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Bank of America Corp. said Monday that it is selling an $8.6 billion credit card portfolio in Canada and plans to unload $19 billion of card loans in Europe as it works to exit the international card business.
August 15 -
Canadian Imperial Bank of Commerce is tiptoeing back into the U.S. after losing billions of dollars in a botched stateside push a decade ago.
July 15
Toronto-Dominion Bank answered critics of its big push into the U.S. with strong quarterly results.
Stateside gains driven by acquisitions helped boost overall profits at Canada's second-biggest bank, which topped analyst expectations with earnings of $1.5 billion in May to July.
It saw numerous returns from its costly U.S. expansion over the last six years. Its 1,300-branch U.S. retail bank had stronger year-over-year profit and revenue growth than its Canadian bank, thanks to aggressive dealmaking.
Toronto-Dominion now has about 150 more branches in the U.S. than it does in Canada. It also has more capital allocated to its U.S. retail bank than to its Canadian bank.
That fact irks some Canadian investors and analysts who worry that returns on investment in the U.S. will never come close to those it makes in Canada.
Toronto-Dominion reported Thursday an 8% return on the nearly $18 billion of capital invested in the U.S. as of July 31, while $9.5 billion of capital invested in Canada returned nearly 41%.
Still, doing deals in the states paid off in a number of ways in the most recent quarter: U.S. mortgages, credit card, business property and commercial and other types of loans rose about $1 billion, or 2%, from the previous quarter, excluding the addition in April of the U.S. auto lender Chrysler Financial Corp. Deposits grew by $3 billion, or 2%, in the same period.
Also, margins were better in the U.S. than in Canada in the most recent quarter, even if they declined more sharply on acquisition-related charges. Net interest margin in U.S. banking was 3.58%, compared with 2.77% in Canadian banking.
Toronto-Dominion said in its presentation to investors that it intends to keep looking for selective acquisitions, after agreeing in August to buy Bank of America Corp.'s Canadian credit cards business for $7.6 billion.
The $682 billion-asset bank's most recent major U.S. purchase, Chrysler Financial, helped send up U.S. profits 8% from the previous quarter, and 20% from a year earlier, to $357 million. U.S. revenue was $1.523 billion, up 8% from the previous quarter and 30% from a year earlier.
"Our acquisitions are performing well. … We've been well received in the new markets we have entered since last year," Bharat Masrani, head of U.S. personal and commercial banking said in a press release, "although we are cautious about broader confidence in the U.S. economic recovery."
Ed Clark, president and chief executive of Toronto-Dominion, added that it "was a great quarter … with truly impressive performance from our retail business on both sides of the border."
Toronto-Dominion aims to keep growing in the U.S. despite the uncertain economy and the toll new regulations will take on profits, executives said in a conference call with analysts.
Toronto-Dominion projects U.S. pre-tax profits to begin declining by $50 million to $60 million in the fourth quarter because of the Durbin rule.
It hopes to begin earning that money back within two years by selling more loans and deposit services to U.S. customers, Masrani said. It also intends to stick with plans to open another 35 U.S. branches in 2012, he said.
"As a bank we'll have expense management but not at the expense" of growth, he said.
"My hope is we'll be able to outrun some of these [negative] headwinds with [product sales] growth."
Toronto-Dominion has four major divisions, and its $96 billion-asset U.S. retail bank was the second-best performer after Canadian banking, which earned $977 million. Profits narrowed in the other two big units: wealth management and wholesale banking. Toronto-Dominion still makes most of its money from banking Canadian businesses and consumers, with Canadian banking delivering 60% of its companywide profits last quarter.
But its biggest investment is in the states, where it established the bulk of its operations through three major purchases: South Financial Group Inc. of Greenville, S.C., last year; Commerce Bancorp Inc. of Paramus, N.J., in 2008; and TD Banknorth of Portland, Maine, in 2005. It also bought three failed banks in Florida last year with combined assets of $3.8 billion: AmericanFirst Bank, First Federal Bank of North Florida and Riverside National Bank of Florida.
