Soon after Ed Clark took over as CEO of Toronto-Dominion Bank, he began asking his colleagues at the Toronto headquarters who the smartest executive inside the bank was.
The answer was surprising: Bharat Masrani, a quiet, understated former loans officer who toiled 5,500 kilometres away in Manchester, running TD’s discount brokerage division in the United Kingdom.
So on Mr. Clark's next trip to Britain, he met with Mr. Masrani on a two-hour train ride from London to Manchester, and discussed over breakfast his aspirations for the job.
On Tuesday, those corporate aspirations reached their zenith, as Mr. Clark unveiled Mr. Masrani, 56, as the next chief executive officer of Canada’s second-largest bank.
The Ugandan-born banker will take over on Nov. 1, 2014, after a transitional stint as chief operating officer. It is a significant moment in the Canadian banking world, making Mr. Masrani, who is of South Asian descent, the first visible minority to ascend to the corner office of a major Canadian bank, in a business that is often criticized for the homogeneity of its senior ranks.
It is at once a dream job and a massive challenge for Mr. Masrani, who has steered TD's bold and largely successful U.S. expansion for the past seven years, and was previously a steady hand behind its lending operations as the bank’s chief risk officer.
“I’ve had the good fortune of working probably in every part of the bank over many years. Some might say that I couldn’t keep a job,” Mr. Masrani said in an interview Tuesday. “But I’m going to believe that I got moved around because the bank thought I was doing a reasonable job.”
In fact, Mr. Clark, 67, said it was Mr. Masrani’s performance in key roles at the bank, particularly as TD launched its U.S. push, that the incoming CEO distinguished himself.
Mr. Masrani, known as a calm, deliberate thinker who doesn’t like to take big risks, said he was honoured to be named CEO, and particularly to represent a movement toward greater diversity in the sector from when he began at TD 26 years ago.
“To be honest I don’t personally look at it from that lens,” he said. “But if my future role inspires individuals to seek out leadership positions, or motivate organizations to commit to creating a more diverse and inclusive environment, I feel great about that.”
The incoming CEO arrives with big shoes to fill. Mr. Clark acknowledges that he rode a boom time in banking for much of the past decade, turning in unprecedented growth rates during his era at TD. In an interview Wednesday, Mr. Clark said the landscape of the industry, from stubbornly low interest rates to tougher regulations, is creating new challenges for the next wave of top executives.
“They were unusually good circumstances,” Mr. Clark said of his tenure, during which earnings per share grew an average of 13 per cent a year. “The leaders that take over from this group of leaders is facing a more difficult environment than I faced. So in judging their performance, you look at it relative to the environment they got.”
Mr. Clark intends to stay on as a director until the bank’s annual meeting in 2015. The two men will share offices next to each other at TD’s Toronto headquarters, and Mr. Clark said he intends to assist his successor in the transition, while also trying not to get in the way.
Mr. Clark’s time as CEO will undoubtedly be remembered for TD’s swift move into the U.S. market, creating a North American financial institution. A series of large bets, including the 2007 purchase of New Jersey-based Commerce Bancorp for more than $8-billion, turned TD into one of the 10 largest U.S. banks, with branches stretching down the east coast to Florida. TD has about 1,300 branches in the U.S., compared to about 1,100 in Canada.
At the same time, TD reached new heights in Canada over the past two years, at one point briefly passing Royal Bank of Canada, as the most valuable company in the country by market capitalization.
Mr. Masrani, who moved to the U.K. as a child before arriving in Canada in the mid-1970s to attend York University, said his focus as CEO will be to continue the bank’s evolution. “Ten years from now I expect the bank to be much larger than what it is today. … but I don’t expect any major change in what we stand for.”
TD announced several executive changes that will take place in the next few months. On July 1, Mike Pedersen, who runs the wealth management division, will take over Mr. Masrani’s role as head of the U.S. banking operations, based in Cherry Hill, N.J. Tim Hockey, the head of Canadian banking, auto finance and credit cards, will add TD’s wealth management business to his responsibilities in July, the bank said. Both men had been considered possible candidates for the top job.
Mr. Clark’s retirement is part of a shift expected to sweep through the Canadian banking sector in the next few years. In October, Bank of Nova Scotia named long-time executive Brian Porter its president, setting the stage for him to eventually take over from CEO Rick Waugh. Gordon Nixon, head of Royal Bank of Canada, is now the longest-serving bank CEO. Mr. Nixon has served about 12 years in the role, and was named to the job at RBC in 2001, a little more than a year before Mr. Clark took over at TD.
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