Thursday, April 03, 2008

TD Bank Annual Shareholders Meeting

  
Financal Post, Carrie Tait, 3 April 2008

Toronto-Dominion Bank chief executive Ed Clark cautioned shareholders on Thursday that the liquidity crisis facing the markets will take longer than the bank had expected to work its way through the financial system as a recession looms over the U.S. and possibly Canada.

"We expect to see a much slower growth environment in 2008," he said, reiterating a message the bank has already broadcast to the market.

TD had hoped the financial crisis that kicked off last year would be over in the first half of this year, but Mr. Clark changed his tone.

"Now it appears that it will take the market all of 2008 to work its way through the balance sheet and liquidity issues associated with this crisis."

Mr. Clark told the bank's annual meeting in Calgary that its goal "is to grow earnings per share by 7% to 10% per year. Some years a little more, some years - like 2007 - a lot more. And some years, most likely in 2008, a little less."

He expressed confidence that the bank's U.S. expansion strategy is working, despite growing subprime woes and the worsening economic outlook in the United States. "People believe the United States is going into a recession. We frankly don't disagee."

Mr. Clark noted the bank has "significant commercial exposure" south of the border, but noted TD Banknorth and Commerce - the bank's U.S. operations - are "conservative lenders."

"We are not saying we can operate in the United States in a recession and not be impacted. Obviously we will be," he said.

If that recession creeps into Canada, TD's commercial operations will also be hit, he said.

Mr. Clark said the wholesale bank has been impacted directly, especially in its spread business. The gains the wholesale bank has made in past years will not be matched in 2008. "In these markets these gains will be much smaller," he said.
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Bloomberg, Sean B Pasternak, 3 April 2008

Toronto-Dominion Bank Chief Executive Officer Edmund Clark said he hasn't seen any changes in the financing terms for the C$51.7 billion ($51.3 billion) takeover of phone company BCE Inc.

``We will be there with our money,'' Clark told reporters today after the bank's annual meeting in Calgary. Toronto- Dominion is among the banks that agreed to finance the takeover for a group led by the Ontario Teachers' Pension Plan.

BCE shares have been trading below the C$42.75 a share offer on speculation that the buyout may lose funding because of turmoil in the credit markets. BCE, Canada's biggest phone company, today rose 52 cents, or 1.5 percent, to C$35.35 in 4:10 p.m. Toronto Stock Exchange trading.

Clark, who heads the country's third-biggest bank, said he doesn't regret the BCE financing, calling it a ``transparent'' risk. He said the bank will have to hold senior debt of Montreal-based BCE because it won't be able to sell bonds given current market conditions.

``Right now, we probably can't sell those bonds in the marketplace,'' Clark said. ``So we may end up initially with a couple of billion dollars in senior Bell debt.''

The bank said in July that it committed C$3.3 billion, or about 10 percent, of the C$34.3 billion credit line for the BCE transaction, which BCE says is expected to close by June. The Toronto-based bank also said it will buy C$500 million in BCE stock.

``So far we haven't seen,'' any changes in the terms, Clark said. ``We're not the drivers in that, and so I think our position is, we will be there with our check for the equity, and we will be there with our check for the debt. And we'll be interested to see if other people show up with their checks or not.''

Concern among BCE shareholders heightened after Bain Capital LLC and Thomas H. Lee Partners LP last month went to court to try to complete the $19.5 billion acquisition of Clear Channel Communications Inc. The buyout firms say the banks are refusing to provide $22.1 billion of loans on the original terms.

Three of the banks that committed funding to the Clear Channel buyers -- Citigroup Inc., Royal Bank of Scotland Group Plc and Deutsche Bank AG -- are also financing the BCE transaction.

Ontario Teachers' Chief Executive Officer Jim Leech said in an interview yesterday the buyout of BCE is ``different'' from the stalled takeover of Clear Channel, adding that he's working to complete the purchase this quarter.

Toronto-Dominion Bank isn't involved in the Clear Channel bid.

Canadian communications regulators last week gave conditional approval to the purchase of BCE by Teachers' and its U.S. investors, including Providence Equity Partners Inc. and Madison Dearborn Partners LLC.
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Bloomberg, Sean B Pasternak, 3 April 2008

Toronto-Dominion Bank Chief Executive Officer Edmund Clark said the slump in the banking industry may extend into next year because of a slowing economy.

``While 2008 may shape up as the year of the financial services crisis, 2009 could be challenging if there is an economic slowdown significant enough to hit the banking sector,'' Clark said at the bank's annual meeting in Calgary. ``We may not be out of the woods at the end of this year.''

Clark he couldn't predict how long the slowdown would last because Toronto-Dominion's consumer banking and asset-management businesses have been largely removed from the turmoil in the U.S. subprime mortgage market.

``The anomaly is, we don't see any signs of it right now,'' Clark told reporters after the meeting today. ``Our two core businesses are just motoring on as if nothing's going on.''

Toronto-Dominion, Canada's third-largest bank, is the only lender in Canada that has avoided investments tied to U.S. subprime mortgages, which has resulted in at least $232 billion in losses among global finance companies.

Clark, 60, forecast C$1.2 billion ($1.19 billion) in earnings next year from the U.S. personal and commercial lending unit, up from C$700 million this year. U.S. profit will rise after the purchase of Cherry Hill, New Jersey-based based Commerce Bancorp Inc. Clark said Toronto-Dominion paid about $7 billion for Commerce in the stock and cash transaction, down from an announced value of $8.5 billion in October after Toronto-Dominion shares fell.

``It's a highly accretive deal in 2009,'' Clark said. ``I don't think the market has figured that out at all.''

Clark also said that the bank may make acquisitions once it integrates the Commerce acquisition with its TD Banknorth business. They would have to be ``enormously shareholder friendly,'' he said.

Toronto-Dominion rose 21 cents to C$64 at 4:10 p.m. on the Toronto Stock Exchange, and has fallen 7.9 percent this year.

Clark said the current stock price ``doesn't feel good, for me, for our employees, management or our shareholders.''

``When the market runs for the hills, it runs away from everyone,'' he said. ``There's no question it's hard to have your stock go up and do well in a world in which the market has decided it doesn't like banks generally.''
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The Globe and Mail, Tara Perkins, 3 April 2008

Toronto-Dominion Bank chief executive Ed Clark told shareholders at the bank's annual meeting in Calgary Thursday that TD's current stock price doesn't "feel good" but he sees a bright future ahead and is confident about the future performance of TD's U.S. operations despite an apparent recession.

The bank's shares are trading "in the low sixties. And I have to tell you, this doesn't feel good," Mr. Clark said, adding he knows that employees, management and shareholders feel the same way.

Mr. Clark said that although TD has managed to avoid many of the subprime mortgage related issues that have tripped up its competitors, "when the market runs for the hills, it runs away from everyone."

It's hard to make your stock go up in a world in which the market does not like banks generally, he said.

In TD's case, the market has also decided that it specifically doesn't like U.S. banks. This week, TD closed its blockbuster acquisition of New Jersey-based Commerce Bancorp.

Mr. Clark said he's confident that five years from now, the market will see how good an acquisition that was.

The bank is willing to take risks to continue building its business, he said. "I recognize that many people are worried about our strategy in the United States," Mr. Clark said.

"They have two concerns. First, people believe the United States is going into a recession...frankly, we don't disagree. And we do have significant commercial exposure in the United States.

"So, I think the people that worry about us worry that we'll be damaged as a result of that. Second, they worry we won't pull off the TD Banknorth and Commerce Bancorp integration."

Mr. Clark noted that TD's U.S. operations are "extremely conservative lenders."

"We're not saying that we can operate in the United States in a recession and not be impacted," he said. "Obviously, we will be, and if the recession moves North into Canada, so too will operations in Canada."

But Mr. Clark said TD should remain in better shape than competitors.

He said it appears the market will take all of 2008 to work its way through the balance sheet and liquidity issues associated with the financial crisis.

"So while 2008 may shape up as the year of the financial services crisis, 2009 could also be challenging if there is an economic slowdown significant enough to hit the banking sector," he said. "And, since loan losses tend to be a lagging - not leading - indicator, we may not be out of the woods at the end of this year."

Mr. Clark said the banks that will weather 2009 best will be those that have better risk management practices.

And, while "we are at risk of having a pause in our growth rate...(I) believe we'll have a good 2009 because of the positive effects of the Commerce transaction."
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