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NEW YORK (Reuters) - Toronto-Dominion Bank (TD.TO) wants to take advantage of its relative stability amid the financial crisis by doing government-assisted deals in the United States, but it will not acquire risky assets, the Canadian bank's chief executive told Reuters on Wednesday.
Ed Clark said TD Bank, Canada's No. 2 bank and North America's No. 6 lender by market capitalization, is watching out for potential acquisitions from the Federal Deposit Insurance Corp's weekly list of failed U.S. banks, although it has yet to find an attractive opportunity.
"We are very clear with the regulator on what we're interested in and what we're not interested in," Clark said in an interview. "Our conservatism is famous to them ... We're not high-risk players, and that's why we're still standing."
The bank is not considering U.S. acquisitions without regulatory assistance because it is not clear how much further U.S. house prices will fall, Clark said.
"I won't take on asset risk at this point," he said, adding that talks with the FDIC have centered on "very small banks with niche deposit bases."
TD Bank, which bought U.S.-based Commerce Bancorp in 2007 for about $8.5 billion, earned a better-than-expected C$712 million ($556 million) in the first quarter, even as its U.S. peers unveiled deep losses.
The more conservative lending practices of Canadian banks have helped them avoid the problems plaguing large U.S. banks, many of which have been humbled by credit losses and forced to seek government bailouts.
Clark said the U.S. government is right to offer U.S. institutions "truly expensive capital," and predicted that Wells Fargo & Co (WFC.N), JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) would ultimately emerge as TD's chief U.S. rivals.
"Five years from now we are going to have three megaplayers that are well run, well capitalized ... so we have to be ready to take those on," the CEO said. "And I think they will be moving very clearly to imitate the Canadian model of a heavy cross-sale universal bank on the retail side."
Last year, Canada's banking system was ranked the world's soundest by the World Economic Forum.
<span style="font-weight: bold">BRANCH EXPANSION</span>
Since its Commerce takeover, TD Bank has integrated branches and now plans to add branches this year on the U.S. East Coast from New York to Florida, which is one of the states hardest hit by the severe housing slump.
Now is the right time to expand in Florida because "deposits haven't disappeared, and in fact now you're lending against pretty good dollars," Clark said, adding that increasing branches "is the safest way to grow."
The CEO said TD Bank, which owns a 45 percent stake in U.S. online broker TD Ameritrade Holding Corp (AMTD.O), is not anxious to make a full takeover bid for the second-biggest online broker.
TD Bank boosted its stake by 5 percent last month, while Ameritrade's second-biggest stakeholder, the family of Ameritrade founder Joe Ricketts, decreased its stake to 17 percent from 22 percent.
Closer to home, Clark said the first quarter likely represented the best quarter for the Canadian banking industry in general, although he noted that his bank's TD Securities unit could represent a positive earnings surprise.
TD Bank shares were up 1.6 percent at C$36 on the Toronto Stock Exchange in afternoon trade, in line with Canadian peers. The stock is off about 17 percent so far this year.
Clark, who holds a doctorate in economics from Harvard and previously worked for Merrill Lynch, last week reached agreement on an extension of his contract to 2013 as TD's head. "I'm a franchise player who frankly could do no acquisitions and be happy," he said on Wednesday.