Friday, July 28, 2006

TD Banknorth Aims to Double Its Size

Reuters, Jonathan Stempel, 27 July 2006

TD Banknorth Inc., a Canadian-backed company expanding rapidly in the U.S. Northeast, may double in size in the next couple of years, helped by mergers and the end of "stupid rules" at the bank that repel customers, its chief executive said on Friday.

Chief Executive William Ryan said the bank, majority-owned by Toronto-Dominion Bank parent TD Bank Financial Group, plans to focus more on New Jersey, New York and Connecticut, where it is advertising heavily, rather than "slow growth" states such as Maine and Vermont. The bank is based in Portland, Maine.

TD Banknorth, which ended June with $40.3 billion of assets, expects to reach $60 billion to $80 billion with "one or two acquisitions a year, and maybe every 18 months a larger acquisition," Ryan said at an analyst conference monitored by Webcast. "Right now, the prices are fairly high."

The real issue is geography, and extending that geography, and we're focused on concentrating in the mid-Atlantic," he said. "Don't be surprised if you see us buy a little bank. Don't be surprised if you see us buy a big bank."

Still, he added: "Right now, the prices are fairly high."

The bank now operates 597 branches in eight states from Maine to Pennsylvania.

In January it added some 200 branches in New Jersey and Pennsylvania when it bought Mahwah, New Jersey's' Hudson United Bancorp. It will add 30 in early 2007 when it buys Saddle Brook, New Jersey's Interchange Financial Services Corp.

"We will be going to new geographies, but not in the next couple of years, I don't think," Ryan said.

While Ryan said the bank would consider expanding into the Baltimore and Washington, D.C. areas, it won't move into faraway areas, such as Chicago, while he is in charge.

Asked how long he'll stay, the 62-year-old, who has been chief executive since July 1989, said: "I have no plans to retire.... I like what I'm doing."

In the second quarter, profit excluding several items rose 18 percent to $128.3 million, or 56 cents per share, topping analysts' average forecasts by a penny per share. A balance sheet restructuring to reduce interest-rate risk helped lending margins expand, contrasting with declines at many banks.

A balance sheet restructuring to reduce interest-rate risk helped lending margins expand, contrasting with declines at many banks. Ryan said stock buybacks are unlikely in the next year as the bank builds capital and tries to cut costs.

Advertising expenses rose 24 percent as the bank, using the Andy Williams song "Born Free," began marketing a program waiving automated teller machine fees worldwide for New York, New Jersey, Connecticut and Pennsylvania customers.

The campaign may help TD Banknorth win market share from bigger banks in the region, such as JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Wachovia Corp., Royal Bank of Scotland Plc's Citizens Bankand Commerce Bancorp Inc., New Jersey's largest bank.

Ryan acknowledged that TD Banknorth faces heavy competition, especially for deposits. "That seems to be the one we're really struggling with," he said.

Commerce, which often gets good marks for customer service, appears in particular to be in TD Banknorth's sights.

Ryan said he plans to launch a "no stupid rules" contest, in which he asks employees to identify TD Banknorth policies that get in the way of good service.

Commerce uses the same phrase in its marketing. A call to the Cherry Hill-based bank was not immediately returned.

Ryan hopes TD Banknorth can learn as it did a few years ago, when it last solicited employees for a list of stupid rules.

"You'd read it and say, 'That's not us, is it?'" Ryan said.