TD’s retail bank dominating in the U.S.

The U.S. retail arm of Toronto-Dominion Bank is shining south of the border, outperforming its U.S. peers by a wide margin and offering more evidence of a sound operation in a shaky market.

Chiefly, TD Bank National Association is cultivating its loan portfolio at a faster pace than other U.S. commercial banks, and it's also outpacing the U.S. arm of BMO, BMO Harris Bank. TD is doing particularly well in car loans, with this unit up almost 10 per cent in the second quarter, according to new data released by the Federal Deposit Insurance Corporation. Overall, new loans were up 5.7 per cent in the second quarter, compared with just 1.1 per cent for the national average.

These figures only instill more confidence from analyst Peter Routledge at National Bank Financial, who pulled the numbers from the FDIC report. Seeing the growth, he strongly believes that TD will continue to be a reliable money maker south of the border, especially when the shaky conditions caused by the financial crisis start to improve.

BMO's U.S. operation, BMO Harris Bank, isn't faring as well as its Canadian rival, but that has a lot to do with the lingering runoff portfolios associated with its purchase of Marshall & Illsley, which is still diverting management's attention from its core growth areas. However, organic growth in units like commercial and industrial loans – as well as automobile loans – look promising, so investors shouldn't be too discouraged.

Despite these results, not everything is rosy. No matter how strong loan growth is, both TD and BMO are affected by weak interest rates, which have lowered spreads, as well as by the U.S. regulatory environment, which has affected things like fee revenue.