The Toronto-Dominion Bank History

Company Perspectives:

They say that organizations are more than the sum of their parts, and that's certainly true for TD. We are a personal and commercial bank, a wholesale bank, a self-directed brokerage and an asset manager advisor and distributor. But we're also much more. We are a team of over 51,000 people with a shared goal: to be the best Canadian-based financial institution in North America.

Key Dates:

1855:

The Bank of Toronto is chartered.

1869:

The Dominion Bank is chartered.

1955:

Bank of Toronto and Dominion Bank merge to form The Toronto-Dominion Bank, with 450 branches and assets of $1.1 billion.

1984:

Bank enters the discount brokerage business by establishing Green Line Investor Services.

1987:

Canadian regulators begin allowing chartered banks to own securities firms, leading TD Bank to establish an investment bank called TD Securities Inc.

1996:

U.S. discount broker Waterhouse Investor Services, Inc. is acquired.

1998:

TD Bank's proposed merger with Canadian Imperial Bank of Commerce is blocked by the Canadian government.

2000:

The bank acquires CT Financial Services Inc. (Canada Trust) for C$8 billion.

Company History:

The Toronto-Dominion Bank (commonly called TD Bank) ranks as Canada's second largest bank in terms of assets, trailing only RBC Financial Group. The bank's operations are divided into four main businesses. TD Canada Trust consists of the retail banking operations that serve about ten million individual, small business, and commercial customers in Canada. A full range of financial services are offered through about 1,000 branches and more than 2,700 automated teller machines. TD Securities is the wholesale banking arm, serving corporate, government, and institutional clients and focusing on five main areas: investment banking, debt capital markets, institutional equities, private equity, and foreign exchange. TD Waterhouse offers discount and online brokerage services to individuals interested in self-directed investing; it serves customers in the United States, Canada, the United Kingdom, Australia, Japan, Luxembourg, Hong Kong, and India. TD Wealth Management offers asset management and financial planning services as well as a full-service brokerage; it serves individuals as well as pension funds, corporations, institutions, endowments, and foundations. TD Bank and its subsidiaries are collectively referred to as TD Bank Financial Group.

Toronto-Dominion Bank's hyphenated name suggests its origins: the amalgamation of the Bank of Toronto and of the Dominion Bank. The Bank of Toronto missed celebrating its centennial by six weeks when the new bank's charter was signed on February 1, 1955.

Development of the Predecessor Banks

Founded by flour producers who wanted their own banking facilities, the Bank of Toronto was originally chartered on March 18, 1855. The Millers' Association of Canada West, as Ontario was then known, coordinated its preliminary affairs, and on July 8, 1856, the bank opened its doors to the public.

From its initial service to wheat farmers, millers, and merchants, the Bank of Toronto quickly expanded to the lumber industry and to other agricultural interests, mirroring the expansion of business activities on Canada's frontier as pioneers pushed west. In addition to this expansion, railroad booms both in England and in the United States increased the demand for flour and timber. Unfortunately, both booms collapsed at the same time, sharply curtailing the Canadian economy and with it, the westward growth of railroads and towns. Entire communities that had borrowed heavily to finance the building of rail service to their areas went bankrupt.

Although geographically in the middle of this national crisis, the Bank of Toronto was not as imperiled as many other businesses that had invested in the promise of the railroads because it had been established too late to provide much of the financing to the industry. Nor was it directly affected by the radical swings in real estate prices, dependent on the coming of the railroad, because its first officers did not believe in investing in an asset that fluctuated in value. While the business of the bank did contract, wheat was still grown, milled, and shipped.

The Canadian economy rebounded when markets in the United States reopened after the American Civil War in 1865. Fledgling businesses in leather, tanning, and liquor distillation sprang up, but the harvest still formed the backbone of business for native Ontario banks. A good year brought prosperity and a bad one meant hardship.

The Bank of Toronto was not without competition. The Bank of Montreal, older and larger, attempted to have the new bank's status limited to that of a community bank with no authority to establish branches. This debate was settled by Lord Durham's Report of 1850, which established branch banking as the national structure for the industry and guaranteed that successful banks could compete within their provinces and beyond, giving all institutions the opportunity to establish national identities.

The volume of business in Ontario in general and in Toronto specifically encouraged a group of professional men to seek a charter and to found the Dominion Bank, which was chartered in 1869 and opened for business on February 1, 1871. The Toronto-Dominion Bank was foreshadowed from the start: stock subscriptions for the Dominion Bank were deposited in the Bank of Toronto. Although originally incorporated to facilitate and promote agricultural and commercial growth, the Dominion Bank stressed the commercial end of banking, investing heavily in railway and construction ventures as well as in the needle trade in Ontario and Montreal.

Over the next several decades, through a series of booms and busts, Canada's economy grew and new industries were established: dairying, textiles, pulpwood, mining, and petroleum. Both the Bank of Toronto and the Dominion Bank responded to the opening of the prairies with a pioneering spirit. Many a new office shared the counter of a town's single general store, while a one-man staff slept with deposits beneath his mattress and a revolver under his pillow.

The outbreak of World War I brought great demand for Canada's natural resources. Within a year the country had erased its trade deficit and become a creditor nation. A few brief years of prosperity followed Germany's surrender in 1918, but the depression and panic preceding World War II appeared at the Dominion Bank on October 23, 1923. Sometime that Friday morning a foreign customer presented a check that was uncashable because of insufficient funds in the account. The teller attempted to overcome the customer's lack of fluency by raising his voice. "No money in the bank," he said. Those five words began a run that lasted until Tuesday afternoon, when rational voices finally overruled rumors.

Hastily established branches were another symptom of the shaky ground on which growth was built. For example, when three banks, one of them the Bank of Toronto, decided simultaneously to open an office at Cold Lake, Manitoba, the Bank of Toronto's officer rushed to be the first--with the help of Western Canada Airways. Although undocumented, he claimed it was the first bank in the world to open with the help of aviation.

The impact of the 1929 stock market crash in New York was compounded in Canada by the beginning of a seven-year drought. Foreign trade decreased, inventories accumulated, and factories closed. Both banks compensated by closing unprofitable branches, writing off bad debts, and reducing assets. Public criticism abounded. Partly as a response to the outcry but also as an attempt to coordinate the industry, the Bank of Canada was founded in 1934 to issue currency, set interest rates, and formulate national monetary policy. During World War II, the Foreign Exchange Control Board had issued regulations for all foreign transactions. Both banks worked under these restrictions and cooperated with the Bank of Canada to raise $12.5 billion from Canadian citizens to finance the war effort. In another major contribution, 707 employees of the Dominion Bank and more than 500 of the Bank of Toronto, approximately half of each staff, served with the Canadian forces while their jobs were held for them.

Creation of TD Bank in the Mid-1950s

By 1954, both the Bank of Toronto and the Dominion Bank occupied a special position among the nine major banks in Canada. Each had achieved national prominence through its own efforts rather than through merger or acquisition. Each bank, however, realized that to retain its position, it needed to improve its capital base. Only a merger would support the size of industrial loans, which had grown from thousands to millions of dollars. The Minister of Finance approved the merger on November 1, 1954, and it was enacted on the following February 1, the first amalgamation of chartered banks since 1908 and only the third in the nation's history.

On opening day, The Toronto-Dominion Bank operated 450 branches, including offices in New York and London. It controlled assets of $1.1 billion and a loan portfolio of $479 million. During its first 15 years the new bank devoted a great deal of effort to establishing a unified image. In 1967, it moved into the 56-story Toronto-Dominion Bank Tower of Toronto-Dominion Centre. During the 1970s, the bank began to expand internationally--within three years it opened branches in such diverse locations as Bangkok, Frankfurt, and Beirut. During the mid-1970s, Toronto-Dominion issued the $65 million offering for the Toronto Eaton Centre, a 15-acre urban redevelopment project in downtown Toronto.

Toronto-Dominion prospered during the late 1970s and 1980s under the leadership of Richard Murray Thomson, who became chairman in 1976. By the late 1980s the bank was consistently outperforming its rivals both in return on assets and in stock performance, and was one of only two non-regional banks in North America to enjoy an AAA credit rating. Thomson was independent enough during the 1980s to refuse the government's request to provide free services to retail depositors, and to have led the opposition against the bailout of two regional banks in Alberta. On the other hand, he willingly stopped the flow of money to Canadian firms for the purchase of foreign oil companies because it was causing a run on the already weak dollar in 1981. During the 1980s, in fact, Thomson and Toronto-Dominion were credited with two major successes: reducing problems related to third world debt and helping to finance the largest merger in Canadian history.

Indeed, developing countries offered a financial frontier for large banks during the 1960s and 1970s. By 1987, though, Brazil's debt alone totaled $90.4 billion. Of that amount, Brazil owed $7.1 billion to Canadian creditors, including $836 million to Toronto-Dominion. In February 1987, Brazil suspended payment on the entire debt. After months of negotiation, a settlement was reached in which several Canadian banks, including Toronto-Dominion, agreed to assist Brazil with a $2 billion interest payment to the United States by loaning the country an additional $6 billion. This action protected the U.S. banks from classifying Brazil's loans of $37 billion as uncollectible and preempted a banking crisis in that country. Internally, Toronto-Dominion reclassified most of its Brazilian loans as non-accruing in the second quarter of 1987. Thomson reduced the risk from all third world debt further by selling off $411 million in loans for 66 cents on the dollar.

The other major liability resolved under Thomson's guidance involved a merger between Dome Petroleum and Conoco, Inc. Problems began in 1981 when Dome purchased Conoco for US$1.7 billion. As oil prices fell, Dome attempted to restructure its debt, but succeeded only in prolonging the inevitable. By early 1987, Dome was entertaining buyout discussions with several different companies. Amoco Canada Petroleum emerged as the early leader among the bidders and signed an agreement with Dome in April. It took eight months and an additional $400 million for Dome's creditors to approve the largest buyout in Canadian history. The final $5.5 billion offer provided 95.4 cents on the dollar to each secured creditor.

A key development in the Canadian banking sector in the late 1980s was the enactment of deregulatory legislation in 1987 that enabled chartered banks to own securities firms. Many of the top Canadian banks moved quickly to acquire investment banks, but TD Bank took a different approach. It established its own investment bank, TD Securities Inc., and built it up from scratch.

Expanding and Diversifying in the 1990s

Toronto-Dominion continued to prosper in the late 1980s and to expand into new businesses and regions. Some analysts criticized the bank's performance during that period, implying that it was failing to take advantage of real estate industry gains. Fortunately, though, Toronto-Dominion stayed the conservative course. The real estate market crashed, bringing many banks along with it. Toronto-Dominion suffered during the downturn, which lingered throughout the early 1990s. But it continued to post profits, increase its asset base, and enter new service businesses. After bottoming out in 1992 at about $6.14 billion, the bank's sales jumped to about $7 billion in 1994 as net income recovered to about $640 million. Meanwhile, Toronto-Dominion's asset base swelled past $100 billion early in 1995 from just $67 billion in 1990.

Toronto-Dominion's gains following the banking industry downturn of the early 1990s reflected its healthy future prospects. Besides building its traditional banking operations, the organization was aggressively chasing new markets in an effort to keep pace with changing technology and to compete against new competitors in the financial services arena. To that end, Toronto-Dominion was among the first Canadian banks to offer mutual funds. By 1995 the bank was offering nearly 50 different funds. Toronto-Dominion was also boosting its investments in electronic and home banking services, trust administration, retail brokerage, and credit card services. Importantly, Toronto-Dominion was permitted by the federal government to enter the property and casualty insurance business beginning in 1995. In the first month following the announcement the bank received 40,000 inquiries and 1,000 new customers.

Also in 1995 A. Charles Baillie was named president of Toronto-Dominion, having moved up through the ranks of TD Bank's investment banking operations. He succeeded Thomson as CEO in February 1997 and then as chairman one year later. Baillie (whose grandfather had been an executive with Dominion Bank) led Toronto-Dominion through a dizzying series of acquisitions from the mid-1990s through the early 2000s that transformed the bank into a well-diversified financial services powerhouse whose assets had tripled from 1994 (C$99.76 billion) to 2002 (C$300.7 billion).

During the mid-1990s it was the bank's discount brokerage operations that were the object of the bulk of the expansion activities. TD Bank had first entered the sector in 1984 by establishing Green Line Investor Services, which quickly became the dominant discount broker in Canada and by 1996 held about 70 percent of the Canadian market. Running out of room to expand Green Line in its home market, Toronto-Dominion completed a series of acquisitions to create an international discount brokerage operation. In October 1996 TD Bank acquired New York-based Waterhouse Investor Services, Inc., the number four discount broker in the United States, for C$714 million (US$525 million). As part of the conditions of the cash-and-stock deal for the publicly traded Waterhouse, Toronto-Dominion's stock began trading on the New York Stock Exchange. During 1997 Toronto-Dominion added two Australian discount brokers to the fold, Pont Securities Ltd. and Rivkin Croll Smith, thereby gaining 50 percent of that market. Then in October 1997 the bank spent C$214 million to acquire Kennedy, Cabot & Co., a closely held discount broker based in Beverly Hills, California. In March 1998 another California discount broker, Jack White & Co., which was headquartered in San Diego, was acquired for US$100 million. TD Bank also established a discount brokerage in London, England, in 1997 and was using an operation that had been established in Hong Kong as a beachhead for further expansion in Asia.

Toronto-Dominion entered 1998 as the smallest of Canada's "Big Five" banks, with assets of C$163.85 billion. Despite a wave of megamergers in the North American banking and financial services sector, including the proposed merger of Royal Bank of Canada (RBC) and Bank of Montreal, two of the top five Canadian banks, it appeared that TD Bank was content to go it alone. But in April 1998 the bank agreed to merge with the number two Canadian bank, Canadian Imperial Bank of Commerce (CIBC), to create what would have been the ninth-largest bank in North America. In December of that year, however, Finance Minister Paul Martin rejected both the proposed merger between TD Bank and CIBC and that of RBC and Bank of Montreal. Ignoring the banks' insistence that they needed to merge in order to compete in the increasingly globalized financial services market, Martin concluded that from the standpoint of Canadians the mergers would create two banks with too much power and would severely reduce competition.

During 1999 Toronto-Dominion combined its global discount brokerage operations, including Waterhouse and Green Line, under a new holding company called TD Waterhouse Group, Inc. and then sold an 11.2 percent stake in the new company to the public via an IPO on the New York Stock Exchange. The offering raised just over US$1 billion. In December 1999 Bank of Tokyo-Mitsubishi Ltd. and TD Waterhouse entered into an alliance to launch an online brokerage business for the Japanese market. By this time TD Waterhouse was the number two discount broker in the world and had also expanded into India.

Acquiring Canada Trust in 2000

Despite the scuttling of the proposed merger with CIBC, Toronto-Dominion appeared to be holding its own in the highly competitive global financial services marketplace. The bank reported net income of C$3.03 billion for the year ending in October 1999, the largest such figure on record by a Canadian bank. The profit figure was aided greatly by the funds raised through the TD Waterhouse IPO. TD Bank was also able to complete a major acquisition in early 2000--in fact, the largest financial services takeover in Canadian history--although it was not at the level of the earlier megamergers. In February 2000 Toronto-Dominion paid nearly C$8 billion in cash for CT Financial Services Inc., a Toronto-based financial services holding company operating under the name Canada Trust. CT Financial was a subsidiary of Imasco Limited, which was majority owned by British American Tobacco PLC (BAT), and TD Bank's purchase of Canada Trust was part of BAT's deal to acquire the shares in Imasco it did not already own. For Toronto-Dominion, the purchase of Canada Trust enabled it to jump to the number three position among Canadian banks in terms of total assets and made the newly named TD Canada Trust unit the leading retail banking operation in Canada. The deal added more than 400 branches to TD Bank's network of nearly 900 branches, although plans were in place to close as many as 275 branches postmerger as well as cut about 4,900 jobs nationwide. The merger was expected to reduce annual expenses by about C$450 million. The addition of Canada Trust also bolstered the TD Wealth Management unit with the addition of CT's mutual funds operations. One condition for securing regulatory approval was that CT's MasterCard credit portfolio had to be sold off (they were sold to Citibank Canada) because TD Bank was already an issuer of Visa credit cards.

As it worked to integrate Canada Trust into its operations in the early 2000s, Toronto-Dominion was also attempting to gain a larger presence in the U.S. retail banking market. One approach was stepping up the activities of a U.S. retail bank called TD Waterhouse Bank that had been inherited when Waterhouse was acquired (it had been known as Waterhouse National Bank). This online bank worked in conjunction with TD Waterhouse to sell banking services, such as credit cards, checking accounts, and wealth-management products, to the customers of the discount brokerage. By mid-2001 TD Waterhouse Bank had US$5.6 billion in federally insured deposits. In September 2001 Toronto-Dominion announced plans to begin offering banking services within U.S. units of discount retail giant Wal-Mart Stores, Inc., but U.S. regulators rejected the planned alliance because of concerns that Wal-Mart would be in control of the operation, a situation that would violate U.S. laws that bar commercial businesses from operating banking establishments.

During 2001 and 2002, TD Waterhouse was once again at the center of much of the bank's activities. In October 2001 TD Bank regained full control of TD Waterhouse by acquiring the 12 percent publicly traded stake for US$386 million. Later in 2001, TD Waterhouse acquired the British online brokerage DLJdirect Ltd. from Credit Suisse First Boston Corp. and also the Australian operations of archrival Charles Schwab Corporation. In July 2002 the U.K. operations of TD Waterhouse were further bolstered through the purchase of 50 percent of NatWest Stockbrokers, which had been wholly owned by the Royal Bank of Scotland Group plc. Meantime, in early 2002 Toronto-Dominion announced that it would begin to use the TD Waterhouse brand for all of its investment management businesses. As a result, the discount brokerage itself would be renamed TD Waterhouse Discount Brokerage, the bank's full-service brokerage, TD Evergreen, would be renamed TD Waterhouse Full Service Brokerage, and TD Financial Planning, part of TD Wealth Management, would become TD Waterhouse Financial Planning.

Toronto-Dominion Bank continued to be one of the most profitable Canadian banks in the early 21st century, and the bank reported net income of C$1.3 billion for fiscal 2001. Under Baillie's leadership, the bank had a well-diversified and growing array of financial services operations, highlighted by the newly bolstered TD Canada Trust retail banking unit and the rapidly expanding TD Waterhouse unit. By the turbulent economic times of 2002, however, the bank's future was becoming clouded by its exposure to losses from loans connected to Argentina, which was in a state of financial crisis, and to the battered telecommunications sector, in which the bank had made heavy investments. By the end of the third quarter of fiscal 2002 TD Bank had been forced to take one-time loan-loss provisions of C$2.1 billion.

Principal Subsidiaries: Meloche Monnex Inc.; Newcrest Holdings Inc.; TD Asset Management Inc.; TD Capital Group Limited; TD Capital Trust; TD Mortgage Corporation; TD Mortgage Investment Corporation; TD Nordique Inc.; TD Realty Limited; TD Securities Inc.; TD North American Limited Partnership (U.S.A.); TD Waterhouse Holdings, Inc. (U.S.A.); TD Waterhouse Group, Inc. (U.S.A.); Toronto Dominion Holdings (U.S.A.), Inc.; TD Haddington Services B.V. (Netherlands); Haddington Investments Ltd. (Cayman Islands; 70%); TD Ireland; Toronto Dominion Australia Limited; Toronto Dominion Jersey Holdings Limited; Toronto Dominion International Inc. (Barbados); Toronto Dominion Investments B.V. (Netherlands); Toronto Dominion (South East Asia) Limited (Singapore).

Principal Operating Units: TD Canada Trust; TD Waterhouse; TD Wealth Management; TD Securities.

Principal Competitors: RBC Financial Group; Canadian Imperial Bank of Commerce; The Bank of Nova Scotia; Bank of Montreal.

Further Reading:

• Blackwell, Richard, "TD Bank Licensed to Sell Home and Auto Insurance," Financial Post, February 8, 1995, Section 1, p. 3.
• ------, "TD, National Profits Higher," Financial Post, February 24, 1995, Section 1, p. 5.
• Cone, Edward F., "Do It My Way," Forbes, August 8, 1988, pp. 50+.
• Craig, Susanne, "Angry Bankers Face an Uncertain Future," Globe and Mail, December 15, 1998, p. A1.
• ------, "TD to Spin Off 10 Percent of Global Brokerage," Globe and Mail, April 1, 1999, p. B1.
• Dalglish, Brenda, "Opening the Bank," Maclean's, November 16, 1992, p. 54.
• DeCloet, Derek, "What's Big, Green, and User-Friendly?," Canadian Business, August 27, 1999, p. 40.
• Haliechuk, Rick, "TD Bank, National Bank Post Solid Profit Gains," Toronto Star, February 24, 1995, Section B, p. 4.
• Harris, Jonathan, "Single and Proud," Canadian Business, April 10, 1998, pp. 47+.
• Howlett, Karen, "TD Faces New Challenges with Canada Trust Merger," Globe and Mail, May 23, 2000, p. B1.
• ------, "TD Takes Provision on Telecom Exposure," Globe and Mail, July 19, 2002, p. B1.
• McFarland, Janet, "Baillie to Become TD President," Financial Post, September 23, 1994, Section 1, p. 7.
• ------, "TD Buys Canada Trust, Expects Martin's Approval," Globe and Mail, August 4, 1999, p. A1.
• McQueen, Rod, "Thomson Insists on Hand-Picking His Heir," Financial Post, September 24, 1994, Section 1, p. 4.
• Newman, Peter C., "The Biggest Threat to Canada's Future," Maclean's, March 8, 1999, p. 44.
• Noble, Kimberley, "Bitterness on Bay Street: Ottawa Hands the Banks a Resounding Defeat," Maclean's, December 28, 1998, pp. 70-73.
• ------, "How the Banks Blew It," Maclean's, December 7, 1998, pp. 26-30.
• Partridge, John, "TD Nails Deal with U.S. Broker," Globe and Mail, April 11, 1996, p. B1.
• ------, "TD Raises Loss Provisions: Cites Trouble in Argentina, Telecom Sector," Globe and Mail, February 6, 2002, p. B1.
• Schull, Joseph, 100 Years of Banking in Canada: A History of the Toronto-Dominion Bank, Toronto: Copp Clark, 1958, 222 p.
• Willoughby, Jack, "Prime Cuts," Barron's, June 21, 1999, p. 38.
• Wilson-Smith, Anthony, "The Challengers," Maclean's, April 27, 1998, pp. 40-44.

Source: International Directory of Company Histories, Vol. 49. St. James Press, 2003.