The Toronto-Dominion Bank, which is pursuing an aggressive expansion into the United States, said on Wednesday that the head of its American operation would become its chief executive late next year.
Bharat B. Masrani will take over the bank when William E. Clark retires as president and chief executive in November 2014. To smooth the transition, Mr. Masrani will return to the bank’s head office in Toronto and become chief operating officer on July 1.
Mr. Masrani emerges from what was widely seen from the outside as a competition between several executives of the bank who, like him, have spent most of their working lives at Toronto-Dominion or Canada Trust, which Toronto-Dominion acquired along with Mr. Clark in 2000.
“It was always our desire to appoint internally,†Mr. Clark said in an interview. “The people who work at TD love the business model. If you’ve got really strong executives the best method is to go with people internally who will continue to go with that business model.â€
While Canada’s banking system is overwhelmingly dominated by the country’s five largest banks, Mr. Clark concentrated his efforts on retail banking, a profitable segment that many banks had largely taken for granted. A former senior bureaucrat with the federal government who had also worked at Merrill Lynch, Mr. Clark introduced conveniences like longer hours at Canada Trust that, while common generally in retailing, were unknown in Canadian banking. Compensation throughout the bank also became tied to results from customer satisfaction surveys.
Mr. Clark then successfully transposed that template on Toronto-Dominion, making it the largest retail banker in Canada.
Toronto-Dominion also became an exception to Canadian banking with its successful foray into the United States, a move that has brought other Canadian banks more grief than growth. The conservative management style of Canadian banks, including Toronto-Dominion, and tighter regulations in Canada meant that they remained healthy financially during the crisis of 2008.
With its strong balance sheet, Toronto-Dominion took advantage of the weakness in the American financial system to bargain hunt. Among other things, it spent $8.6 billion to acquire Commerce Bancorp of New Jersey in 2008 and followed that with a $6.3 billion acquisition of Chrysler Financial in 2011.
Mr. Masrani, who was Toronto-Dominion’s chief risk officer before he went to the United States, said that turning around American operations was not as simple as just applying the methods used by Toronto-Dominion in its home market.
“The U.S. banking environment is to some extent different than the Canadian banking environment,†Mr. Masrani said, adding that it demanded numerous, if small, adjustments to the bank’s standard methods.
He said the American banks had also exported some new tricks to Canada, including Sunday branch openings and coin-counting machines in branches.
Mr. Masrani will be succeeded as head of Toronto-Dominion’s American operation, which is based in Cherry Hill, N.J., by Michael Pedersen, who currently runs the bank’s wealth management and insurance businesses.
Timothy D. Hockey, who manages Canadian banking and Toronto-Dominion’s credit card business, and Colleen M. Johnston, the chief financial officer, will gain additional responsibilities over the coming year. Both were seen as possible successors to Mr. Clark.
Mr. Clark said the bank’s emphasis on American expansion and Mr. Masrani’s appointment did not signal an end to its Canadian growth plan.
“It’s always a mistake in any business to ignore your home base,†he said, noting that Toronto-Dominion acquired the Canadian credit card operations of MBNA in 2011.
But he said that if Canada’s economy slowed as expected at the same time as the United States was rebounding, the growth of the bank’s American operations might outpace that of its home market units.
