Friday, April 07, 2006

TD Hires Frank McKenna

Duncan Mavin, CanWest News Service; Financial Post, 7 April 2006

Former Canadian ambassador to the United States Frank McKenna resurfaced at Toronto-Dominion Bank Thursday, where it's hoped he will lend some star quality to TD's pursuit of growth in Canada and the U.S. as the bank's new deputy chair.

TD's chief executive officer Ed Clark said he had been pursuing the former New Brunswick premier and one-time favourite for the Liberal leadership to join him at TD for two years before they finally settled on a deal.

``If you try to recruit Wayne Gretzky, you don't do it in one shot,'' said Clark.

A key reason for hiring McKenna is to help beef up TD Securities as it strives to become one of the top three investment banks in Canada, said Clark.

There had been speculation on Bay Street recently that the bank might be willing to sell TD Securities to a number of acquisition-hungry Wall Street investment banks. TD is in the best position of any of the Canadian banks to cash in on a ``once-in-a-lifetime'' opportunity to sell their wholesale business at a premium to bloated Wall Street firms, said Bank of Montreal analyst Ian de Verteuil in a note to clients.

TD Securities has historically struggled to match some of its rivals, especially because of a weaker retail-brokerage network and because the business has not made adequate inroads with Canadian chief executives.

However, Clark trumpeted McKenna's arrival as a sign of the bank's growth plans for TD Securities. Those plans could include a hiring spree. Also, McKenna will bring strong relationships with ``virtually every CEO in Canada,'' said Clark. ``We have lots of capable investment bankers, but we don't have the historical relationships that other banks have and we think Frank can be the gap-filler,'' he said.

BMO's de Verteuil said there is no sign of any ``imminent'' sale of TD Securities.

McKenna could also provide a higher profile for TD's ambitions in the U.S. He was Ottawa's man in Washington for a year until the election of the Conservative government in January.

TD could be on the cusp of making significant growth plays in the U.S., including potential acquisitions, say some analysts. The bank's shares closed at $64.20 Thursday, down 30 cents on the Toronto Stock Exchange.

The bank has a stated five-year plan to grow TD Banknorth's market capitalization to between $10 billion US and $12 billion US. The U.S. bank has a current market cap of about $6.7 billion US.

High prices on potential acquisitions in the U.S. are currently considered a significant barrier to deals featuring Canadian banks. But U.S. banks could be more accessible later this year if tougher conditions prevail in the sector. Capital-heavy Canadian banks with U.S. ambitions such as TD could benefit from a downturn in the U.S. economy, and the continued flattening of the yield curve in the States, as well as the strength of the Canadian dollar relative to its U.S. counterpart.

``We know the banking environment is tough in the U.S.; that's the bad thing,'' Clark told the Financial Post last month. ``The thing is it's going to cause some acquirees to put up their hands,'' he said.

``You have to be prudent but if you say 'this is ugly, I'm out of here,' you run the risk of missing an opportunity.''

McKenna said his role will also relieve some of the ``ceremonial duties'' from other TD executives, especially Clark.

McKenna, a lawyer, was a member of the New Brunswick legislature for 15 years, including 10 as premier. He was also a member of the board at several companies, including the Bank of Montreal.

He is understood to have received various offers from Canadian businesses after resigning as Canada's ambassador to the U.S. and before agreeing to join TD's board starting May 1.

``I've resolved that I want a full-time job, with a full-time focus, and to be part of a really exciting growth story,'' said McKenna, who is 58. ``I'm really committing the next tranche of my life to helping this institution on its growth trajectory,'' he said.
The Globe and Mail, Sinclair Stewart, 7 April 2006

Ed Clark didn't wait to see whether Frank McKenna planned to run in the Liberal leadership race before he began recruiting him to join Toronto-Dominion Bank. Just hours after Mr. McKenna revealed he was quitting his post as Canada's ambassador to the United States, the chief executive officer called him and urged him to return to the private sector as a rainmaker for TD.

"The day I made the announcement that I was resigning, Ed Clark was on the phone with me, and quite frankly, aggressively thereafter, in a way that I found very flattering," the former New Brunswick premier said in an interview yesterday, when TD announced his appointment as a deputy chairman.

"I liked the idea of getting back to a single obsession in my life, rather than doing a hundred different things. I didn't really become persuaded that I wanted to leave the large buffet that I was at and go to kind of a single course, but then I went to Washington on behalf of the prime minister and I came to realize just how much satisfaction there was in having a single-minded focus."

He was appointed by Liberal Leader Paul Martin and quit when Conservative Leader Stephen Harper formed the government earlier this year.

Mr. McKenna, who had his fingers in several corporate pies before becoming a diplomat early last year, and who served as a director of TD rival Bank of Montreal, insisted he was not weighing Mr. Clark's offer against the chance to take the helm of the Liberal Party. He said he was not interested in becoming a leadership candidate a few days after he resigned as ambassador in late January, but said he had pretty much decided several months before that he wasn't going to re-enter politics.

Mr. McKenna will essentially have an ambassador-like role at TD, using his connections to help the bank land new corporate customers in Canada and the United States. He will report directly to Mr. Clark.

"We haven't had the historical relationships, we don't have enough people in the bank who have the knowledge and the relationships with the key CEOs, and that's what made Frank so attractive," Mr. Clark said. "He has all that."

Mr. Clark is trying to reinvigorate TD Securities Inc., the investment banking arm, and transform it into one of the top three dealers in the country. Many analysts and bankers are skeptical that he can do it: TD Securities has an enviable trading operation, but it has a smaller market share than its peers in underwriting and mergers. That's partly because TD chose to build its own dealer largely from scratch, rather than buy a major independent firm like the other banks did.

The hope is that Mr. McKenna will be able to convert his myriad relationships into new business for the firm. He has served on several boards, including BMO, Air Canada, CanWest Global Communications Corp. and General Motors of Canada Ltd., while acting as counsel to a pair of law firms, doing much the same kind of work he will be doing at TD.

He bought a kitchen cabinet company in 2002, which is run by one of his sons, and has been active with private equity groups.

In addition to his Ottawa ties, which can help the bank with domestic lobbying, Mr. McKenna has strong political links with the northeastern U.S. states, where TD is anchoring its expansion strategy through TD Banknorth, based in Portland, Me. When he was in office, Mr. McKenna was very active with the Conference of New England Governors and Eastern Canadian Premiers, an affiliation that could prove helpful to Mr. Clark and TD.

The two long-time Liberals met each other in the early 1990s, when Mr. Clark, a former high-ranking civil servant, was running Canada Trust and Mr. McKenna was acting as New Brunswick's premier, and trying to entice companies to set up call centres in the province. They stayed in touch sporadically, and two years ago Mr. Clark first approached him about taking a job at the bank.

Despite his designation as deputy chairman, Mr. McKenna has an executive role, and will not be named to TD's board of directors.
Dow Jones, Monica Gutschi, 6 April 2006

Toronto-Dominion Bank has hired former U.S. Ambassador Frank McKenna as a rainmaker to help it open doors as it works to boost its profile in wholesale and commercial banking.

"We think that we have less than our natural market share in certain key markets," Chief Executive Ed Clark said in an interview. "We think that Frank can help us there."

The bank named McKenna, 58, to the newly created role of deputy chairman Thursday. In the position, which he will assume May 1, he'll report to Clark and be a member of the bank's executive team.

McKenna, who most recently served as Canada's ambassador to the U.S., first entered public life as a member of the New Brunswick legislative assembly in 1982. He became Premier in 1987 and served in that position for 10 years.

McKenna's relationships in New York and Washington will be useful in helping Toronto-Dominion strengthen its U.S. growth strategy, Clark said.

Toronto-Dominion has moved aggressively into the U.S. in recent years, buying Boston-based retail bank Banknorth Group in 2004, and joining with discount brokerage Ameritrade Holding Corp. to form TD Ameritrade last year.

Clark said that, as Bill Ryan of Banknorth and Joe Moglia of Ameritrade make more acquisitions in the U.S., McKenna's contacts in the "upper echelons" of U.S. society will come in handy.

McKenna said he sees his role as a facilitator of "business-development opportunities and retention of business." He said he will work to connect the bank's leaders with customers, in order to "leverage to the maximum the strength of the team."

As well, Clark said that, in the Canadian market, Toronto-Dominion lags in equity underwriting, despite having the capacity to do more deals.

"We're the Number One personal bank, but not the Number One commercial bank," Clark said.

He noted his Canadian banking peers purchased investment dealers and thus obtained "historical relationships." In the absense of that at Toronto-Dominion, "we're convinced that Frank can build those relationships."