Saturday, June 24, 2006

TD Banknorth Names Masrani President

Financial Post, Duncan Mavin, 24 June 2006

Toronto-Dominion Bank is dispatching a seasoned Canadian executive to beef up the management team at Portland, Me.-based TD Banknorth as the U.S. subsidiary focuses on growth despite tough conditions for banking.

Intense competition for customers and unfavourable trends in interest rates have made for a hostile retail-banking environment in the United States, especially around Banknorth's northeastern stronghold.

At the same time, Banknorth is still trying to swallow the acquisition of Interchange Financial Services Corp. and Hudson United Bancorp bought earlier this year for a total of almost US$2.5-billion. It is also reported to be actively pursuing further growth, including potential acquisitions next year.

"The deals have definitely come faster than we thought," said Ed Clark, TD's chief executive. "But it's also fair to say that the economic environment in the U.S. has turned out to be more hostile."

That scenario has left the management team at Banknorth, led by chief executive Bill Ryan, trying to do several tasks at once, Mr. Clark said.

But yesterday, Banknorth announced it has recruited Bharat Masrani, a 19-year TD veteran, as the new president of the subsidiary.

Mr. Masrani will focus on running day-to-day operations at Banknorth, Mr. Clark said. His appointment will enable Bill Ryan, Banknorth's chief executive, to concentrate on integrating recent acquisitions that are ahead of schedule, he said.

Mr. Masrani said the challenges facing Banknorth are common to all banks in the U.S. northeast.

Deposit rates paid to Banknorth customers were driven up 30 basis points by interest-rate hikes in the first quarter of 2006. However, the rates charged on loans were held back by competition in the U.S. lending market, rising only 13 basis points in the period and compressing net interest rate margins.

Banknorth reported disappointing results in the first quarter of 2006, delivering adjusted earnings of US$115.6-million, compared with US$111.8-million for the first quarter of 2005. On a per-diluted-share basis, adjusted earnings were US55 cents for the first quarter of 2006, compared with US60 cents a year earlier.

Banknorth has already responded to the "hostile" banking conditions by, for example, introducing a "no ATM fees" card for customers in New Jersey, Connecticut, Pennsylvania and metropolitan New York, home to Hudson United.

And in April, the bank announced a US$25-million advertising push intended to garner more market share for its U.S. businesses.

Mr. Masrani is currently chief risk officer of TD. He has also been a director of Banknorth since 2005, a position he will now leave. His tenure in that role gave TD the flexibility to introduce additional management resources at Banknorth, while Mr. Masrani was able to learn more about the business there, Mr. Clark said.
The Globe and Mail, Sinclair Stewart, 24 June 2006

TD Banknorth Inc. chief executive officer Bill Ryan is "borrowing" a senior official from parent Toronto-Dominion Bank so he can concentrate on making acquisitions in the northeastern United States.

Bharat Masrani, currently vice-chairman and chief risk officer for Toronto-based TD, will head to Portland, Me., this fall to become president of TD Banknorth, where he already serves as a director. He is being parachuted into an operations role and will assume day-to-day responsibilities for the bank's retail, commercial, investment and insurance businesses.

Mr. Ryan, whose penchant for deal making over the past 15 years has transformed Banknorth from a bit player in New England into a leading regional bank, will now focus on what he does best: hunting for deals that will allow TD to further its cross-border push.

One of the things TD stressed when it bought control of Banknorth for $5-billion was the quality of that bank's management team. Nevertheless, there did not appear to be any successors within the bank who could slide into the president's role and run the operations.

"I think Bill is saying 'I could try to do two things at one time, but I don't think that's smart,' " explained Ed Clark, TD's CEO. "The debate is, if there isn't a natural person to fill that job right now in Banknorth, does he go outside, or does he essentially borrow an executive from us? And he said, 'Why don't I borrow that which I've seen and liked . . . and maybe over the next three or four years develop someone inside."

They debated this point for some time. TD has repeatedly talked about the need for strong local management in the U.S. market, and Mr. Clark conceded there would have been a "big attraction" in hiring an official from a competing U.S. bank to fill the void. At the same time, he said, it may have stunted succession plans at TD Banknorth: Mr. Masrani is expected to return to Canada at some point, which will give him time to groom the next president of the bank.

"From our point of view, it means we take one of our top executives and say you have already been there, done that," said Mr. Clark. "And as these operations get bigger and bigger as a share of our earnings, having executives at TD Canada that have been in the U.S. becomes a huge asset."

Mr. Masrani, 50, has had a varied career at TD. He headed corporate banking in Canada, established an operation in India, and ran the bank's British discount brokerage subsidiary.

However, he is heading south amidst a difficult climate for smaller U.S. banks. The flattening yield curve has squeezed the spreads these lenders depend upon to generate their profit. That, along with fierce pricing competition, has hurt TD Banknorth's bottom line and made it less of an immediate contributor to TD than many investors had hoped.

The less-than-ideal conditions only exacerbated the need to provide Mr. Ryan with additional support, Mr. Clark said, especially if he wants to continue expanding the bank.

"I think it is fair to say that the operating challenges for Banknorth are definitely more elevated now, given both the environment they're operating in, and the speed with which we're transforming it," he said. "This job is getting bigger and bigger as we grow the bank."
The Globe and Mail, Tavia Grant, 23 June 2006

TD Banknorth Inc. on Friday named Bharat Masrani as president of the bank, adding a new role to its management team.

Mr. Masrani, currently chief risk officer at TD Bank Financial Group, will assume the position in the fall and report directly to William Ryan, chairman and chief executive.

“I am delighted to have an executive with the breadth of Bharat's experience join our exceptional management team here at TD Banknorth,” Mr. Ryan said in a statement.

The move will allow Mr. Ryan to focus on making acquisitions, he said.

“With the increased size and complexity of our company, adding Bharat to our organization will assist me in managing the day-to-day operations of the company and will allow me to continue to actively pursue growth opportunities and acquisitions.”

Mr. Masrani joined TD Bank Financial in 1987 and has served in a number of international management positions in commercial, corporate banking, and global wealth management. He is currently a vice chair and the chief risk officer and has been a director of TD Banknorth since 2005.

In a separate release, TD said it will work over the coming months to find a replacement for Mr. Masrani.