TD all but shuts door on U.S. retail acquisition

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Ed Clark is sick of answering questions about the chances of a U.S. acquisition.

Whenever a bank on the U.S. east coast puts itself up for sale, Toronto-Dominion Bank is often rumoured to be hovering – regardless of how real its interest is or isn't. The latest speculation: that TD is interested in Citizens Financial Group, Royal Bank of Scotland's U.S. retail arm.

For the past few months TD's chief executive officer tried to make it clear that a Citizens deal wasn't likely. The problem is that he always left open a little window of possibility. Reporters love to exploit little cracks like that.

To stop the questions, Mr. Clark finally gave a rather unequivocal answer when asked about the prospects of a U.S. deal Tuesday. His team has surveyed the landscape, he said at RBC's Canadian bank conference, and their analysis makes one thing clear: "Don't make acquisitions right now in the U.S."

The first reason: assets are expensive. As RBS ponders what to do about Citizens Bank, it has sold off 94 Midwest branches to U.S. Bancorp for $315-million. Richard Davis, the buyer's CEO, "is a fantastic banker, he's a very smart guy, but that's a pretty high price to pay for the branches, and it is not obvious to us, certainly in our marketplace, that we would do that," Mr. Clark said.

Then there's the issue of management. "We've got new people down in the United States," Mr. Clark said. Bharat Masrani, the bank's incoming CEO, used to head the U.S. arm, but came back to Canada to ease the management transition. Mike Pedersen, TD's former head of wealth and insurance, took his place in the United States, but he and his team are just getting up to speed.

That doesn't mean TD can't do U.S. deals, but it certainly "leans against" the prospects. "And if you listen to what Mike has been [saying] in the United States… the acquisition word is not in our rhetoric," Mr. Clark said.

So stop the questions. TD's more than content.