The man responsible for running the division on which Toronto-Dominion Bank has bet its future is retiring, a move that has shocked colleagues and sent Bay Street buzzing.
Mike Pedersen, who turns 56 in December and currently heads TD's U.S. personal and commercial banking arm, announced his retirement late Thursday, but he will stay with the bank until the summer of 2017 to help with the transition.
In a personal note to his friends and colleagues, Mr. Pedersen acknowledged that his decision "will perhaps be a surprise to some, but less so to others," adding that he is "saddened by the prospect of leaving" but also "looking forward to what lies ahead, which will certainly include more time with [his wife] Martha and our kids, as well as more time for my various passions, including the environment, music, wilderness trips in northern Canada, and so on."
In a memo to employees, TD chief executive officer Bharat Masrani noted that Mr. Pedersen "has informed me of his intention to retire," and also named Greg Braca, TD's head of corporate and specialty banking, as Mr. Pedersen's replacement.
Mr. Braca, an American who joined TD in 2002 and used to run retail and commercial banking in New York, starts as the U.S. arm's chief operating officer. He takes over the unit next June.
Mr. Pedersen's retirement caught many people by surprise. In conversations with TD employees and people on Bay Street, the most common refrain was one of shock.
In his youth, Mr. Pedersen was viewed as somewhat of a boy wonder, rising quickly under Holger Kluge at Canadian Imperial Bank of Commerce. After Mr. Kluge's infamous split with CIBC CEO John Hunkin, Mr. Pedersen worked for Matthew Barrett, who ran Barclays Bank in Britain. He joined TD in 2007.
The role Mr. Pedersen leaves behind is an important one for the bank. Although Canadian personal and commercial banking currently generates roughly 60 per cent of TD's total profit, the lender has spent almost $20-billion on retail banking acquisitions south of the border since 2004, in the hope that a solid U.S. franchise will deliver future growth.
Because the U.S. division is so important for the bottom line, its head is widely viewed as a potential contender to be the bank's next chief executive officer. Mr. Masrani, the current CEO, spent nearly a decade in the United States, starting in Maine and then moving to New Jersey after TD bought Commerce Bancorp for $8.5-billion (U.S.) in 2008.
For many years, TD's U.S. division struggled to deliver solid returns because the market south of the border is hypercompetitive and loan margins are thin. Lately, however, the unit has showed signs of progress. The bank's brand and offerings continue to catch on, a process that takes time, and the prospect of U.S. rate hikes improves lending margins.
Mr. Pedersen took control of the U.S. arm in 2013, shortly after Mr. Masrani was named the bank's next CEO, and he is leaving as TD shifts gears under its new leader. Mr. Masrani took over in November, 2014, and he largely spent his first year cutting costs and incurring t
Recent strategy changes have included emphasizing TD's wealth management business, expanding its capital markets division and building its footprint as a North American bank. On the last front, earlier this week, the lender teamed up with TD Ameritrade, the discount brokerage that TD jointly owns, for a $4-billion joint bid for discount brokerage Scottrade, which also has a banking arm.
Although Mr. Pedersen is leaving, close colleagues expect that he might have another act in him – but possibly in a different light, such as advising government.