TORONTO — The man who has helped TD Bank, headquartered in Portland, Maine and Cherry Hill, N.J., grow into one of the largest banks in the United States has been chosen as the next chief executive of Toronto-Dominion Bank, TD Bank’s Canadian parent.
Bharat Masrani, TD Bank’s CEO since 2006, will replace Ed Clark, who will step down as CEO of Toronto-Dominion Bank next year. Clark transformed Toronto-Dominion Bank from a struggling Canadian lender into one of the largest retail banks in North America.
Masrani, 56, will take on the role of chief operating officer on July 1 in preparation for the CEO job, which he will officially take over on Nov. 1, 2014.
Mike Pedersen, Toronto-Dominion’s head of wealth management, insurance and corporate shared services, will succeed Masrani as head of U.S. banking operations on July 1.
The handover, part of a larger changing of the guard taking hold in the Canadian banking sector, comes earlier than expected, but does not suggest a change in direction for Canada’s second-largest lender, Masrani told Reuters.
“I don’t see a change in vision,” said Masrani, who had been seen as one of two likely successors to Clark. Tim Hockey, who runs TD’s Canadian retail bank, was the other.
“We’re a growth-oriented bank and we would like to grow all our businesses in all of the markets we are in,” Masrani said.
Clark, 65, said last year that he planned to retire in the “next few years,” but gave no signs that his departure was imminent.
Under Masrani’s watch, TD’s U.S. retail network has grown to around 1,300, outnumbering the bank’s 1,200 Canadian branches at a time when the U.S. market is showing signs of recovering while Canadian loan growth is stagnating.
“I think probably what [Masrani’s appointment] is saying is that they’re going to stay with the focus on the U.S.,” said John Kinsey, a portfolio manager at Caldwell Securities in Toronto.
The bank’s shares were down 1.4 percent around midday, moving in line with the 1.5 percent drop in the Canadian financial sector, as investors said they expect few hiccups at the bank resulting from the transition.
“Canadian banks have done a good job transitioning guys into their jobs,” said Paul Harris, a portfolio manager at Avenue Investment Management in Toronto.
“He’s got a year and a half to transition. That’s a long time.”
Masrani, who joined the bank in 1987 and took over leadership of its U.S. unit in 2006, will have big shoes to fill when he takes over from Clark.
A one-time senior bureaucrat in the Pierre Trudeau government of the early 1980s, Clark joined TD when it acquired Canada Trust in early 2000.
He was named CEO of TD in 2002, when the bank was struggling under a mountain of bad loans to the telecommunications sector.
He set about de-risking the bank’s balance sheet, and in 2004 began building the bank’s now significant U.S. network by launching a takeover of a majority stake of Maine lender Banknorth, making the purchase when rival Royal Bank of Canada was struggling with its own U.S. retail bank.
Clark followed that with a string of other U.S. acquisitions, including the $8.5 billion acquisition of New Jersey-based Commerce Bancorp in 2008.
While the U.S. division’s profit has struggled at times, it earned C$315 million during the first quarter of 2013, out of the bank’s overall profit of C$1.79 billion.
In an interview, Clark said he has accomplished what he wanted to as CEO, and he believed the bank was well positioned to benefit from strength in the United States at the same time as Canadian lending slows as the country’s housing sector cools.
“We believe there is going to be a rotation away from Canada generally in the next two years here, the U.S. will … grow a little faster than Canada, but we’re well positioned for that,” he said.
TD’s changing of the guard also comes as some of its rivals are doing the same.
Bank of Nova Scotia last year named longtime executive Brian Porter as its president, making him the heir apparent to current CEO Rick Waugh. Larry Pollock, who had held the top job at Canadian Western Bank for 23 years, stepped down earlier this year.
TD, like other Canadian lenders such as RBC, Scotiabank and Bank of Montreal, has continued to make acquisitions in the wake of the 2008 financial crisis.
Masrani said that would likely continue, but the bank’s U.S. footprint is such that it does not need to make any deals to satisfy its growth objectives.
“When we started in the U.S. we were very clear that we need to have sufficient scale such that we can organically grow our franchise,” he said.
“The great thing for us is we don’t have to do a transaction in the U.S. We do have sufficient scale from which to grow organically, so that continues to be our outlook.”
Tim Hockey, who along with TD’s Canadian banking wing, heads its auto finance and credit card units, will also be responsible for TD Wealth Management starting this July.