01/17/2013 08:06 EST | Updated 03/19/2013 05:12 EDT

Banking on America: How TD Bank Rose To the Top and Took On the U.S.A. (Excerpt)

2013-01-16-BankingOnAmericapull.jpg A few years ago TD held its annual general meeting in Saint John, New Brunswick. One of the top executives was out on the street when a group of American tourists from a visiting cruise ship walked past and one noticed a TD branch on Canadian soil. "Hey, guys," the tourist said, "they've got TD up here too!" TD has barged across the border and planted itself toe-to-toe with enormous and legendary American banks like JPMorgan Chase.

FILE - In this Nov. 12, 2010 file photo, a sign for TD Bank is shown in New York. TD Bank Group has agreed to buy Chrysler Financial, the automaker's old lending arm, from private equity firm Cerberus Capital Management LP for $6.3 billion. (AP Photo/Mark Lennihan, file)

Since 1855, when TD Bank's predecessor, The Bank of Toronto, was founded by a group of flour millers and grain dealers to today, to the international conglomerate it is today, TD Bank has been one of the most proactive financial institutions on the planet. And in the bank's expansion into the United States, it has been arguably the most successful of the ventures, with the familiar stylized TD logo and the green background lighting up buildings in Manhattan and other major American cities. Today, TD Ameritrade does more daily trades than any discount brokerage in the world, and the bank itself has more than a thousand branches in the United States, even as institution after institution has closed up shop in the face of the financial crisis.

Howard Green, Canada's best-known interviewer of business notables, brings a Canadian bank to life through the people who have built it into the money-spinning machine that spews out more than $11-million a day in profit. From the days of former CEO Keith Gray filling inkwells and packing a revolver in rural Ontario branches in the 1950s to today's CEO, Ed Clark, overseeing more than half a trillion dollars in assets, 74,000 employees and 10 million Internet customers, this book is about an iconic Canadian company that has outshone its American counterparts, and is now taking over their world.



Selling TD in the U.S.

Not only is he on American TV again, for an hour after the closing bell of equity trading in New York, Ed Clark is co-hosting--yes, co-hosting--on the business channel CNBC with none other than the "Money Honey," Maria Bartiromo. With her cat's eyes and full lips, Bartiromo conjures up a fortyish Sophia Loren. Clark, who at the time is sixty-three, lanky and with a face that's both boyish and pleasantly nerdy, looks slightly uncomfortable, unusual for a person so bursting with confidence. He later described the experience of being Bartiromo's co-pilot as "terrifying" but fun. This CEO is apparently willing to endure a bit of terror. He is regularly found flogging his bank's story in the United States (often repeating the same lines), where TD now has more branches than in Canada.

Going on Bartiromo's show is a way of getting in the face of Americans. It's also a way to win the hearts and minds of Clark's approximately 27,000 employees in the United States, close to a third of the bank's total. As Clark puts it, his American staffers can look up at the TV and proudly say, "There's my guy." It's a way of giving market and street cred to a bank that's trying to beat the Yanks at their own game.

Clark has his rap down cold for his U.S. audience. "You put us on a corner, where there are three other banks, and when people find out we're open longer, have better service, roll their pennies for free, and have treats for their dogs, they'll come to TD and we'll take market share."

He repeats his shtick over and over again, wherever and whenever he can. For someone who says he sometimes has trouble with words, Clark is second to none as a communicator. This is a deep-thinking, strategically precise intellectual who would seem equally at home telling people why they should buy a Veg-O-Matic on the boardwalk at Coney Island. Described as someone who plays chess in 3-D, Clark may be a Harvard PhD, but he is also a salesman, and he is pitching to America like you wouldn't believe. So much so that TD now has just over 1,300 branches in the United States versus 1,150 in Canada--and it only started buying retail banks in the U.S. in 2005, investing some $19 billion USD to gain the critical mass it believes is necessary to be a player on American soil.

In just a handful of years during Clark's tenure, TD has barged across the border and planted itself toe-to-toe with enormous and legendary American banks like JPMorgan Chase, Bank of America and Wells Fargo. Clark started in sleepy New England and then crept into the outskirts of Manhattan. Through some lucky timing, in late 2007, just as the financial world was going on red alert, Clark pounced on a bank with a cult-like focus on customers called Commerce Bank. TD suddenly had branches in New York City and its metropolitan area, a market that has roughly the deposit base of all of Canada. In a brazen move, to show New Yorkers it wasn't just some hick bank, TD did what's known in advertising as a "takeover." It bought every inch of ad space in the iconic Grand Central Station, including the umbrellas on the hot dog stands outside, blanketing the joint in TD's colour, which is green for money. Its goal is to move from being the number five bank in Manhattan to number three by 2015. It's a slight exaggeration, but one top financial sector observer has said that there are now as many TD branches in New York as there are Starbucks.

Clark's opportunistic purchase of Commerce also gave TD a hub in New Jersey, Philadelphia and Washington, and a toehold in Florida. The 2008-09 financial crisis would challenge bankers like Ed Clark as they'd never been challenged before, but the turmoil would also present him with other pigeons he could pick off to build his flock of banks in the U.S. Looking at a map might make you think TD is the "I-95 Bank," its branches roughly tracking the famed interstate that runs down the eastern seaboard.

It didn't hurt that Canadian banks did not implode during the financial crisis like their brethren in the U.S. or the U.K. Believe it or not, staid Canadian bankers are now the rock stars of the global banking club. Their banks did not engage in the loose lending and hanky-panky that destroyed banks in the U.S. and forced its government to bail out the economy and financial system. Canada's banks, long considered big and boring, have proved that boring is what you want in a bank. They make gobs of money and in September of 2012 were named the soundest on earth by the World Economic Forum for the fifth year in a row. Since the crisis, these dullards of finance have had the world's attention.

During the crisis, although its stock was halved and it sold new shares to the public to shore up its bunker of protective capital, TD still earned $3.8 billion during the worst year of the meltdown. This strength allowed it to take advantage of opportunities that arose because others found themselves in precarious states.

TD, it should be said, sits in an exclusive club. There are really only six Canadian banks of note: Royal Bank of Canada (RBC), Toronto-Dominion (TD), Bank of Nova Scotia (Scotiabank), Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC) and National Bank. They are known as the Big Six and each has hundreds of billions in assets, although National is concentrated in Quebec and is considerably smaller than the other five. Critics will jump at the chance to say that Canada's banks enjoy an oligopoly, which is true, but they omit that the same is true in countries like Australia and France. In contrast, the U.S. has 7,300 banks, from community banks with just a few branches and mere millions in assets, to JPMorgan Chase with more than $2 trillion.

Canada's banks, with a limited market of 34 million people, have looked longingly at the gigantic yet fragmented market south of the border. Restricted from merging in Canada, they need to find other places to do deals and grow earnings to satisfy the one-half of Canadians who, directly or indirectly, through mutual funds or pension funds, own their shares and rely on their quarterly dividends. The most obvious target of the bankers' lust has been the United States. While far from a fatal attraction, this obsession with expanding into the U.S. has not been without its difficulties.

From Maine to Florida, TD is suddenly everywhere, with a forceful presence in moneyed counties and major cities like Boston, New York, Philadelphia and Washington, and throughout Florida.

Americans could be forgiven for wondering just who these TD people are. On June 13, 2011, it was game six of the Stanley Cup final between the Vancouver Canucks and the Boston Bruins. Vancouver was ahead in the series three games to two. This could have been the Canucks' night. But they were playing on the Bruins' home ice, which was no longer called Boston Garden, but rather TD Garden. Every time the director cut to a shot of the Canucks' bench, viewers got a look at repeating TD logos. When the players fought for the puck along the boards, there was the TD logo. It also stared back from under the ice. Ultimately, the Canucks lost and Boston went on to win the Stanley Cup. Although no Canadian team has won the NHL championship in nearly two decades, the winning team was playing in an arena named for a Canadian bank. Clark enjoyed imagining that other Canadian bank CEOs were watching the game, grinding their teeth every time the TD shield appeared.


In a story that's now legendary among the brass of the bank and a favourite of Ed Clark's, a few years ago TD held its annual general meeting in Saint John, New Brunswick. One of the top executives was out on the street when a group of American tourists from a visiting cruise ship walked past and one noticed a TD branch on Canadian soil. "Hey, guys," the tourist said, "they've got TD up here too!"

It wasn't always thus. After a merger of The Bank of Toronto and The Dominion Bank in 1955, Toronto-Dominion, or TD, as it was now called, was for decades stuck as Canada's fifth-largest bank. It was known to be well run, with specialties in certain areas, such as its discount brokerage, and was the number one lender in the world to the cable television industry, funding entrepreneurs like Ted Rogers. But TD wasn't climbing in the rankings versus its four main competitors in Canada.

TD had tried foreign adventures a few times. In the early 1960s, the bank opened talks with David Rockefeller, grandson of the legendary John D. Rockefeller. David was CEO of Chase Manhattan Bank and had engaged in conversations with TD's boss at the time, Allen Lambert, about some sort of stake in each other's enterprise. According to Lambert's assistant, future CEO Dick Thomson, Rockefeller secretly wanted to buy TD but was thwarted by the government of Prime Minister Lester Pearson. In the early 1970s, TD bought a few bank branches in ritzy neighbourhoods in California, but the experiment didn't work. The operation was too small to make inroads and TD finally sold the unit in California to the Japanese in 1983. Bizarrely, TD even once had branches in Lebanon. In the mid-70s, someone (the bank suspects it was an employee) fired a bazooka into the vault of one of the branches in Beirut, destroying it. Two other branches in Lebanon were also obliterated, ending that chapter in the bank's history.

As the century ended and a new one started, the transformation began. TD bought Canada Trust, a company that set the standard for customer service, showing up the stodgy and crusty banks with its underdog gimmicks. Along with that purchase, TD got Ed Clark, an unbanker-like CEO if there ever was one. After establishing himself as boss and refocusing the bank on retail, rather than fancy financial products and corporate lending, Clark embarked on a fearless U.S. buying spree.

When Clark took over from Charlie Baillie at the end of 2002, TD's assets stood at $278 billion. By the end of the third quarter of 2012, they were $806 billion, second only to Canada's largest bank and company, Royal Bank, and placing TD as the sixth-largest bank in North America (by assets, deposits and market value) and the only bank traded on the New York Stock Exchange with a triple-A credit rating from Moody's. Although Royal Bank has a higher market value, TD continues to gather assets at a faster clip. As of the end of the third quarter of 2012, RBC had just $18 billion more assets than TD ($824 billion versus TD's $806 billion). As for profitability, TD earned upwards of a billion dollars more than Royal in 2011 and now has more branches than RBC.

Excerpt from Banking on America by Howard Green. Published by HarperCollins Publishers Ltd. Copyright © 2013 by H&H Media Inc. All rights reserved