Bharat Masrani said new entrants — from tech giants like Apple and Google offering mobile payment systems to alternative lenders in the shadow banking sector — are creating heightened competition.
Many of these non-traditional competitors are not subject to the same regulations that govern banks and other financial institutions, which allows them a competitive advantage, Masrani said.
They are also not bogged down by legacy systems, allowing them to be more nimble and efficient than the banks.
At TD Bank's (TSX:TD) annual meeting Thursday, Masrani urged regulators to take a closer look at these non-traditional entities.
"We are talking people's livelihoods," Masrani told reporters following the meeting. "Banks are highly regulated to make sure that our financial system is safe and sound. In light of that, I think it is important that — as a country, as a system — we ensure that those things are not compromised as new innovation comes through."
In addition to stiffer competition, the bank is also grappling with slower revenue growth and higher customer expectations.
"We find ourselves in a challenging operating environment," Masrani told shareholders. "In addition to the economic, regulatory and competitive pressures we face, people expect more from their banks."
He said it's unlikely that growth this year will come from Canadian consumer borrowing and real estate.
The big decline in oil prices will continue to hurt consumer confidence and hamper Canada's economic growth, he added.
One bright spot for the bank is the economic recovery south of the border, where TD has a large division. Strong job growth in the U.S. may eventually spur the Federal Reserve to raise interest rates.
"However, we have to temper our enthusiasm," Masrani noted. "The level of interest rates will remain exceptionally low, U.S. real estate markets are recovering slowly and the pace of economic growth will be far from booming."
He added that the profitability of financial services companies is also under pressure from rock-bottom interest rates and narrowed spreads between long and short term bond rates.