot of this debt is still in mortgages, which is a good thing," Masrani said. “As long as we have a growing economy and unemployment at the levels that we have now, then I think this thing is manageable. But if it turns out that unemployment were to go up substantially, then this will of course hurt."

Masrani also commented on changing U.S. banking regulations, including President Donald Trump’s latest step in his push to ease regulations of banks with changes to the 2010 Dodd-Frank Act this week.

“We don’t see a dramatic shift for TD, but having said that there are certain changes that are very helpful, in stress testing and how that will be conducted in the future," Masrani said. “So it is positive from that perspective."