TD Banknorth Inc. chief executive officer Bill Ryan is “borrowing” a senior official from parent Toronto-Dominion Bank so he can concentrate on making acquisitions in the northeastern United States.
Bharat Masrani, currently vice-chairman and chief risk officer for Toronto-based TD, will head to Portland, Me., this fall to become president of TD Banknorth, where he already serves as a director. He is being parachuted into an operations role and will assume day-to-day responsibilities for the bank's retail, commercial, investment and insurance businesses.
Mr. Ryan, whose penchant for deal making over the past 15 years has transformed Banknorth from a bit player in New England into a leading regional bank, will now focus on what he does best: hunting for deals that will allow TD to further its cross-border push.
One of the things TD stressed when it bought control of Banknorth for $5-billion was the quality of that bank's management team. Nevertheless, there did not appear to be any successors within the bank who could slide into the president's role and run the operations.
“I think Bill is saying ‘I could try to do two things at one time, but I don't think that's smart,' ” explained Ed Clark, TD's CEO. “The debate is, if there isn't a natural person to fill that job right now in Banknorth, does he go outside, or does he essentially borrow an executive from us? And he said, ‘Why don't I borrow that which I've seen and liked . . . and maybe over the next three or four years develop someone inside.”
They debated this point for some time. TD has repeatedly talked about the need for strong local management in the U.S. market, and Mr. Clark conceded there would have been a “big attraction” in hiring an official from a competing U.S. bank to fill the void. At the same time, he said, it may have stunted succession plans at TD Banknorth: Mr. Masrani is expected to return to Canada at some point, which will give him time to groom the next president of the bank.
“From our point of view, it means we take one of our top executives and say you have already been there, done that,” said Mr. Clark. “And as these operations get bigger and bigger as a share of our earnings, having executives at TD Canada that have been in the U.S. becomes a huge asset.”
Mr. Masrani, 50, has had a varied career at TD. He headed corporate banking in Canada, established an operation in India, and ran the bank's British discount brokerage subsidiary.
However, he is heading south amidst a difficult climate for smaller U.S. banks. The flattening yield curve has squeezed the spreads these lenders depend upon to generate their profit. That, along with fierce pricing competition, has hurt TD Banknorth's bottom line and made it less of an immediate contributor to TD than many investors had hoped.
The less-than-ideal conditions only exacerbated the need to provide Mr. Ryan with additional support, Mr. Clark said, especially if he wants to continue expanding the bank.
“I think it is fair to say that the operating challenges for Banknorth are definitely more elevated now, given both the environment they're operating in, and the speed with which we're transforming it,” he said. “This job is getting bigger and bigger as we grow the bank.”
