Two compelling threads comprise the 2008 story of TD Bank Financial Group and Colleen Johnston, its CFO: the $500 billion bank is one of very few North American institutions that didn't write down a single penny in subprime mortgage losses, and with the $8.5 billion acquisition of Commerce Bancorp, TD now has as many branches south of the Canadian border as it does up north.
Johnston gets much of the credit for TD's early exit from some of the high-risk and complex businesses that eventually hammered most banks. "We looked at our business and said, "Are these businesses part of our core capabilities? Do we understand the risk, is the business transparent, is there sufficient liquidity? Those are all factors where we made significant decisions to exit complex businesses," Johnston says.
But despite its protection from the subprime debacle, TD wasn't shielded from the malaise in the rest of the economy. Net income for the second quarter was $852 million, down three percent from the same quarter last year, primarily on a decline in wholesale banking. But for the first six months of 2007, net income rose one percent to $1.8 billion, driven by higher income in U.S. personal and commercial banking. Return on equity for the quarter was 13.4 percent, down from 17.1 percent in the year earlier quarter.
Johnston's team just completed a three-year project aimed at reinventing the finance department, but there's still more to be done given that during that time the bank has morphed into one of the only true North American institutions. "The bank has changed fundamentally, and finance has been a huge part of that success," she says. "But the truth is we have more work to do. ...Our goal is to have world class finance capabilities."
In June 2008, Johnston also took responsibility for corporate services, including sourcing, real estate and security. A big push in this new role is TD's cost transformation project, a strategic sourcing initiative focused on slimming down the almost $6 billion the bank spends annually with external suppliers and partners. One example of a quick win on the expense management front: in the past year Johnston implemented an online expense reporting system. This eliminated the printing of an estimated 1.8 million pages, and streamlined the expense process across the bank. Johnston's other challenge going forward is to increase her, and the bank's, profile with institutional investors. "Given all the global crisis, TD really is an outlier," she says. "The TD name is resonating as a very high-quality name, and that's a big part of my priorities: to make sure we can continue to get increased support from our investors."
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