Bharat Masrani, chief executive officer of Toronto-Dominion Bank, can rattle off a daunting list of challenges facing the banking sector in 2016: Commodity prices are in the dumps, loan growth is slowing, the Canadian economy is weak and the global economy outside the United States isn't performing much better.
"We've had a terrific macro environment over the past number of years," he said in an interview with The Globe and Mail. "But you can see now that those fundamental tailwinds are subsiding."
There are challenges elsewhere, too. Strong mortgage growth and rising home ownership rates are levelling off, forcing banks to get their expenses in line with slight revenue gains.
As well, new financial technology is pushing banks to redirect resources from traditional branch banking toward online and mobile banking.
"As our customer needs evolve, we will adapt," Mr. Masrani said.
Some of this adaptation has caused a stir.
This year, Mr. Masrani's first full year as CEO, he has been cutting substantial costs at TD and redirecting financial resources, even as profit at the bank rose above $8-billion in fiscal 2015.
TD cut its payroll by about 1,600 jobs, or 1.9 per cent of its work force, and reported total restructuring charges of $686-million – by far the biggest annual charge in the Canadian banking sector over the past decade.
Mr. Masrani believes these efforts are part of a repositioning of the bank that will help it navigate through the challenges and deliver ongoing profit growth.
But his plans go well beyond belt-tightening and involve ambitious goals for two areas where TD has been outshining its Canadian peers: U.S. retail banking and credit cards, where growth is strong and acquisitions are on the table.
TD's U.S. operations, which account for nearly one-third of the bank's profit and where branches now outnumber those in Canada, are clearly benefiting from the stronger U.S. economy. The U.S. dollar is at a decade high relative to the loonie, providing a favourable currency translation, and potential interest rate hikes by the Federal Reserve should drive interest income higher.
Mr. Masrani also believes TD's regional focus and relatively brief 10-year history in the United States will also drive organic growth.
This modest size implies the bank has not yet reached the limits of expansion as loans, deposits and customer accounts continue to rise – yet TD has enough heft to be viewed as a serious player in the market.
Mr. Masrani won't rule out acquisitions, either. "If there is an attractive opportunity that shows up, that would strategically fit within our framework, that makes financial sense, that is well within our risk parameters, that provides us with decent returns – of course we would look at it very seriously," he said.
He takes a similar approach to the credit card business, where recent deals with Target Corp. and Nordstrom Inc. have built TD into Canada's largest card issuer in terms of outstanding balances.
Those deals, Mr. Masrani said, fit with a strategy: The credit card businesses are great assets, but they also give TD an opportunity to sell cardholders additional financial services.
"I feel comfortable where we are," he added. "But that doesn't mean we won't look at new opportunities."
His competitors have similar ambitions, raising their vulnerabilities to a harsh economic decline, since credit card balances are seen as being more sensitive to the economy than, say, mortgages.
Mr. Masrani said TD will have its share of issues to deal with during a downturn, but he doesn't expect the bank will stand out among its peers.
"We are here for the long haul," he said. "We are not into what I call the subprime space of these businesses. We are very much into what I call the mainstream – and that's the brand we have."