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Now that he’s next in line to become the bank’s chief executive officer, replacing the retiring Ed Clark, Bharat Masrani more than anyone else understands the ins and outs of TD’s key growth driver for the foreseeable future. Mr. Masrani is pictured here at the U.S. operation’s headquarters in Cherry Hill, N.J. on Thursday, Feb. 25, 2010.

RICH SCHULTZ/The Associated Press

"For the next generation of TD bankers, this is the growth engine."

Those were the words out of Bharat Masrani's mouth three years ago when he spoke about Toronto-Dominion Bank's fast-growing U.S. operation under his watch.

Now that he's next in line to become the bank's chief executive officer, replacing the retiring Ed Clark, Mr. Masrani more than anyone else understands the ins and outs of TD's key growth driver for the foreseeable future.

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Consider this: In 2008, TD's profit from its U.S. personal and commercial banking operation was $806-million. Last year, it hit $1.4-billion, growing roughly 75 per cent in just five years. Better yet, 2012's profit was the U.S. P&C division's highest ever, resulting in lots of congratulatory slaps on Mr. Masrani's back.

The Canadian operation has grown quickly, too, with profits jumping to $3.4-billion last year from $2.4-billion in 2008 – a rise of about 40 per cent. But keep in mind that Canada's already seen an extraordinary rise in consumer borrowing, and our economy made it through the Great Recession in relatively good shape.

Over the past year, Mr. Clark has made numerous comments about the expected slowdown in the Canadian personal and commercial division. He, and so many others, believe consumers can't really afford to take on more debt. The U.S. economy, however, is widely viewed as just starting its long recovery. Just look at the $17-billion annual profit from mortgage insurer Fannie Mae announced on Tuesday, proving that the country's critical housing market is swinging back to life.

This rebound is falling right in line with TD's long-term game plan – albeit probably a lot later than management hoped. When TD went all-in and bought Commerce Bancorp for $8.5-billion (U.S.) in 2008, after already buying Banknorth in two parts, ultimately valuing it $7.4-billion, executives pitched the deal as a long-term bet on the U.S. market.

And remember, in the past Mr. Clark has said that he saw a day where there would be 2,000 TD branches in the U.S. and 1,000 in Canada. (Right after the Commerce acquisition the two countries had roughly the same number. At the end of 2012 there are 1315 in the U.S. and 1168 in Canada.)

Plus, unlike Royal Bank of Canada, which recently said sayonara to its U.S. retail operation, TD keeps doubling down south of the border, tacking on small purchases in such states as Florida and South Carolina. Just a few years back TD was big on buying troubled banks that were about to fall into the U.S. government's hands, such as South Carolina's South Financial group, which it acquired for $192-million (U.S.) in 2009.

Almost all of this growth has come under Mr. Masrani's watch. He was installed as TD's U.S. head in 2006 and he's the guy who shouldered the Commerce acquisition. When he comes back to Canada, he'll understand the U.S. division's DNA better than anyone else here.

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Not only is that crucial because the division is expected to drive growth, but its return on equity is also still relatively weak, coming in at just 8.1 per cent in 2012. The Canadian P&C powerhouse, by contrast, posted a return on equity of 44 per cent.

To really make the major acquisitions from the last decade worthwhile, the U.S. division is going to need to start looking a little more like the stalwart Canadian operation.

(Tim Kiladze is a Globe and Mail Reporter.)

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