Canada's largest banks are currently sitting on tens of billions in excess capital, giving them elbow room for big moves
One of the Big Six banks has said that it remains “very open” to a major deal south of the border.
In an interview with Bloomberg, Toronto-Dominion Bank CEO Bharat Masrani said that the institution is still interested in a major acquisition, which TD is planning to add to its US retail operations.
“With respect to major mergers and acquisitions in the United States, we’re very open,” Masrani said. “If we can find some opportunity that fits all our criteria, we will look at it very seriously, and our capital gives us that flexibility.”
TD is currently sitting on approximately $12 billion in excess capital. This is far above what the bank needs to maintain “the 11% common equity tier 1 ratio that banks typically target,” a Bloomberg analysis stated. “That gives Toronto-Dominion the financial capacity for a significant acquisition.”
Masrani added that TD weathered the COVID-19 collapses relatively well considering that it had no exposure to now-beleaguered hedge funds such as Archegos Capital Management.
“We pride ourselves in saying that we don’t make bad loans during the good times in order to be able to make good loans during bad times,” Masrani said. “That’s an important attribute within the bank.”
The bank reported sustained strength amid the pandemic, posting earnings of $3.3 billion and adjusted earnings of $3.4 billion for the fiscal first quarter. Both figures represented annual increases of 10%, a robustness that Masrani attributed to TD’s diversified business model.
“Throughout the quarter, we made important investments to deepen customer relationships across our businesses, including through enhanced digital capabilities and advice programs to meet the rapidly changing needs of those we serve,” Masrani said in late February.
