TD’s Ed Clark takes off rose-coloured glasses – and sees uncertainty

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Canadian banks are churning out record profits. Global fears of a sudden economic shock are waning. But Toronto-Dominion Bank chief executive officer Ed Clark is feeling uneasy.

"I'm probably more uncertain now about where the world is economically than even a year ago," he said in an interview. The signals are conflicting.

The U.S. economic rebound is "incredibly positive," and once-troubled countries such as Britain and even Spain are becoming bright spots. However, most economies continue to struggle. China and other emerging markets are seeing slower growth.

Mr. Clark has a knack for speaking his mind, even when the message isn't very comforting. A year ago, he was one of the few voices publicly warning about revenue growth slowing at Canadian banks.

That trend is now in full force.

But his concerns today extend far beyond Canadian banks' bottom lines. They touch the core issues that he believes will be crucial to the Canadian economy for decades to come – and he worries Canadians, particularly policy makers, have gotten too cozy with the status quo.

"There were a lot of things that went in our favour" during the crisis, he said. The federal government went in with a budget surplus, China's massive stimulus program reinflated commodity prices and low interest rates sparked a housing boom. "But it doesn't mean we don't face the same headwinds" as many of our peers today, he said.

"I think we have these big societal dilemmas, and the worry is because we did so well, you haven't got people in the mood to say: 'Here's what we're going to have to do to tackle them,'" he said. Everything from health care costs to pensions are on his radar.

Mr. Clark compared the Canadian experience with countries such as Ireland or Spain. While these countries' economic shocks cut deep, they forced the governments to start making necessary reforms to things such as labour costs and the procurement of health care products.

The new world brings new economic realities, he said – something already seen in areas such as southern Ontario's manufacturing belt, where plants are closing as work is relocated to the United States or overseas where labour is cheaper. Mr. Clark does not believe in lowering the minimum wage, but the new dynamics create "a real dilemma for society," he said.

Canada is also no longer the star of the Western world. This week, Canadian Imperial Bank of Commerce predicted that the U.S. economy will grow at a faster clip in 2014.

Mr. Clark is not entirely doom and gloom. "It could be that the U.S. is so big and so powerful that it just gets traction and lifts the whole world up," he said. The Canadian dollar is also falling in value relative to the greenback, and that should help exports.

TD is also rather positive about the outlook for its own profits next year. While domestic personal loan growth will be harder to come by, the bank believes it can continue to grab market share from its rivals. TD invested heavily in commercial banking since the crisis, one of the few areas where loan growth is still hot, and the bank is betting big on credit cards in the hope of helping TD to earn more transaction fees as more clients pay with plastic.

TD also has an outsized exposure to the United States, given its retail bank south of the border. "Clearly having large U.S earnings in an economy that's going to be the best of the Western world economies is not a bad place to be," Mr. Clark said.