Signage for the TD Centre faces Bay Street in Toronto’s downtown core in 2014.Fred Lum/The Globe and Mail
Toronto-Dominion Bank is getting serious about cutting jobs.
One recently dismissed employee said the bank "took a while to get its feet wet" but is now "cutting, cutting, cutting." The cutting extends to some senior executives.
But the question remains: Why is TD slashing jobs when it is making record profit?
Reuters reported this week that TD has hired Boston Consulting Group to help it identify cuts that could affect several hundred employees. As BCG said in a 2011 report, it has conducted a benchmarking survey of 12 major financial institutions, giving it a better perspective on how banks can improve their productivity.
It noted, for example, that the top-performing banks can open a customer account in less than 20 minutes and make a decision on mortgages in less than an hour. The best banks also have a higher percentage of their employees in customer-facing sales and service roles.
But the report makes it clear that even the top banks can do better: "Most banks – even those in the premier league – can make significant improvements in operational performance," it said.
Apart from increasing its efficiencies, though, TD is also trying to adapt to a shift in the lending cycle. Canadians have increased their debt levels dramatically over the past 20 years as the cost of borrowing has fallen. But loan growth is now slowing as Canadians are more or less tapped out.
This slowdown can be seen in TD's personal and commercial banking revenue. In the first three quarters of 2015, revenue has risen just 3.6 per cent from the comparable period in 2014.
That's a marked deterioration in the sort of growth seen in previous years for personal and commercial banking. In 2014, revenue rose 7.6 per cent from the previous year. In 2012, it increased 12.6 per cent. And in 2006, it climbed 11.2 per cent.
In other words, double-digit revenue growth has shrunk to low single-digits.
TD is not alone here. On a bank-wide perspective, mortgages look like a key factor in the slowdown. According to the Bank of Canada, the number of residential mortgages has risen less than 2 per cent since January, compared with about double that growth in 2014 and double-digit gains in 2011.
Work forces that had been designed for strong growth are now being redesigned for a mature, slower-growth business.
Before the recent round of job cuts at TD, the bank had already cut 375 full-time staff from its Canadian personal and commercial banking in 2015, representing just over 1 per cent of its work force in the division. The bank's fourth-quarter results, due to be released on Dec. 3, will be closely watched to see if those numbers are moving noticeably higher.
David Berman