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TD CEO defends sales practices, denies any ‘widespread problem’

TD Bank Group president and CEO Bharat Masrani speaks during the bank's annual meeting of shareholders in Toronto, Ontario, March 30, 2017.


Toronto-Dominion Bank's chief executive officer sought to reassure investors that the bank does not have "a widespread problem" with aggressive sales practices, even as the bank enlists outside advice to help steer an ongoing internal review.

Bharat Masrani led his speech to shareholders at the company's annual meeting with a defence of TD's sales culture, saying allegations of improper or high-pressure sales tactics made in recent media reports "go against the very fibre of our culture." Hardly any shareholders attending the meeting raised the issue.

He told reporters that "of course it concerns me" that a small subset of unnamed employees voiced complaints about their experiences in the bank's front-line branches and call centres. But he also stressed repeatedly that out of 100 million customer interactions with tens of thousands of employees last year, the bank logged fewer than 100 escalated complaints about compliance issues, and "all of them were investigated and addressed."

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For weeks, TD has been under intense scrutiny, perhaps more so than its Canadian peers, over allegations of questionable sales tactics that some staff claim to have used under pressure to meet sales goals. But since November, the bank has been looking more closely at its own sales culture after U.S. regulators slapped American bank Wells Fargo & Co. with hefty fines for creating up to two million unauthorized accounts.

"I don't believe we have a widespread problem, but any one problem is one too many, so we will look at that," Mr. Masrani, who has been TD's CEO since 2014, told a group of journalists.

He declined to name a professional services firm advising TD's board on its continuing review, which he expects will be finished "over a reasonable period of time" – almost certainly less than six months from now.

Concerns about sales tactics at Canadian banks, which entered the spotlight after reporting by the Canadian Broadcasting Corp., have dented TD's share price. The bank's stock plunged 5.6 per cent in a single day on March 10, and the broader S&P/TSX Banks Index then fell nearly 3 per cent, before rebounding over the past week.

Mr. Masrani said it would be "premature" to change the incentive structures for TD employees, despite the concerns that have been raised. "We are very comfortable with how we incent people and how we manage this business," he said.

Any bank would be loath to ease back from its sales goals given that retail banking accounts for the largest share of profits at Canada's largest banks, all of which are already contending with slow economic growth at home, as consumers have piled on debt.

As to whether the extra attention on banks' sales tactics could hurt growth in TD's personal and commercial banking arm, Mr. Masrani said: "It's hard to predict exactly what happens tomorrow, a month from now, three months from now. We have a fantastic franchise."

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Where bank branches are concerned, the franchise is changing fast, however. Routine transactions are steadily moving online – 80 per cent or more at some big banks – and branches are being overhauled to focus on giving advice. As a result, tellers are being retrained and asked to meet challenging sales goals.

In 2012, TD hiked compensation for front-line customer service staff as it added to their responsibilities. They are judged on three key factors – individual behaviour, team or branch performance and customer feedback – and each teller gets coaching every week.

Mr. Masrani said the bank also regularly collects anonymous surveys from rank-and-file staff, "and we make sure that if there are any concerns within our employee base that we assess them very seriously."

On Thursday, TD shares nudged 9 cents higher in trading on the Toronto Stock Exchange, to $66.22 per share – the same price at which they ended 2016.

"I think the bank, as you would expect in a situation like this, will endure," Mr. Masrani said.

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