TD Bank, the fourth-largest retail bank in Massachusetts, isn't planning any major acquisitions or spreading beyond its East Coast footprint, but it still has plenty of room to grow, Mike Pedersen, the bank's chief executive said in a recent interview.
Pedersen, named chief executive about six months ago, said TD Bank expects to grow by expanding its home financing, credit card, and wealth management businesses. The bank, owned by the Canadian financial services giant Toronto-Dominion Bank, is the 10th largest in the United States.
"We're a bank that has lots of opportunities to grow, " said Pedersen. "We have more than enough to do in our current footprint."
TD Bank entered the US market in 2004 with the purchase of Portland, Maine-based Banknorth, and has steadily expanded south to Florida. It operates 1,300 US branches — more than it does in Canada. Next year, TD Bank will open another 34 offices, including one in Boston, Pedersen said.
Following the acquisition of Commerce Bank of New Jersey in 2008, TD Bank maintained two headquarters, in Portland and Cherry Hill, N.J. It quietly dropped the Portland headquarters and consolidated in Cherry Hill this past summer.
TD Bank has been buffered from some of the problems that hobbled competitors and forced them to shrink since the recent recession. It had limited exposure in investments in complex mortgage-backed securities, which soured during the housing bust and helped spark the financial crisis. It also avoided subprime lending to risky home buyers. Canadian banks in general came through the financial meltdown less damaged in part because of stricter industry regulations.
TD Bank's financial stability and size are among the reasons it has often been mentioned as a potential buyer for Citizens Bank, based in Providence, with 1,400 branches across 12 states.
Pedersen declined to comment on Citizens specifically, but said, "We are not focused on large acquisitions at all." Citizens' parent, the Royal Bank of Scotland, recently said it would start selling its US subsidiary through public stock offerings next year.
Pedersen said the bank will focus on selling more services to existing customers. For example, only 3 percent of its depositors have mortgages with TD Bank. The bank has been hiring more mortgage loan officers.
And while the parent bank's leadership continues to see opportunities in the United States, it is also trying to ensure that its venture south is worth the billions in investment. Toronto-Dominion's return on equity — a common yardstick of an institution's profitability — is lower for its US bank than for other units of the Canadian company. And even among some of its US peers, TD Bank underperforms on return on equity, according to its financial filings.
Pedersen said profits have not grown as quickly because of the investment TD Bank has made to build new branches. The new branches are smaller than bank offices in the past to meet the changing habits of customers, who are handling many of their transactions online or over mobile phones. But the brick-and-mortar locations are still crucial, Pedersen said.
"We're building the franchise," he said. And branches "play a vital role in acquiring customers."