425
Filed by The Toronto-Dominion Bank
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934
Subject Company: The South Financial Group, Inc.
Commission File No.: 0-15083
This filing, which includes communications made available to employees of The Toronto-Dominion
Bank and/or TD Bank, Americas Most Convenient Bank on May 31, 2010, may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995 and
comparable safe harbour provisions of applicable Canadian legislation, including, but not limited
to, statements relating to anticipated financial and operating results, the companies plans,
objectives, expectations and intentions, cost savings and other statements, including words such as
anticipate, believe, plan, estimate, expect, intend, will, should, may, and other
similar expressions. Such statements are based upon the current beliefs and expectations of our
management and involve a number of significant risks and uncertainties. Actual results may differ
materially from the results anticipated in these forward-looking statements. The following
factors, among others, could cause or contribute to such material differences: the ability to
obtain the approval of the transaction by The South Financial Group, Inc. shareholders; the ability
to realize the expected synergies resulting from the transaction in the amounts or in the timeframe
anticipated; the ability to integrate The South Financial Group, Inc.s businesses into those of
The Toronto-Dominion Bank in a timely and cost-efficient manner; and the ability to obtain
governmental approvals of the transaction or to satisfy other conditions to the transaction on the
proposed terms and timeframe. Additional factors that could cause The Toronto-Dominion Banks and
The South Financial Group, Inc.s results to differ materially from those described in the
forward-looking statements can be found in the 2009 Annual Report on Form 40-F for The
Toronto-Dominion Bank and the 2009 Annual Report on Form 10-K of The South Financial Group, Inc.
filed with the Securities and Exchange Commission and available at the Securities and Exchange
Commissions Internet site (http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial
Group, Inc. will be submitted to The South Financial Group, Inc.s shareholders for their
consideration. Shareholders are encouraged to read the proxy statement/prospectus regarding the
proposed transaction when it becomes available because it will contain important information.
Shareholders will be able to obtain a free copy of the proxy statement/prospectus, as well as other
filings containing information about The Toronto-Dominion Bank and The South Financial Group, Inc.,
without charge, at the SECs internet site (http://www.sec.gov). Copies of the proxy
statement/prospectus and the filings with the SEC that will be incorporated by reference in the
proxy statement/prospectus can also be obtained, when available, without charge, by directing a
request to The Toronto-Dominion Bank, 15th Floor, 66 Wellington Street West, Toronto, ON
M5K 1A2, Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc.,
Investor Relations, 104 South Main Street, Poinsett Plaza, 6th Floor, Greenville, South
Carolina 29601, 1-888-592-3001.
The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
executive officers and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding The Toronto-Dominion Banks
directors and executive officers is available in its Annual Report on Form 40-F for the year ended
October 31, 2009, which was filed with the Securities and Exchange Commission on December 03, 2009,
and in its notice of annual meeting and proxy circular for its 2010 annual meeting, which was filed
with the Securities and Exchange Commission on February 25, 2010. Information regarding The South
Financial Group, Inc.s directors and executive officers is available in The South Financial Group,
Inc.s proxy statement for its 2010 annual meeting, which was filed with the Securities and
Exchange Commission on April 07, 2010. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by security holdings or
otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be
filed with the SEC when they become available.
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF THE TORONTO-DOMINION BANK ON MAY 31, 2010
1. B20
brings business leaders together on eve of summit The Globe and
Mail
A delegation of Canadian business leaders will press their foreign counterparts to liberalize trade and abandon plans
for a global bank tax, just before the Prime Minister takes up the same challenge at the Group of 20 summit.
See full
story
2.
Toronto ATMs latest target of G8/G20 protests National Post
(online)
Police have arrested a Toronto man in connection with anti- G20 graffiti spray-painted on several downtown banks. TD
Canada Trust mentioned. Also appeared in The Vancouver Sun (online).
See full story
3.
Carney to take centre stage with
interest rate decision The Globe and Mail
Mark Carney forged a name for himself in the midst of a global crisis. Now, he faces another difficult series of
challenges in charting a new course for Canada and fending off
inflation without derailing the economy.
See full
story
4. Rate
decision, jobs figures, GDP report: a busy time National Post
There will be much to talk about concerning the economy in the coming week. As an opening act today, we get an overall
assessment of Canadas economic performance during the first three months of this year, when Statistics Canada releases
first-quarter gross domestic product figures. Eric Lascelles and
Millan Mulraine (TD Economics) quoted.
See full
story
5.
Banks banking on newcomers; Competition for immigrant clients is
fierce National Post
When Jagdeep Walia arrived in Canada last month, waiting for him was a chequing account and credit card at Bank of Nova
Scotia. And the bank offered him a safety-deposit box for one year, free of charge. Phil Bowman (SVP, Customer Strategy
and Marketing Planning, Marketing) quoted.
See full story
6.
VIDEO CLIP: CNBC Closing Bell CNBC
Insight on Toronto-Dominion Banks latest earnings, with Ed
Clark, TD Bank Financial Group CEO.
See link to video
7. What
does giant TD Banks entry to Wilmington mean for competition?
Star-News (Wilmington, NC)
TD Bank calls itself Americas most convenient bank, and it promises to arrive in Wilmington with a competitive
attitude. Fred Graziano (EVP and Head of Retail Banking, TD Bank)
quoted.
See full story
8. Saving money is always in
vogue National Post
Every spring, the change in the weather inspires many of us to shop for a new wardrobe. Whether that means adding the
seasons col-ours to your existing clothes or buying those must-have accessories, it is the time to step out in style.
But given the recent statistics on consumer debt, I am not certain that everyone can really afford to splurge. Written
by Patricia Lovett-Reid. Article appears in other Canwest publications, including The Gazette (Montreal) and The
Vancouver Sun.
See full story
9.
Making your assets pay The Province (Vancouver)
Youve listened to all the experts and opened up a tax-free savings account. Good for you. But thats not where it
ends. Patricia Lovett-Reid quoted.
See full story
10.
Bankers hurt as deals dry up; Disorderly Market
National Post
Investors arent the only ones on a roller-coaster ride through volatile markets these days. With the delay of a number
of initial public offerings, sharp declines for shares of newly public companies and a lack of liquidity in the credit
market, investment bankers looking to raise money for companies have
also been whipsawed by the turmoil.
See full story
11.
Mexico sides with Canada to oppose global bank tax The Globe and
Mail
As Canada takes its vociferous opposition to a global bank tax back to the world stage next week, it can count on NAFTA
partner Mexico as a staunch ally.
See full story
12. Spains troubled savings banks could spur new European crisis
The Globe and Mail
It took a priest in southern Spain to remind the world that the European banking industry might be on the verge of
another disaster. The Rev. Santiago Gomez Sierra, the chairman of CajaSur, a regional savings bank in Cordoba, began
his last board meeting last week with a prayer. Several directors performed the sign of the cross. No miracle happened.
Within hours CajaSur, controlled by the Roman Catholic Church, was
seized by the Bank of Spain.
See full story
13. Negotiating
risk; Five strategies to help investors cope with chronic market
volatility National Post
After two stock market crashes in a decade, and ongoing anxiety about sovereign debt in Europe, volatility has become a
chronic companion for serious investors. Those who cant stand the heat can always do what chartered accountant David
Trahair suggests in his book, Enough Bull, and make a permanent
retreat to GICs. TD Waterhouse mentioned.
See full story
14.
Different strategies for playing the Big Five The Globe and
Mail
What are we looking for? Beaten up bank stocks. Why? A sneaking suspicion that they may just be some of the best deals
out there. Number Cruncher has heard it said many times that you just cant go wrong buying Canadian bank stocks. And
whats not to like?
See full story
15. We
cant afford to live in health-care denial The Globe and
Mail
Sudden crises, such as hurricanes or the Greek debt crisis, produce fast reactions. Slowly worsening problems, however,
are often left to fester until they become a crisis, by which time remedial action is painful and sometimes too late.
TD Economics mentioned.
See full story
16.
Editorial: Wealthy, healthy and wise The Globe and Mail
No one seems able to figure out why Canadian productivity is growing so slowly. Whatever the reason, says the TD Bank
Financial Group, persuading more young people to go to postsecondary schools and insisting on better teaching wont
hurt. If you dont think higher education raises productivity, then try ignorance, the bank says in a report this
month on education. TD mentioned.
See full story
Looking
for TDs view on articles about the bank or the financial
industry? Visit TD News & Views for background on
some stories of the moment that may come up in your discussions with customers, colleagues and friends.
Vous cherchez des opinions et des articles de la TD au sujet du secteur bancaire ou financier? Visitez Nouvelles et
Opinions de la TD pour y trouver de linformation sur certains sujets dactualité qui peuvent être évoqués dans vos
discussions avec des clients, des collègues et des amis.
Full Stories
1. B20 brings business leaders together on eve of summit
The Globe and Mail
05/31/2010
TARA PERKINS
Pg. B1
A delegation of Canadian business leaders will press their foreign counterparts to liberalize trade and abandon plans
for a global bank tax, just before the Prime Minister takes up the same challenge at the Group of 20 summit.
In partnership with the government, the Canadian Council of Chief Executives (CCCE) is co-ordinating and hosting a G20
business summit dubbed the B20 that will begin on the eve of the June 26-27 leaders summit in Toronto.
Former finance minister and deputy prime minister John Manley, who is now chief executive officer of the CCCE, and
Perrin Beatty, head of the Canadian Chamber of Commerce, will be representing this country along with four Canadian
CEOs who have yet to be named, according to people familiar with the meeting.
Prime Minister Stephen Harper has written the other Group of 20 leaders to tell them about the B20, and Finance
Minister Jim Flaherty has asked each of his counterparts to send two top business leaders to the gathering.
The initiative speaks to the importance the G20 is placing on discussions about financial reform and the global
economy, and to politicians desire for the private sector to be involved in solutions to the big problems confronting
them.
The global CEOs will be available June 26 for questions from the G20 finance ministers, who are expected to tap them
for information on subjects ranging from hiring intentions and investment plans to potential consequences of European
financial instability.
The finance ministers will effectively be seeking the most current economic and industry data, in addition to advice.
And the advice will flow in both directions.
Its the next evolution of the summit of business leaders that the British government hosted at 10 Downing Street two
weeks before the G20 leaders met in London in the spring of 2009. At that smaller gathering, attended by Paul Desmarais
Jr. of Power Corp. and 20 of his global peers, the business leaders were made available to a number of British
government ministers. That meeting sought to give the global business community a voice at the G20 but it was
channelled through the British prime minister.
It is important for the business community to contribute when asked as we strive to work together to build a stronger
world economy, Mr. Desmarais said last week.
In South Korea, preparations got under way earlier this year for a business summit that will coincide with the G20
leaders summit in Seoul in November.
While the business minds who descend on Toronto are expected to be a sounding board for G20 finance ministers, they
will also have an opportunity to air their own concerns.
The foreign business leaders are also expected to face pressure from the Canadian business delegation on issues that
business leaders and politicians in this country want to put at the top of the global agenda, including fears about
protectionism and a global bank tax. On the latter, the argument will be that such a tax would ultimately be passed on
to consumers, and that Canadians should not be paying the price for the mistakes of foreign banks.
The list of attendees has not be drawn up yet, but organizers are hoping they will represent a cross section of
industries, and the Canadian delegation will be chosen to reflect that.
The business gathering will begin with a dinner June 25, but will substantially take place the following day, during
which there will be a series of meetings and discussions.
2. Toronto ATMs latest target of G8/G20 protests
National Post (online)
05/31/2010
KRISTEN SMITH
Police have arrested a Toronto man in connection with anti- G20 graffiti spray-painted on several downtown banks.
Vandals spray-painted slogans such as Resist G20? and Stop the G20? on bank walls, windows and ATMs along the busy
Spadina Avenue.
The screens of several ATMs had been covered in spray paint, as had a parked police vehicle.
Samuel Bradley Kadosh, 22, has been charged with nine counts of mischief under $5,000. Police are looking for at least
one other suspect.
A witness told CP24 she saw two white men in their early 20s spray paint a TD Canada Trust branch before disappearing
into a nearby alleyway. Both were dressed in black; black bandanas covered their faces.
Its quite clear that the billion dollars thats spent is not there to protect taxpayers, its there to protect
Stephen Harpers photo-op, city councillor Adam Vaughan said Friday morning. Its just wrong. It wasnt just the
banks that got tagged its . . . small businesses that got tagged.
Vaughan, whose ward in Torontos downtown core will likely be seriously affected by security surrounding the world
leaders summit, expressed frustration that the federal government will not be compensating homeowners or businesses
for property damage sustained during the G20.
The Prime Ministers office has got to revisit this policy now, Vaughan said. I dont understand the federal
government that wont protect its own citizens.
Speaking to reporters Friday at city hall, Toronto Mayor David Miller said he hopes the vandalism is not a harbinger of
things to come during the G20.
The graffiti and the damage to bank machines was wrong. We dont welcome people who do damage in this city. We do
welcome peaceful protest, he said.
The activists message was not well received by some area residents stopping by the banks.
Its a pain in the butt, said Nicole Breen, a volunteer at a local womens shelter, as she squinted her way through
an ATM transaction. All it does is make people angry. Who wants to listen to their side of the story when all theyre
doing is destroying things?
Meanwhile, police in Ottawa are still investigating an Ottawa Royal Bank branch that was firebombed earlier this month.
Although no one was injured, initial estimates suggested the vandals caused $300,000 damage.
Police earlier this week seized a rental SUV they believe served as the getaway vehicle for the suspects. The white GMC
Acadia was reportedly being dusted inside and out for fingerprints.
On an independent media website where a catch-me-if-you-can-style video of the fiery blast was posted the
perpetrators warned they are also headed for the G8 and G20 summits in Huntville, Ont., and Toronto.
3. Carney to take centre stage with interest rate decision
The Globe and Mail
05/31/2010
KEVIN CARMICHAEL
Pg. B1
Mark Carney forged a name for himself in the midst of a global crisis. Now, he faces another difficult series of
challenges in charting a new course for Canada and fending off inflation without derailing the economy.
For market watchers, the question is how he plans to do it.
In 27 months on the job, this Governor of the Bank of Canada has never raised rates. On Tuesday, he may have to.
For most of his tenure, it is no exaggeration to say that Mr. Carney has been in crisis mode. In May of 2009, he
dropped the Bank of Canadas benchmark interest rate to 0.25 per cent the lowest it can go without upsetting
short-term money markets and made a conditional pledge to leave the overnight target there for at least a year.
So how he will approach the more mundane job of managing inflation remains an open question. With indicators showing
that Canadas economy is moving beyond recovery and into a period of expansion, thats about to change, perhaps this
week when the central bank announces the results of its latest interest rate decision.
What we are going to find out in this meeting is how Mark Carney plans to conduct monetary policy, said George Vasic,
a strategist at UBS Securities Canada Inc. in Toronto.
Now that Canadas central bank is coming out the other side of its long battle with recession, investors are keen to
know what are the actual actions [Mr. Carney] is going to take and how he plans to communicate those actions, if he
plans to communicate them at all, Mr. Vasic said.
According to a survey of 27 economists by Bloomberg News, 25 predict a quarter-point increase and two forecast no
change. The people with actual money at stake are less certain.
Last Friday, the rates investors were paying on one-month interest rate swaps suggested a 75-per-cent chance that the
Bank of Canada will increase the overnight target to 0.5 per cent.
Those predictions arent as solid as they seem. About a week ago, markets had priced in only a 50 per cent chance of an
interest rate increase. Surveys of economists have been all over the map, from near universal certainty that rates were
going up in June after the central bank ended its conditional commitment on April 20 to more equivocal stances as
Europes debt crisis caused global stock markets to plunge and the euro to sink some 7 per cent in May alone.
Markets are expressing uncertainty about the Bank of Canadas decision Tuesday, Andrew Tilton, an economist at
Goldman Sachs in New York, wrote in a note to clients Friday. What had looked to be a clear case for a rate hike ...
has been thrown into doubt given the volatility in markets and uncertainties about the impact of the debt crisis in the
European periphery on growth.
Theres reason to think Mr. Carney wants to keep economists and investors on their toes. In an August, 2009, speech at
a conference hosted by the Kansas City Fed in Jackson Hole, Wyo., Mr. Carney argued that group-think contributed to the
financial crisis as too many people believed they knew where interest rates were headed. This
led to mass complacency
that kept investors from properly interpreting data suggesting trouble was brewing.
They have to leave the door open for different options, said Stéfane Marion, chief economist at National Bank
Financial in Montreal. Once you start on the path of normalization, how will the Bank of Canada give guidance? Thats
more important than the actual rate hike.
Both Mr. Marion and Mr. Tilton predict the Bank of Canada will raise borrowing costs Tuesday, citing an economy that is
growing at an annual pace of about 6 per cent and inflation that is hotter than the central bank had factored into its
latest assumptions.
The argument for standing pat is on display on the other side of the Atlantic Ocean. After Tuesday, the banks next
interest rate announcement is scheduled for July 20. Waiting until then would allow Mr. Carney to gauge whether
European policy makers have contained their debt crisis.
It would also allow the Bank of Canada to show solidarity with the European Central Bank and the continents finance
ministers, who are trying to maintain confidence in the $1-trillion (U.S.) financial backstop they erected last month
to ease pressure on European interest rates. A decision by a fellow G20 member to go its own way could send an
unintended signal to skittish investors, said Mr. Vasic, who predicts the central bank will leave the rate
unchanged.
4. Rate decision, jobs figures, GDP report: a busy time
National Post
05/31/2010
DEREK ABMA
Pg. FP2
There will be much to talk about concerning the economy in the coming week.
As an opening act today, we get an overall assessment of Canadas economic performance during the first three months of
this year, when Statistics Canada releases first-quarter gross domestic product figures.
Economists expect that annualized GDP growth came in at 5.8% in the last quarter, up from 5% in last years fourth
quarter. If right, it would market the third straight quarter of economic growth in Canada, coming on the heels of
three consecutive quarters of contraction. It would also be the highest growth rate since the last quarter of 1999.
When the country saw economic growth in the third quarter of last year, it marked the economys transition from
recession to expansion. Another major turning point in this countrys economic cycle is anticipated tomorrow, when the
Bank of Canada announces a decision on interest rates.
Economists overwhelmingly expect the central bank to make its first interest-rate hike since lowering it to a
record-low 0.25% in April 2009 to fight off the worldwide recession.
Out of 26 economists polled by Bloomberg, only two say the Bank of Canada will leave rates as they are, while the rest
are anticipating a quarter-point increase to 0.5%.
Eric Lascelles , chief strategist with TD Securities, expects a rate hike despite the fact the central bank is
grappling with a strong domestic economy versus substantial downside risks to the global and financial outlook.
We believe the balance of evidence continues to argue for a 25 basis-point rate hike [tomorrow], though the
probability of this action is not greatly in excess of 50%.
In a Friday research note, Mr. Lascelles said the rate hike is justified given the extraordinarily strong housing
market in Canada and consumers here that spend with conviction. If there is a deterioration of economic conditions,
he said the Bank of Canada can simply pause later in its tightening cycle with minimum damage done.
CIBC World Markets economist Meny Grauman said in a report on Friday that based on macroeconomic fundamentals alone,
the Canadian economy is ready for a rate hike.
He qualified that view based on the trends seen in GDP data and employment, the latter of which will also be addressed
in the coming weeks data. Both Canada and the United States on Friday will see job figures for the previous month.
In Canada, its expected that 20,000 more people were working in May. While down substantially from the record-breaking
108,700 job additions in April, it would still mark the eighth month of employment gains in 10 months. The unemployment
rate is thought to have dropped to 8% from 8.1%.
Strong construction activity and a rebound in manufacturing sector employment should ensure that the goods-producing
sector of the economy will continue to add jobs in May, while the service sector should shed jobs following the
blistering 106,600 positions that were added in April, said TD Securities senior strategist Millan Mulraine, whos
expecting 15,000 addition Canadian jobs for May.
Economists say about a half-million jobs were likely added in the U.S. in May, which would mark the biggest gain since
September 1997. The unemployment rate is believed to have fallen to 9.8% from 9.9%.
CIBCs Mr. Grauman goes as far to forecast 600,000 job gains for the U.S. in May and a jobless rate that falls to 9.7%,
largely due to temporary jobs to put together the countrys upcoming census.
5. Banks banking on newcomers; Competition for immigrant clients is fierce
National Post
05/29/2010
TIM SHUFELT
Pg. FP10
When Jagdeep Walia arrived in Canada last month, waiting for him was a chequing account and credit card at Bank of Nova
Scotia. And the bank offered him a safety-deposit box for one year, free of charge.
The paperwork had already been completed before he left India, where he attended a pre-immigration workshop, part of
the banks Start-Right program for those planning a move to Canada.
The engineering professor was told the transition to Canadian life, both financial and otherwise, would probably
require some patience.
They told me what I can do to make myself a real part of Canadian society. They made me prepared for the situation,
that it will take time to settle in Canada, he said, adding that while he has yet to land a job, he is on his way to
getting accustomed to the nuances of Canadian finance, thanks to Scotiabank.
I wont open any other bank account, he said. Im satisfied.
Thats the kind of brand loyalty banks are eager to build among a fast-growing new Canadian customer base that must
make quick decisions about where to put its money. On average, immigrants choose a bank and open their first Canadian
account within two days of arriving, said Rania Llewellyn, vice-president of multicultural banking at Scotiabank.
It is difficult to overstate the importance of new arrivals each one requiring a bank account to the retail
banking sector.
A newcomer comes without having any relationships with a bank, Ms. Llewellyn said. So theyre ripe for the picking,
and the trust you build early on in terms of giving them that first helping hand is definitely an important building
block in that relationship.
In courting immigrant customers, competition is becoming fierce among the banks, Ms. Llewellyn said. This past week,
Royal Bank of Canada sponsored the second annual Top 25 Canadian Immigrant awards. And Bank of Montreal is currently
running an advertising campaign aimed at newcomers.
Given the numbers, the competition is understandable. This year alone, Canada will become home to up to 265,000 new
permanent residents.
And having the highest rate of immigration of any Western nation is resulting in profound changes to the countrys
population profile.
By 2031, almost half of Canadians aged 15 and older will be foreign-born, Statistics Canada says. And by the end of
that period, Canada will rely on immigration for 100% of its population growth.
The need to tap into that steady supply of account holders is underlined by the fact that efforts to steal existing
customers from competing banks are generally not all that fruitful. Canadians tend to stick with the same bank for
years.
But the inherent lack of a Canadian credit history prevents many immigrants from accessing a full range of products.
None of their credit history travels with them from their home country, said Michelle Duke, head of client strategy
at RBC. Starting all over again is daunting for some newcomers.
However, banks are beginning to look beyond the credit score and find ways to offer loans to immigrants.
Last month, Scotiabank launched an auto loan program for new immigrants at car dealerships across the country.
You have to be a newcomer to Canada and have no credit history to actually qualify for this, Ms. Llewellyn said,
adding that many immigrants owned cars in their home countries. They are likely to walk into a dealership before they
even walk into a bank.
At TD Canada Trust branches, discretion is given to individual managers to evaluate credit risk, said Phil Bowman,
senior vice-president of customer strategy and marketing planning. If someone comes without a credit history, there
are ways [the bank] can still serve you, he said.
HSBC will actually consider a customers banking history in other countries, a reflection of the banks core mission to
cater to immigrants and international clients.
We dont look at them as just starting from scratch, said Euan Campbell, HSBCs head of marketing for Canada. If
youve got a credit score in India, you have the ability to bring that across, Mr. Campbell said. Failing that, HSBC
will look at records from foreign banks.
For its part, CIBC offers a simplified mortgage process and will consider investible assets and offshore income.
The Big Five banks have also been putting much effort into expanding their language capabilities on ABMs and within
branches.
They want to feel as comfortable as possible, said Mr. Bowman, citing TDs emphasis on staffing its branches with
members of ethnic communities and establishing branches in key ethnic areas.
Beyond what is becoming a standard package for new arrivals in Canada, including free banking for one year, banks are
tailoring products specifically to the immigrant experience.
Were also mindful of the need to send money back to their home country on a regular basis, Ms. Duke said, noting
RBCs international remittances.
6. VIDEO CLIP: CNBC Closing Bell
CNBC
05/31/2010 10:45:15
To play clip in a separate window, click here.
Program: Closing Bell
Station: CNBC
Date: 5/27/2010
Insight on Toronto-Dominion Banks latest earnings, with Ed Clark, TD Bank Financial Group CEO.
7. What does giant TD Banks entry to Wilmington mean for competition?
Star-News (Wilmington, NC)
05/31/2010
WAYNE FAULKNER
TD Bank calls itself Americas most convenient bank, and it promises to arrive in Wilmington with a competitive
attitude.
The $51 billion bank is getting the four area branches of Carolina First Bank in TDs pending takeover of the troubled
Southern Financial Corp. of Greenville, S.C.
The bigger banking picture is that TD picked up 176 bank offices, including 27 in North Carolina, furthering its
strategy of expansion along the whole Eastern Seaboard. Its entrance into the Carolinas and expansion in Florida
gives it 1,300 branches in the United States.
The big picture, however, also affects Wilmington consumers and the areas existing banks. TDs goal is to become at
least No. 3 in deposits and number of branches in all its markets, said Fred Graziano, head of retail banking and
executive vice president of TD Bank Financial Group, TDs parent.
But banks already in this market didnt have much to say about TDs entry. Some banks did not respond the question,
while others said that they lacked knowledge of the bank or that is was too early to tell about TDs goals.
First Citizens Bank, currently No. 3 here, is in a great position in your market, said Barbara Thompson, the
Raleigh-based banks manager of corporate communications.
First Citizens has 14 offices in New Hanover, Pender and Brunswick counties, she said.
RBC Bank Chairman and CEO Jim Westlake said, I really have no view on them, but then went on to say: If I were to
list key competitors, TD would not come up in most markets. TD, he added, is RBCs major competitor in Canada.
Raleigh-based RBC is the U.S. unit of Royal Bank of Canada, that nations largest bank. TD, with twin headquarters in
Portland, Maine, and Cherry Hill, N.J., is a unit of TD Bank Financial Group, Canadas second largest bank.
One TD policy that might spark competition here is its banking hours.
In most markets they are 7:30 a.m. to 8 p.m., weekdays; 7:30 a.m. to 6 p.m. Saturdays; and 11 a.m. to 4 p.m. on
Sundays, Graziano said, adding that the bank is closed only four days a year.
Early in May, Wachovia Bank joined the list here of institutions with Saturday hours. First Federal of Charleston also
has Sunday hours in its offices in Lowes Food stores.
Wachovia, No. 2 in market share in Wilmington, and First Federal, No. 7, didnt wish to comment about TD.
BB&T, first here in market share and deposits, did not return phone calls.
TD promises not only to be competitive in retail banking but in commercial, small-business and residential mortgages as
well.
TD is the No. 1 SBA lender in the East and No. 5 in the nation, Graziano said. Small Business Administration loans are
a key source of capital for new and small businesses.
The rest of the industry has cut back on (commercial) lending because of financial conditions, Graziano said. During
the recession, TD has grown its commercial loan book, he said, explaining that the bank is good at credit risk.
We have had a substantial increase in residential mortgage business, and hold the loans on our books, Graziano said.
We are friendly to lending, have an appetite for lending, but it doesnt mean we are taking excessive risk.
After the Southern Financial deal closes, Graziano said, TD will take a breather to absorb its new acquisitions.
But, with only four branches here at first, TD would seem to have a steep climb to capture enough deposits to be
No. 3.
TDs strategy, Graziano said, is not just to expand its footprint through acquisition.
In Florida, we built 34 stores.
8. Saving money is always in vogue
National Post
05/29/2010
PATRICIA LOVETT-REID
Pg. FP11
In this new bi-weekly column, Patricia Lovett-Reid, author and senior vice-president of TD Waterhouse, takes a look at
the wealth issues on womens minds.
Every spring, the change in the weather inspires many of us to shop for a new wardrobe. Whether that means adding the
seasons col-ours to your existing clothes or buying those must-have accessories, it is the time to step out in style.
But given the recent statistics on consumer debt, I am not certain that everyone can really afford to splurge.
Canadians owe $1.3-trillion in mortgages and consumer credit. According to a Statistics Canada study from the end of
2009, Canadian households had $146.20 in debt for every $100 of disposable income. This compares to $90 in debt for
every $100 of disposable income at the beginning of the 1990s. In turn, our personal savings rate has fallen from a
peak of 20% in 1982 to 10% in the 1990s and further to 4.6% by the end of 2009.
I know it is tough to beat the instant gratification that comes from a new pair of strappy sandals, but it is essential
to strike the right balance between spending and saving. While fashion styles may come and go, making money is always
in vogue.
The next time you are out shopping, take a moment to consider your spending habits. If you pass a shoe store with a big
sale sign in the window, do you drop in and treat yourself to one pair or buy everything available in your size? Its a
good deal, right?
I dont suggest that you save until it hurts, but I also dont recommend that you spend as if theres no tomorrow.
Consider adding discipline to your spending and saving. If you do, it will be possible to live well and retire well.
Only 31% of eligible tax filers contribute to their registered retirement savings plan (RRSP) and use about 6% of the
total contribution room available. Being able to find the right balance between enjoying disposable income today and
building an investment portfolio for retirement is key.
Its never too early to start investing the earlier, the better, as additional time can allow an investment to grow
and benefit from the power of compound interest. We all know this in theory, but the difference between an early and
later start should make people sit up and notice.
For example, starting at age 25 and contributing $100 a month to an RRSP to age 65, which earns an average annual
return of 6.8%, compounded monthly, will give you a tidy nest egg of approximately $234,500. Everything else being
equal, if you were to wait and start saving at age 35, you would have accumulated roughly $112,700 by
age 65 less than half.
The foundation of your saving strategy needs to be your investment plan. There are many correlations between building a
great wardrobe and building a solid investment portfolio.
Although we all want the on trend look each year, the foundation of your wardrobe should be those classic, timeless
items that never go out of style. The same strategy works for your portfolio: The bulk of your holdings should be the
equivalent of your little black dress high-quality, reliable and always in style.
Consider building a well-balanced, globally diversified portfolio of investment grade bonds and blue-chip
dividend-paying stocks of companies that are leaders in their industry, have strong balance sheets and great management
teams.
Although it may be tough at first, paying yourself first means that instead of simply living for the moment, youll
build the foundation for a wealthier life in the long-term.
We need to stop trying to keep up with the Joneses theyre broke! and start creating wealth by spending less then
we earn. That discipline will always be in style.
- Patricia Lovett-Reid , senior-vice president, TD Waterhouse , is one of Canadas leading authorities on personal
finance. For her outstanding contribution to the profession of financial planning in Canada, The Financial Planners
Standards Council (FPSC) recognized Ms. Lovett-Reid with the 2009 Donald J. Johnston Award.
9. Making your assets pay
The Province (Vancouver)
05/31/2010
KIM COVERT
Youve listened to all the experts and opened up a tax-free savings account. Good for you. But thats not where it ends.
No one ever says now that Ive opened it, what do I do with it? says Patricia Lovett-Reid, senior vice-president at
TD Waterhouse. And there are a lot of people that do the exactly the same thing with an RRSP.
Theyll get their tax refund, theyll put the money in and then theyll say well, I am saving for my retirement, I put
it into the RRSP like you told me to and dont consider that there are further steps they should be taking.
In case youre wondering, Lovett-Reid says the first thing you should do is figure out what youre saving the money
for, whether youve put it in an RRSP, a TFSA or some other vehicle.
Next, figure out the best spot for your assets, letting taxes drive your investment decisions.
She says if all youre going to do with your TFSA is leave funds liquid, you might as well put that money in a
traditional savings account. A TFSA should be used for investment vehicles that generate income that would otherwise be
taxable.
In my tax-free savings account I have a dividend-growth fund and my husband has a dividend-income fund, says
Lovett-Reid, who sees her TFSA as a place for retirement savings.
So Im looking for long-term capital gains appreciation in the stock as well as dividends and Im not going to have to
pay tax on the gains that I make in that plan.
While an RRSP gives an upfront tax break, which is helpful if you think youll be earning less in retirement than when
you socked it away, you will have to pay taxes on all the income from that investment when you take it out of the fund.
A TFSA, on the other hand, gives no upfront tax break but any money earned inside it is tax-free.
Its non-taxable income so it wont affect your government benefits, such as guaranteed-income supplement, old-age
security or the age credit. For some lower-income Canadians who may struggle and save to put a little money into an
RRSP, Ill say forget about that, put it into your tax-free savings account.
Because the last thing you want at retirement is to have your government benefits compromised and then youre
struggling now to save for RRSPs? No, that doesnt make sense.
A self-directed TFSA is good because individual investors can decide, based on their investment goals, exactly what to
do with the money in the account. While contributions to a TFSA may be limited to $5,000 a year, compounding can make
that money grow quickly, Lovett-Reid advises.
When youre deciding the direction your TFSA will go, she says to keep asset allocation in mind
It makes sense in many cases to position the fixed income of an investment portfolio inside an RRSP and maybe the
equities portion in a non-registered tax-free savings account, she says.
If you have foreign equities that generate a healthy dividend, you might want to put the foreign equities in a
tax-free savings account so that the foreign-dividend income, which is otherwise fully taxed, accumulates tax free in a
tax-free savings account.
The time horizon of your investment is also important if you think you might need the money in six months, keeping
it liquid in a savings account or TFSA is a good idea.
If you will need it in the next five years, for a down payment on a home, for example, I might consider mixing
guaranteed investment certificates and investment grade bonds or fixed-income mutual funds, says Lovett-Reid, who has
advised her adult children to open [a TFSA] up, put them into dividend mutual funds, leave it alone and youll be
fine.
Talk to a financial planner if you need some help figuring out what to do, but doing your own homework will help you
feel like you have a measure of control over your own future, she says.
I think you start to take back your control by understanding what you have, where its invested, and how can you make
the most of your money.
10. Bankers hurt as deals dry up; Disorderly Market
National Post
05/31/2010
JONATHAN RATNER
Pg. FP1
Investors arent the only ones on a roller-coaster ride through volatile markets these days. With the delay of a number
of initial public offerings, sharp declines for shares of newly public companies and a lack of liquidity in the
credit market, investment bankers looking to raise money for companies have also been whipsawed by the turmoil.
Its a disorderly market with forced sellers and no liquidity, said Christine Horoyski, head of fixed income at
Aurion Capital Management. Its been incredible how quickly this has hit.
While this is being felt most in the high-yield bond market, Ms. Horoyski thinks the majority of retail investors who
were buying investment grade corporate bonds last year have also turned into sellers.
Despite the success of Tim Hortons Inc.s first Canadian bond issue on Thursday, an oversubscribed private placement of
seven-year notes yielding 4.20%, the deal was relatively small at just $200-million.
It also came as Viterra Inc. was forced to delay the sale of as much as $500-million in bonds pending stabilization in
global credit markets due to unattractive yields. This, despite a well-received investor roadshow and a recent upgrade
of the companys debt to investment grade by Standard & Poors Inc.
Ms. Horoyski also noted that spreads on Canada mortgage bonds and provincial bonds widened after recent deals came to
the market. Bid-ask spreads have widened significantly another indicator of lower risk tolerance, she said.
People are very nervous.
Yields on U.S. junk bonds continue to rise sharply on concerns that efforts by European leaders to curb deficits will
hamper the economic recovery putting them on pace for their first loss in 15 months.
Bank of America Merrill Lynchs global high-yield index showed that the percentage of corporate bonds yielding 10% or
more jumped to 17% last week. Financing concerns stemming from the European debt crisis pushed the distress ratio up
from 9.2% in April the biggest increase since November 2008.
The risk contagion trade is global, Ms. Horoyski said.
The back-up in credit spreads in high-yield really led the risk aversion trade throughout the credit markets, she
said.
As prices for junk bonds continue to fall and investors pull their money out of fixed income funds, Bloomberg data
shows that at least 22 companies have postponed or withdrawn about US$5-billion worth of debt sales in the past two
weeks. Junk bond sales have also plunged in May to their lowest level since March 2009.
However, once the equity market stops selling off, Ms. Horoyski expects credit spreads to narrow. If we stop seeing
redemptions in high-yield funds and we see people buying them now that yields have backed up, the forced selling should
stop, she said. You have to look to the credit markets because they are probably an early indicator of stress and
probably a good indicator of when risk is coming back. We feel risk is coming back to the marketplace in credits.
While Athabasca Oil Sands Corp.s $1.35-billion IPO was North Americas largest such deal so far in 2010 and Canadas
biggest since 1999, the Calgary-based oil-sands developer saw its shares fall to about $10 from $18 in early April.
Technology firms Lulu Ltd. and NetMotion Wireless Inc. pulled their equity offerings, ScotiaMocatta withdrew its
physical copper fund IPO, and Porter Aviation Holdings Inc. had to delay and cut the price of its $120-million IPO late
last week.
Meanwhile, newly issued shares of Colombian oil developer C&C Energia Ltd. and Homburg Real Estate Investment Trust
fell sharply when they first came to market last week, before quickly recovering.
The fact that were seeing a slew of IPOs coming to market is a positive sign, said Roman Dubczak, head of Canadian
equity capital markets at CIBC World Markets
When youve got market volatility like weve had in the last month or two, investors tend to become a little more
discriminating.
While the income trust era saw IPOs move to the forefront, he noted that the majority of deals have been secondary
offerings in the past three or four years. Since companies making secondary offerings already have a public track
record, its easier for the market to make a relative value assessment.
Last year was remarkable from an equity-issuance perspective because of all the deleveraging of corporate balance
sheets, Mr. Dubczak said, referring to the shoring up of
balance sheets in the face of a high degree of uncertainty.
As a result, there is less of a supply of new issuance this year. This was reflected in the most recent quarterly
results from Canadas biggest banks, which cited a lull in underwriting revenue.
Yet Mr. Dubczak said this must be put into context: Canada saw about $19-billion worth of new issuance in the fourth
quarter of 2009 the biggest three-month period in several years. At $11.2-billion, the second quarter of 2010 may
have been one of the slowest in recent history, but he noted that things started to pick up for the banks in May, so
their fiscal third quarter should turn out to be much stronger. At the same time, Mr. Dubczak pointed out that there
remains a very deep pool of investable cash to potentially absorb new equity issues.
Its a pretty healthy market, he said. You get doses of volatility, which weve been experiencing, that kind of gets
in the way. But Im not telling anyone to hold back, you just have to watch the market for periods of time.
Mr. Dubczak said he has seen no slowdown in equity issuance and highlighted several large financings in recent weeks.
Crescent Point Energy Corp. raised $375-million in a bought deal; Just Energy Income Fund closed a $330-million
convertible debenture offering; Sun Life Financial Inc. completed a $280-million preferred share sale; and Central Fund
of Canada Ltd. increased its equity offering to US$376-million.
These are big deals, Its been quite choppy of late so deals may be pushed back a day or two just given extreme
volatility, but they still do come to market and they still clear, Mr. Dubczak said. Deals still get done, but
obviously its tougher execution.
11. Mexico sides with Canada to oppose global bank tax
The Globe and Mail
05/31/2010
BRIAN MILNER
Pg. B1
As Canada takes its vociferous opposition to a global bank tax back to the world stage next week, it can count on NAFTA
partner Mexico as a staunch ally.
Calling such a levy a moral hazard and a punishment for those countries with healthy financial systems, Mexican
President Felipe Calderon said his country wants no part of such a measure, designed to create a global fund to pay for
future bank bailouts.
If the global economy builds a fund in order to bail out banks, you can be sure that there will be bailouts in the
future, President Calderon said in an exclusive interview with The Globe and Mails editorial board on Friday. His
message puts him firmly in the camp occupied by Prime Minister Stephen Harper; both argue banks would be more likely to
engage in reckless behaviour again, knowing government would be there to rescue them.
The battle lines are now becoming clearer as a growing number of emerging countries in the G20, including Mexico and
Russia, line up on Canadas side against the funds main proponents in the European Union. Most emerging countries
managed to avoid the destructive banking practices that wreaked havoc on balance sheets in the U.S. and much of Europe
and triggered massive government bailouts, takeovers and forced mergers to prevent insolvent institutions from
collapsing.
Supporters of a new global levy say it is in all countries interests to have an insurance policy in place to safeguard
the stability of the world financial system and prevent another credit freeze of the type that triggered a worldwide
economic slump in late 2008.
The U.S. government has been broadly supportive of a universal tax, arguing it is the only way to keep banks from
avoiding such payments by shifting operations to jurisdictions with no such levy. But Washington has recently grown
more lukewarm to the idea over pressure in Europe to expand the reforms to include curbs on hedge funds.
Emerging countries could play a key role within the Group of 20 in forging a compromise on a financial reform package,
and they are being courted by both sides in the debate in advance of a meeting of finance ministers in South Korea next
week. But most regard it as an advanced economy issue and of no concern to them, because their financial institutions
tend to be more local than international players, said Eswar Prasad, a professor of trade policy at Cornell University
and a former official with the International Monetary Fund, a strong advocate of the global tax.
We think that what is required is better regulation, instead of more taxes to burden the banking system, Mr. Calderon
argued.
Like Canadas globally admired financial institutions, Mexican banks weathered the credit crisis fairly well, thanks to
their strong capital positions and good regulation, he said. The Mexican and Canadian experience is more or less the
same. In this particular crisis, the banking system was an asset. It
was part of the solution, not part of the problem. ... Not one single cent of taxpayers went to any Mexican bank.
Why, he asked, should Mexico and others that enforced effective rules and maintained healthy banking systems pay for
others mistakes.
A Canadian counterproposal would require banks to sell debt that would convert to equity at times of extreme stress.
But Mr. Calderon said tougher regulation, properly enforced, is the best answer.
The President acknowledged that Mexico has had its own banking disasters in the past, most notably during the so-called
Tequila Crisis of late 1994 and 1995, when its currency crashed and the U.S. Treasury and international agencies came
to its rescue. At the time, the Mexican government imposed a bank tax of its own.
12. Spains troubled savings banks could spur new European crisis
The Globe and Mail
05/29/2010
ERIC REGULY
Pg. B1
It took a priest in southern Spain to remind the world that the European banking industry might be on the verge of
another disaster.
The Rev. Santiago Gomez Sierra, the chairman of CajaSur, a regional savings bank in Cordoba, began his last board
meeting last week with a prayer. Several directors performed the sign of the cross. No miracle happened. Within hours
CajaSur, controlled by the Roman Catholic Church, was seized by the Bank of Spain.
When the markets reopened on Monday, something close to investor panic set it. Bond and equity markets sank. Bank
shares plunged, and the euro took another beating. By the end of the week, the markets had stabilized, but the message
was clear: All was not well in the Spanish banking industry and the pain in Spain, the euro zones fourth largest
economy, could delay, even wreck, Europes recovery.
While CajaSur itself is small, representing just 0.6 per cent of Spains banking assets, it is part of the wider system
of 45 savings banks that together control half of the countrys banking assets.
The countrys cajas, as the banks are known matter to Spain, the euro zone (the 16 European Union countries that
share the euro) and the wider international markets because credit growth is closely linked to economic growth. Without
the credit provided by the ailing cajas, Spains recession-stricken economy might not improve, or may improve only
slowly. If that happens, the quality of Spanish assets could deteriorate even more.
Fitch Ratings on Friday cut Spains credit ratings to double-A-plus from triple-A, saying its economic recovery would
be more muted than the government forecast due to strict austerity measures passed this week. The downgrade follows a
cut last month by another agency, Standard & Poors.
The moves heap more pressure on the government, battling to reassure markets that its fiscal, political and social woes
will not end up in a Greek-style debt crisis.
Spains problems are a result of the countrys busted real estate and construction market, a reversal of fortune that
now weighs heavily on the cajas, which lent freely in the sector during the boom years.
The banks are finally being restructured, a full two years after it was apparent to any investor or economist paying
attention that Spains property market, once Europes hottest, was ruined. Two cajas, including CajaSur, have been
seized by the Bank of Spain. A third of the 45 cajas are merging. A few will probably get bought by the big banks. A
government fund called Frob, worth up to (EURO)99-billion ($128-billion), will help them fund the merger costs and
reinforce their equity.
The delayed response could cost Spain, and the rest of Europe.
If the current restructuring process is slow, or the problems within the financial institutions are not addressed, we
run the risk of having a sizable chunk of the Spanish banking system acting as a zombie for the next three to five
years, said Jose Manuel Amor Alameda, a partner in Madrid with AFI, a financial and economics consulting firm. This
would have enormous repercussions for the macro picture in Spain and in the euro zone.
Mohamed El-Eiran, chief executive officer of Pimco, one of the worlds biggest bond funds, has a similar view. A small
bank in a small country has indicated to the rest of the world that the whole European banking system is under
pressure, he told the Financial Times.
Spains go-go years, which ended even before the Lehman Bros. collapse in September, 2008, were funded in the capital
markets by the sale of almost (EURO)1-trillion of securities, some of them mortgage-backed bonds issued by the banks.
Forty per cent or more of these securities are owned by European banks, pension funds and other institutional
investors. That is why Spain is so important to the euro zone, Mr. Amor said. Even though there is no political or
fiscal union, the links between the financial systems and economies are so deep.
By European banking standards, the cajas are odd little beasts. Their roots go back to 16th-century Italy, where
Franciscan monks set up Mounts of Piety not-for-profit pawnshops where advances were made against collateral such
as jewellery. They were replicated throughout Europe and eventually evolved into savings banks, where the focus was on
giving inexpensive loans to the masses and helping community development. In Britain in later years, they would become
known as building societies; in France they were the caisses depargne; and cajas de ahorro in Spain.
The modern cajas are supervised and run like commercial banks but have no private owners and do not issue public
shares. Instead, they are mutually owned by stakeholders such as regional and city governments (CajaSur was the only
Church-controlled caja) and distribute some of their profits to charities and community projects.
According to a report by three Spanish economists Antonio Cabrales, Juan Dolado and Jose Garcia-Montalvo the cajas
were instrumental in stoking the property bonanza that ultimately got them into trouble. Traditionally, home ownership
was not part of the family asset mix in Spain. The cajas helped to change that by using ultracheap mortgages to compete
with the big banks, such as Santander and BBVA, and extend their reach into communities. At times they offered house
loans at a mere half a percentage point above Libor the London interbank offered rate. The theory, said the
economists, was to get customers for life: The nearly zero gains made on mortgages could be compensated via commission
on other financial products.
The construction boom bankrolled by the cajas made Spain Europes job creation engine in the first six or seven years
of the last decade. Research by Morgan Stanley said Spain added 2.8 million houses over five years. Then came the bust,
leaving 1.5 million unsold. In the suburbs of the big cities, fully built housing estates remain abandoned. Spains
official unemployment rate, at 20 per cent and rising, up from 11 per cent in late 2008, is a direct result of the
housing collapse.
The cajas are feeling the pain. As a whole, they are thought to be solvent, but there is no doubt the dud housing
collateral is hurting them. The Bank of Spain says banks overall held doubtful assets worth (EURO)97.5-billion or 5.3
per cent of total credit. The figure doesnt seem outrageous, but may mask the true extent of the problems at the
cajas, which are heavily exposed to real estate. Total loans by all banks to real estate companies is
(EURO)454-billion, or almost half of Spains gross domestic product. Of those loans, the non-performing loan ratio is
about 10 per cent.
Opinions vary about Spains ability to skirt a banking crisis, one that could cripple the Spanish economy. Some say the
cajas will muddle through. Others think the cajas problems will deepen as real estate values keep sinking, potentially
resulting in their inability to fund themselves. That scenario could trigger Europes second banking crisis on a
continent already reeling from the Greek debt horror.
13. Negotiating risk; Five strategies to help investors cope with chronic market volatility
National Post
05/29/2010
JONATHAN CHEVREAU
Pg. FP9
After two stock market crashes in a decade, and ongoing anxiety about sovereign debt in Europe, volatility has become a
chronic companion for serious investors. Those who cant stand the heat can always do what chartered accountant David
Trahair suggests in his book, Enough Bull, and make a permanent retreat to GICs. These let you sleep at night, but
after taxes and inflation, youll be hard pressed to eat well in old age. Here, in increasing complexity, are five
other ways to cope with chronic market volatility:
1. INDEX-LINKED GICS , SEG FUNDS & VARIABLE ANNUITIES
One step up from regular GICs are index-linked GICs. These provide some stock market upside while preserving at least
initial capital. But the upside is capped and dividends and capital gains are taxed like interest, making them suitable
only for registered plans. If markets do fall, you wont even get the tiny amount of interest ordinary GICs pay.
Insurance company segregated or seg funds are like mutual funds but guarantee all or 75% of your initial capital
(depending on the contract) after 10 years (or if you die). But 10 years is a long time to wait to get back to even.
Hefty fees are higher than for comparable mutual funds because of the insurance wrapper.
Variable annuities have migrated to Canada from the United States. Manulife Financial Corp. enjoyed first-mover
advantage with Income Plus, with $10-billion invested. That and rival products are hybrids of variable annuities and
seg funds, sporting the unwieldy moniker of guaranteed minimum withdrawal benefits, or GMWB.
As with seg funds, management fees are likely north of 3%. You can slash those costs by doing it yourself, using a
combination of the last three strategies outlined below. This requires sophistication and access to excellent
investment and tax advice. Those unable to go that route could do worse than putting some money in products like the
above.
2. HEDGE FUNDS & ALTERNATIVE INVESTMENTS
Wealthy investors can explore hedge funds and alternatives to traditional stocks and bonds, summarized in a series of
articles in this paper, and online at financialpost.com,by David Kaufman, president of Westcourt Capital Corp. A true
classic hedge fund hedges downside risk through short-selling, while enhancing the upside through leverage and other
techniques unavailable to prospectus mutual funds.
But hedge funds also charge hefty fees2% plus a 20% performance fee is commonand odds are the best funds wont even
accept you as a customer. Also, many hedge funds dont live up to their name and are in reality long-only equity funds
on steroids. They take outsized concentrated risks that may pay off in bull markets but could get hammered more than
ordinary equity funds in protracted bear markets.
Smaller investors who cant get access to elite single-manager hedge funds can do so indirectly through funds of funds.
These provide access to multiple managers but dilute the impact of the best ones, with fees layered on top of fees for
the privilege. The resulting performance may be slightly more than what you could get with a portfolio of bonds but
less than what a traditional stock portfolio might deliver.
Mr. Kaufman also likes real estate investment trusts, or REITs (not necessarily public ones), mortgage investment
corporations and asset-backed lending. Youll have to qualify as an accredited investor for most of these. The trick is
finding qualified investment advisors who can sell them.
3. ASSET CLASS INVESTING WITH ETFS
Investors at full-service or discount brokerages can position portfolios to withstand volatility by using a strategy
called asset-class investing. This is a low-cost approach to strategic asset allocation, based on index funds or
exchange-traded funds (ETFs). Entire books exist on this topic, such as Keith Matthews The Empowered Investor.
Rather than focus on individual securities, you deploy funds in various asset classesprimarily equities and bonds,
but also cash, real estate, gold and precious metals and commodities. Equities are spread geographically, and sliced
and diced to include value and growth, and small-cap to large-cap stocks. If your advisor matches this portfolio to
your risk tolerance and investment goals, you can sit tight when the inevitable next downturn hits. You rebalance
yearly, allocating new money opportunistically (buying on the dips).
This is the antithesis of market timing but those so inclined may take advantage of seasonal trends. An example is
a gambit espoused by Don Vialoux about alternating between consumer staples and consumer discretionary ETFs. From April
23 to Oct. 27, he suggests buying the Consumer Staples SPDR (XLP/NYSE), However, it overweights the largest stocks, so
Proctor & Gamble is 16% of the fund and Wal-Mart another 10%. An alternative is PowerShares Dynamic Consumer Staples
Sector Portfolio (PSL/NYSE), which takes an equal-weight approach, with only 1% or 2% for each holding.
In good times, multiple uncorrelated asset classes provide protection but in a crushing bear market like 2008, almost
everything falls. In that case, protection comes mostly from the amount held in cash and fixed income.
Most ETF firms now have a good selection of fixed-income ETFs providing exposure to corporate and government issues,
inflation-linked bonds and global fixed income. Despite worries about rising interest rates, its best to heed a recent
paper by Vanguard arguing for maintaining broadly diversified portfolios of bond ETFs, with a full range of maturities.
4. REVERSE & LEVERAGED INDEX FUNDS
Committed bears can act out their pessimism by buying reverse index funds (Rydex) or reverse ETFs (Horizons BetaPro,
Direxion, ProShares) that go up when stocks go down. You can short various sectors with double or triple leverage. But
first check out FAIR Canadas cautionary report from May 2009, entitled Heads You Lose, Tails You Lose. It found four
of nine pairs of leveraged ETFs lost money when held for a year, whether bull or bear, even when the investor correctly
guessed the markets direction. While sophisticated day traders can make money with them moving quickly in and out over
a day or two, theyre not really defensive buy-and-hold investments for the long run. Morningstar Inc. has issued
similar cautions, going so far as to say leveraged ETFs kill portfolios.
5. USING OP TION TO HEDGE PORTFOLIOS
The problem with asset class investing is nicely summarized by B.C.-based advisor Fred Kirby, president of Dimensional
Investment Planning Inc.: Diversification works when you dont want it to and doesnt when you do. As noted above,
even properly diversified portfolios got hurt in 2008.
Sophisticated investors can use index options to manage portfolio risk. Your first stop is the Chicago Board Options
Exchange ( cboe.com).If youre with a full-service brokerage, youll need an advisor licensed to use options. If youre
a do-it-yourselfer, youll want your discount brokerage to accept you as a sophisticated investor qualified to use
options, shorting and complex spread or straddle strategies. In Mr. Kirbys experience, iTrade and TD Waterhouse Canada
fully facilitate this but not all the other bank online brokerages provide the full range of choices to fully exploit
their value as a hedging tool.
Unfortunately, some conservative discounters prohibit certain hedging techniques such as a protective collar, which
involves the simultaneous purchase of a put against the sale of a call. Some (like RBC Direct) will reject such trades
because theyre considered too risky. Ironically, such strategies are meant to do the opposite: to mitigate crushing
losses if we get a repeat of the 2008 market action.
Jason Storsley, president and chief executive of RBC Direct Investing, says the firm does not permit naked calls but
its reviewing its options strategy. Its something that appeals to a small number of clients.
14. Different strategies for playing the Big Five
The Globe and Mail
05/31/2010
GORDON EDALL
Pg. B9
What are we looking for?
Beaten up bank stocks. Why? A sneaking suspicion that they may just be some of the best deals out there.
Number Cruncher has heard it said many times that you just cant go wrong buying Canadian bank stocks. And whats not
to like?
Its a cozy oligopoly that turns a pretty penny and it has a good record of returning some of that wealth to
shareholders. And, after the recent carnage inflicted on the rest of the worlds banks, even the regulatory
straightjacket our banks have to wear looks like its a pretty nice fit.
You could of course just buy the Big Five outright settle on a simple equal weight portfolio, rebalanced annually,
and be done with it. In fact, history shows that if you were to do just that you would be laughing, well, basically all
the way to the bank. The total annualized return for such a portfolio over the last 10-years would have almost tripled
the total return for the S&P/TSX composite index.
But, can you do better?
How the screen works
To find out if theres a better strategy for playing the Big Five, Number Cruncher reached out to Jamie Hynes, senior
account manager with CPMS, an equity research and portfolio analysis firm owned by Morningstar Canada.
Hed previously run the numbers on the banks for us and discovered that, coming out of the credit crunch, the best
strategy had been to buy the worst performing stock each quarter, based on its trailing 12-month share price change,
sell it at quarters end and pick up the new laggard. In fact, across the board in that study, he found that the stocks
that had been under the most pressure were the ones most likely to outperform over the next three months.
In order to figure that out, Mr. Hynes looked at a few different criteria and ranked the returns for quarterly trading
strategies based on each criterion.
Weve asked him to run those numbers again so that we can see if the beaten up bank strategy still works.
What did we find?
The case isnt quite as compelling as it was last time around, but buying the quarters laggards still looks like a
solid strategy if not the best one.
To the end of April, the top strategy over the last 12-months was actually to pay for earnings growth. Each quarter,
deciding to own the bank showing the most growth in terms of trailing 12-month earnings per share, would have earned
you a 69.7 per cent return, easily outstripping the banks as a group and the S&P/TSX composite.
While digging in to why this was the case, Mr. Hynes discovered that the top bank when it came to earnings growth each
quarter was also the top ranked bank when it came to lowest price-to-book value, highest dividend yield or worst
twelve-month price change. Although earnings growth was the top factor, the next three low price-to-book, worst
price change and high yield all support the cheap bank strategy, Mr. Hynes said.
Among the metrics explicitly tracking the back of the pack, the most profitable one to keep an eye on this time around
was a weak share price. Picking up the biggest bank loser, in terms of share price appreciation, over the
last year would have netted you a better than 65 per cent return and a solid 8.5 percentage point edge on owning the banks as a
group.
What didnt work? Paying for past performance. Picking up the hottest stock for the last year at the end of each
quarter was the only way you could have done worse than the S&P/TSX composite with any of these strategies.
15. We cant afford to live in health-care denial
The Globe and Mail
05/29/2010
JEFFREY SIMPSON
Pg. A21
Sudden crises, such as hurricanes or the Greek debt crisis, produce fast reactions. Slowly worsening problems, however,
are often left to fester until they become a crisis, by which time remedial action is painful and sometimes too late.
For some years now, weve had a slowly worsening problem of financing health care. Many people, including university
health-care experts who dominated a lot of public debate about the issue, denied the existence of a problem. The
Romanow Commission of 2002 ignored the challenge entirely. Politicians knew a problem was emerging, but were scared to
talk about it, fearing public reaction. A few lonely voices tried to alert readers or listeners to the looming problem,
but they were derided. The public was blissfully ignorant that health-care budgets were growing at an unsustainable
pace.
Unsustainable, that is, provided we didnt want governments to pay for health cares higher costs with more borrowing.
We could easily pay these higher bills with more taxes, but they would be politically explosive, as premiers who
imposed health-care premiums discovered. Or, we could pay by curtailing other programs, which is whats been happening
by stealth to every provincial budget in Canada. Warning signs that this was occurring have been around for a long
time, but they were ignored.
For example, 10 years ago, in 2000, the Conference Board of Canada did a report about health care in British Columbia.
It said expenditures on other programs, which include social services, education, police and economic development will
need to be reduced if the rhythm of health-care spending continued.
The board warned that the health budget, then about $8-billion in 2000, would hit $16-billion by 2020. The Conference
Board got it wrong. B.C.s health-care budget will be $16-billion in 2012-2013, eight years early.
Almost all of B.C. Premier Gordon Campbells budgets have touted the need to make the province the best-educated place
in Canada. A very laudable and important objective, to be sure. Except that from 2000 to 2010, the provinces higher
education budget grew by 36 per cent and the health-care budget by 84 per cent.
In this years budget, health care is going up $447-million, the last instalment of a three-year rise of $2-billion. To
pay for this, the government is diverting all kinds of revenue into the system: all the extra money from the
controversial harmonized sales tax, the tobacco tax, health-care premiums and $167-million from the provincial lottery,
plus of course general tax revenues and $3.6-billion in health transfers from Ottawa.
While B.C.s health-care budget jumps by $2-billion over three years, what about other spending? Adjusted for
inflation, the following departmental budgets are falling: universities, children and family development, citizens
services, K-12 education, forests, housing and social development, public safety, justice, tourism and culture. This
profile of one budget rising while all others shrink is precisely what the Conference Board told British Columbians
in 2000 they could expect.
Every area of B.C. public spending, except transportation, is falling while the health-care budget soars. The same
pattern is reproduced in every province of Canada, and no provincial government has had the courage to try to change
it.
This week, TD Economics produced a report about health-care in Ontario, recommending 10 steps to slow down the rate of
increase. Quite aptly, the report observed, it is quite likely that Ontarians have not come to grips with the
potential risk to their future quality of life from the health-care Pac-Man. For Ontarians substitute British
Columbians and people in every province.
The Ontario government is floating a complete myth, presumably to comfort people and sugarcoat the raw numbers of what
really lies ahead for the province. It promises to reduce health-care spending to 3 per cent increases within three
years. This has never been done and, as TD Economics showed, cannot be done, given population growth, aging and the
increasing use of the system.
Instead, health-care spending is likely to stay on the track of 6- to 7-per-cent yearly increases, compared to
4-per-cent increases in government revenues. Under that very hopeful scenario (Ontario will be lucky to see a 4 per
cent increase in revenues), TD Economics says that in 2030, 80 per cent of the provinces budget will be devoted to
health care. That prediction jibes with the one made by Ontario Finance Minister Dwight Duncan that if nothing changes,
70 per cent of the budget will go to health care by 2022.
What to do? The first and indispensable step is for politicians of every stripe to recognize publicly that the problem
is becoming a crisis of public finance. If they dont talk about the problem, citizens wont pay attention.
The trouble is that politicians are scared of us and the powerful interest groups that will rally against change. Even
the TD Economics recommendations, which dont go far enough to solve the problem but are nonetheless useful starting
points for discussion, would scare the wits out of most politicians.
We remain, alas, far from the adult conversation about health care that former Bank of Canada governor David Dodge
correctly said Canada needs.
16. Editorial: Wealthy, healthy and wise
The Globe and Mail
05/31/2010
Pg. A16
No one seems able to figure out why Canadian productivity is growing so slowly. Whatever the reason, says the TD Bank
Financial Group, persuading more young people to go to postsecondary schools and insisting on better teaching wont
hurt. If you dont think higher education raises productivity, then try ignorance, the bank says in a report this
month on education.
The productivity question is linked to income growth, or rather, its lack. Since 1980, median earnings after inflation
have been stuck in neutral. The standard of living of the average Canadian has remained stagnant on an absolute basis
and declined on a relative basis that is, compared with living standards elsewhere in the world.
Funny. In 1980, the per-student support from Canadian governments was $2,000 more than that in the United States; as of
2006, the U.S. support was $8,000 more per student than in Canada. Students made up some of the shortfall in higher
tuition, paying average annual hikes of 6.8 per cent since 1980. But even as they paid more, they received less; their
class sizes grew larger, and teachers at the many research-intensive universities (in
Ontario, all 19 universities are research-intensive) often became more remote, the bank report says.
Theres a conundrum here. Health-care costs may swallow entire provincial budgets if their appetite for growth isnt
checked; but the best answer to rising health costs is an educated populace. Affluent people tend to be healthier than
the disadvantaged. Squeezing education in the name of health is self-defeating.
Canada is just 11th among OECD countries in its university participation rate. The bank stresses the importance of
outreach programs as early as elementary school in which disadvantaged youngsters visit universities. It points to
Youth Fusion in Quebec, which creates partnerships between high schools and universities, as one model. A great success
is Pathways to Education, which began in Torontos Regent Park and has expanded to other troubled communities, and
provides intensive supports and mentorship.
Its frightening to think that 1980 may be the high-water mark for the Canadian standard of living. The road to a
higher one leads through the postsecondary schools.
Looking for TDs view on articles about the bank or the financial industry? Visit TD News & Views for background on
some stories of the moment that may come up in your discussions with customers, colleagues and friends.
Vous cherchez des opinions et des articles de la TD au sujet du secteur bancaire ou financier? Visitez Nouvelles et
Opinions de la TD pour y trouver de linformation sur certains sujets dactualité qui peuvent être évoqués dans vos
discussions avec des clients, des collègues et des amis.
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risks and uncertainties. Actual results may differ materially from the results anticipated in these forward-looking
statements. The following factors, among others, could cause or contribute to such material differences: the ability
to obtain the approval of the transaction by The South Financial Group, Inc. shareholders; the ability to realize the
expected synergies resulting from the transaction in the amounts or in the timeframe anticipated; the ability to
integrate The South Financial Group, Inc.s businesses into those of The Toronto-Dominion Bank in a timely and
cost-efficient manner; and the ability to obtain governmental approvals of the transaction or to satisfy other
conditions to the transaction on the proposed terms and timeframe. Additional factors that could cause The
Toronto-Dominion Banks and The South Financial Group, Inc.s results to differ materially from those described in the
forward-looking statements can be found in the 2009 Annual Report on Form 40-F for The Toronto-Dominion Bank and the
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and available at the Securities and Exchange Commissions Internet site (http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial Group, Inc. will be
submitted to The South Financial Group, Inc.s shareholders for their consideration. Shareholders are encouraged to
read the proxy statement/prospectus regarding the proposed transaction when it becomes available because it will
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well as other filings containing information about The Toronto-Dominion Bank and The South Financial Group, Inc.,
without charge, at the SECs internet site (http://www.sec.gov). Copies of the proxy statement/prospectus and the
filings with the SEC that will be incorporated by reference in the proxy statement/prospectus can also be obtained,
when available, without charge, by directing a request to The Toronto-Dominion Bank, 15th floor, 66 Wellington Street
West, Toronto, ON M5K 1A2, Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc.,
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Carolina 29601, 1-888-592-3001.
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prospectifs se trouvent dans le rapport annuel de 2009, dans le formulaire 40-F, pour La Banque Toronto-Dominion, et
dans le rapport annuel de 2009, dans le formulaire 10-K de South Financial déposé auprès de la Securities and Exchange
Commission (SEC) et disponible sur le site Internet de la SEC (http://www.sec.gov).
La proposition de fusion entre La Banque Toronto-Dominion et The South Financial Group, Inc. sera présentée aux
actionnaires de The South Financial Group, Inc afin quils lexaminent. Les actionnaires sont invités à lire la
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sera disponible, ainsi que des autres documents ayant fait lobjet dun dépôt qui contiennent de linformation sur La
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(http://www.sec.gov). Des exemplaires de la circulaire de sollicitation de procurations ou du prospectus définitif et
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soumettant une demande [à La Banque Toronto-Dominion, 66 Wellington Street West, Toronto (Ontario) M5K 1A2, à
lattention de : Relations avec les investisseurs, 416-308-9030] ou à The South Financial Group, Inc. Investor
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2009, qui a été déposé auprès de la SEC le 3 décembre 2009, son avis de convocation à lassemblée annuelle et sa
circulaire de la direction sollicitant des procurations, qui a été déposée auprès de la SEC le 25 février 2010.
Linformation concernant les administrateurs et les dirigeants de The South Financial Group, Inc. est disponible dans
la circulaire de sollicitation de procurations de The South Financial Group, Inc. de sa plus récente assemblée
annuelle, qui a été déposée auprès de la SEC le 7 avril 2010. Dautres renseignements sur les participants à la
sollicitation de procurations et une description de leurs intérêts directs et indirects, par titres détenus ou autres,
seront inclus dans la circulaire dinformation/le prospectus et dautres documents pertinents qui seront déposés auprès
de la SEC lorsquils seront disponibles.
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF TD BANK, AMERICAS MOST CONVENIENT BANK AND THE TORONTO-DOMINION BANK ON MAY 31, 2010
Daily News Brief
May 31, 2010
Compiled by Brittany Roberge, Corporate and Public Affairs
TD BANK NEWS
Americas prospects for economic recovery largely hinge on small businesses, a segment particularly
hard hit in the Great Recession, said a new report from TD Economics. [TD Economist James Marple is
quoted.]
It is difficult to overstate the importance of entrepreneurs to the success of the U.S. economy,
says a new report from TD Economics. [TD Economist James Marple is quoted.]
TD Bank calls itself Americas most convenient bank, and it promises to arrive in Wilmington with
a competitive attitude. The $51 billion bank is getting the four area branches of Carolina First
Bank in TDs pending takeover of the troubled Southern Financial Corp. of Greenville, S.C. [TD
Banks Fred Graziano is quoted.]
The Massachusetts economy is back from the precipice, but businesses are reluctant to expand their
bank credit lines, a sign that plans for hiring and expansion remain
idle. [TD Bank is mentioned.]
The downtown landmark Harrisons Hardware store will likely be razed and replaced with a bank,
officials said Thursday. The TD Bank branch office would be the third bank in a short stretch of
South Broad Street; two other banks are across the Green on North Broad.
TD Bank Financial Group (TDBFG) will host an investor day highlighting its U.S. personal and
commercial banking strategy. The event is an opportunity to hear from key members of the leadership
team at TD Bank, Americas Most Convenient Bank(R) who are directly
responsible for executing strategic initiatives for the U.S. Personal and Commercial Banking
business.
A new report from TD Economics says that the recession has hurt small businesses particularly hard,
and says the creativity of small and medium businesses will likely be at the forefront of a
recovery. It also notes that conditions for such a thing to be possible are beginning to take
shape. [TD Economist James Marple is quoted.]
Most banks and credit unions will be closed Monday, with some exceptions. Citizens Bank in-store
banks at Price Chopper on upper Glen Street in Queensbury, and at Hannaford and Wal-Mart in Wilton
will be open 11 a.m. to 3 p.m. Monday. TD Bank branches, except the Glens Falls Maple Street
branch, will be open 8 a.m. to 1 p.m. Monday.
Page 1 of 14
INDUSTRY NEWS
While both the House and Senate financial reform bills claim to restore the so-called Barnett
standard for preemption of state law, that has not stopped federal and state regulators from
continuing to battle over the issue.
The Obama administration continued to push its priorities Thursday on what provisions should be
included in the final regulatory reform bill.
Consumer spending got off to a lackluster start in the second quarter as Americans focused more on
the extra income they earned in April. Meanwhile, consumers views on the state of the economy grew
increasingly optimistic in May, a separate report showed.
Page 2 of 14
TD BANK NEWS
1. |
|
Report: Rebound Depends On Small Business
May 28, 2010 Orlando Business Journal |
Americas prospects for economic recovery largely hinge on small businesses, a segment particularly
hard hit in the Great Recession, said a new report from TD Economics.
The report titled Small and Medium Sized Businesses Key to U.S. Economic Recovery and authored
by TD economist James Marple outlines factors from the recent recession that have been
particularly hard on small businesses, including acute job losses, the tight credit markets and the
industrial composition of the economic correction.
Marples report also contends small and medium-size businesses are at the forefront of the
creative process of powering the economy out of the downturn.
The Great Recession was not kind to small businesses in America. Small and medium-size businesses
suffered a disproportionate share of the job losses and many still have difficulty accessing credit
from some lenders. Fortunately, things are beginning to look up, Marple said.
Marple said economic growth over the longer-term is driven primarily by individuals taking risks
and making sacrifices in order to bring innovative ideas to market.
If that happens, he estimates that by the end of 2011 the U.S. economy could employ more than 6
million more people than it does today.
The complete findings of the TD Economics report can be found by going to
www.td.com/economics/us.jsp.
Page 3 of 14
2. |
|
Report Says: Economy Recovery Depends On Small Biz
By Allan Maurer
May 28th, 2010 Tech Journal South (FL) |
It is difficult to overstate the importance of entrepreneurs to the success of the U.S. economy,
says a new report from TD Economics.
While economists spend a lot of time analyzing near-term trends and developments in aggregate
data, economic growth over the longer-term is driven primarily by individuals taking risks and
making sacrifices in order to bring innovative ideas to market, writes TD economist James Marple
in Small and Medium Sized Businesses Key to U.S. Economic Recovery.
Marple points out that small and medium-sized businesses, typically firms with fewer than 500
employees, make up 99.7 percent of all U.S. companies and more than half of total employment in the
country.
He adds, They are also profoundly important to generating new employment.
We noted in an earlier post that while large tech firms such as IBM continue to shed jobs,
portfolio companies at many venture firms are hiring (see: Job hunting? Venture-backed startups are
hiring
The TD report says that businesses formed within the last five years have been responsible for the
vast majority of net job growth in the last two decades (a statistic we found amazing).
Looking ahead, the report says, the U.S. economic recovery will depend largely on the performance
of U.S. small businesses, which suffered a disproportionate share of the job losses and many still
have difficulty accessing credit form some lenders.
Fortunately, he adds, things are beginning to look up.
We think this is another indication that government policy on national, state and local levels
should pay much more attention to supporting, nurturing, and developing small businesses,
entrepreneurs and startups rather than spending so much time and money on chasing large
manufacturers and big companies.
North Carolina invested a lot of time, money and energy in recruiting a Dell computer manufacturing
plant to the state that is shutting down operations after only a few years.
Would that money have been better spent helping develop and support startup operations that would
generate jobs for a decade or more?
We see more and more evidence that making sure small businesses and startups have access to capital
and support they need to succeed is far more important than shoring up large industries that are
often dinosaurs that face near extinction every time some economic volcano blows its top.
Page 4 of 14
3. |
|
What Does Giant TD Banks Entry To Wilmington Mean For Competition?
By Wayne Faulkner
May 31, 2010 Star-News (NC) |
TD Bank calls itself Americas most convenient bank, and it promises to arrive in Wilmington with
a competitive attitude.
The $51 billion bank is getting the four area branches of Carolina First Bank in TDs pending
takeover of the troubled Southern Financial Corp. of Greenville, S.C.
The bigger banking picture is that TD picked up 176 bank offices, including 27 in North Carolina,
furthering its strategy of expansion along the whole Eastern Seaboard. Its entrance into the
Carolinas and expansion in Florida gives it 1,300 branches in the United States.
The big picture, however, also affects Wilmington consumers and the areas existing banks. TDs
goal is to become at least No. 3 in deposits and number of branches in all its markets, said Fred
Graziano, head of retail banking and executive vice president of TD Bank Financial Group, TDs
parent.
But banks already in this market didnt have much to say about TDs entry. Some banks did not
respond the question, while others said that they lacked knowledge of the bank or that is was too
early to tell about TDs goals.
First Citizens Bank, currently No. 3 here, is in a great position in your market, said Barbara
Thompson, the Raleigh-based banks manager of corporate communications.
First Citizens has 14 offices in New Hanover, Pender and Brunswick counties, she said.
RBC Bank Chairman and CEO Jim Westlake said, I really have no view on them, but then went on to
say: If I were to list key competitors, TD would not come up in most markets. TD, he added, is
RBCs major competitor in Canada.
Raleigh-based RBC is the U.S. unit of Royal Bank of Canada, that nations largest bank. TD, with
twin headquarters in Portland, Maine, and Cherry Hill, N.J., is a unit of TD Bank Financial Group,
Canadas second largest bank.
One TD policy that might spark competition here is its banking hours.
In most markets they are 7:30 a.m. to 8 p.m., weekdays; 7:30 a.m. to 6 p.m. Saturdays; and 11 a.m.
to 4 p.m. on Sundays, Graziano said, adding that the bank is closed only four days a year.
Early in May, Wachovia Bank joined the list here of institutions with Saturday hours. First Federal
of Charleston also has Sunday hours in its offices in Lowes Food stores.
Wachovia, No. 2 in market share in Wilmington, and First Federal, No. 7, didnt wish to comment
about TD.
BB&T, first here in market share and deposits, did not return phone calls.
TD promises not only to be competitive in retail banking but in commercial, small-business and
residential mortgages as well.
TD is the No. 1 SBA lender in the East and No. 5 in the nation, Graziano said. Small Business
Administration loans are a key source of capital for new and small businesses.
The rest of the industry has cut back on (commercial) lending because of financial conditions,
Graziano said. During the recession, TD has grown its commercial loan book, he said, explaining
that the bank is good at credit risk.
We have had a substantial increase in residential mortgage business, and hold the loans on our
books, Graziano said. We are friendly to lending, have an appetite for lending, but it doesnt
mean we are taking excessive risk.
After the Southern Financial deal closes, Graziano said, TD will take a breather to absorb its new
acquisitions.
But, with only four branches here at first, TD would seem to have a steep climb to capture enough
deposits to be No. 3.
TDs strategy, Graziano said, is not just to expand its footprint through acquisition.
In Florida, we built 34 stores.
Page 5 of 14
4. |
|
Bank Credit Is Lagging Economy
By Tim McLaughlin
May 28, 2010 Boston Business Journal |
The Massachusetts economy is back from the precipice, but businesses are reluctant to expand their
bank credit lines, a sign that plans for hiring and expansion remain idle.
Commercial and industrial lending in the first quarter was relatively flat among Massachusetts
community banks. C&I loans, as theyre called in the industry, are the grease of any economy, as
they fund inventory expansion, factory equipment purchases, accounts receivable and new hiring.
There is a lack of demand, Danvers Bancorp Inc. Chief Executive Kevin Bottomley said. His bank
exited the first quarter with the largest C&I portfolio ($729 million) among Bay State community
banks.
Companies arent in a hurry to rehire even if business is growing, he said.
He added that when businesses are expanding theyll use their credit lines more or ask their banks
to increase the amount they can borrow.
Thats really not happening, Bottomley said.
And the numbers show it.
The top 10 community bank C&I lenders in the state reported $3.2 billion of those loans at the end
of the first quarter. That was only slightly better than the $3.08 billion those same banks
reported in the year-earlier period.
Without the benefit of acquisitions, their C&I loan balances would have shown an overall
year-over-year decline, according to a Boston Business Journal analysis of Federal Deposit
Insurance Corp. data. The biggest drop among that group happened at Eastern Bank.
The C&I loan balance at the largest community bank in the state dropped 39 percent to $387 million
from $638 million a year earlier, according to Easterns financial statements. The bank says C&I
lending follows its customers revenue growth. An upswing in demand for working capital hasnt
materialized beyond isolated cases, several community bank executives reported.
In fact, some regional and national banks operating in Massachusetts and New England also showed
sharp year-over-year declines in C&I loan balances.
Sovereign Banks C&I portfolio shrank to $9.6 billion at the end of March, compared with $12.2
billion a year earlier. RBS Citizens, the largest division of Citizens Financial Group, reported a
C&I portfolio that totaled $11.18 billion, a 20 percent decline from a year ago.
TD Bank, which has 165 offices in Massachusetts, reported a C&I portfolio that was 8 percent
smaller than last years $9.94 billion, according to FDIC reports.
C&I lending dropped nationwide, too, according to an FDIC analysis of 6,722 institutions. C&I loans
fell 17 percent to $1.12 trillion, compared with $1.35 trillion in the first quarter of 2009.
In the near term, businesses may find themselves paying more for their working capital needs as
inter-bank lending rates rise because of the Euro zone debt crisis. Their credit line rates may be
pegged to the London Interbank Offered Rate (LIBOR).
The three-month LIBOR, for example, rose to 54 basis points during the last week of May. Thats
more than double the 52-week low of 25 basis points.
The upswing in LIBOR could boost bank lending margins in the short term, but it doesnt lend to a
confident environment, Bottomley said.
C&I lending at Woburn-based Northern Bank & Trust Company actually rose in the quarter as the bank
landed more customers.
For the most part, we didnt see a lot of businesses stocking up on their inventory, but
restructuring existing debt, said James Mawn, CEO of Northern Bank & Trust, which has about $606
million in assets.
Mawn said his bank has generated more loans from deals with Dunkin Donuts franchises.
Were very fond of Dunkin Donuts, Mawn said.
Charles Monaghan, CEO of Mercantile Bank and Trust Company, runs one of the most aggressive C&I
lending operations in the state. Nearly half of the banks $166.4 million in assets are tied up in
C&I loans. The bank, which specializes in financing taxi cab operations, reported $82.5 million in
C&I loans at the end of March, up 18 percent from the year-earlier period.
All of us at the bank have a C&I background, Monaghan said during a telephone interview. You do
what you know how to do, and weve been doing it that way for 20 years.
Page 6 of 14
5. |
|
Bank May Nail Down Site Of Century-Old Hardware Store
By Frank Juliano
May 30, 2010 CT Post |
MILFORD The downtown landmark Harrisons Hardware store will likely be razed and replaced with a
bank, officials said Thursday.
The TD Bank branch office would be the third bank in a short stretch of South Broad Street; two
other banks are across the Green on North Broad.
I know that some people in Milford are disappointed that Harrisons is not going to be transformed
into a retail outlet, said Cyrus Settineri, chairman of the Economic Development Commission. But
people have to understand that while a retail outlet would be a bigger draw, a blighted eyesore is
no draw at all.
The 102-year-old building has been vacant since it was damaged in a January 2006 fire that caused
sprinklers to flood the main floor. Harrisons, opened as Harrison and Gould in 1907, was in
business for 99 years and was the place that many residents when for everything from having keys
copied to buying paint and plumbing supplies.
Robert Gregory, the citys economic development director, said it is his understanding that the
two-story wood building would have needed major renovations and upgrades to meet current building
codes.
Attorney John Knuff and the owners of the Harrisons property at 36-38 South Broad St., Russ
Barton and Brian Aberton, met for an informal discussion last week before the Planning and Zoning
Board. The vacant lot next door at 30-32 South Broad St., owned by Joseph Voll of Bridgeport, is
also part of the project.
The lawyer said his clients realize the project will be closely scrutinized because it faces the
Green in the Center Design District, and is a site that a lot of residents feel nostalgia for.
But Knuff and project architect Stephen McGrane said that the building itself is not
architecturally significant. The building has significant structural and water damage from the
flooding and its 7-foot ceilings are too low to allow a commercial use, the men said. Banks are
allowed in the central business district, though there are restrictions on signs and parking.
Settineri said Thursday that if the bank seeks a drive-through lane, it could be designed so that
it utilizes the city-owned parking lot behind the property instead of emptying onto the busy,
one-way street. It could also be free-standing, as the Milford Banks drive-through is on the other
side of the Green, he said.
Knuff said TD Bank would lease the site from the property owners, but that arrangement hasnt been
formalized yet.
City Planner David Sulkis told the board that while Harrisons is on the citys historic structure
inventory and is subject to the demolition delay ordinance, there is nothing that would prevent the
building from being torn down.
The building is not in a historic district, which would have provided more protection, City
Historian Richard Platt said. A mural on an exterior wall is mentioned on the historic inventory
and should be saved if possible, he said.
Page 7 of 14
6. |
|
TD Bank Financial Group Investor Day: Focus on U.S. Personal and Commercial Banking |
|
|
May 28, 2010 News Release |
TORONTO, May 28 /CNW/ TD Bank Financial Group (TDBFG) will host an investor day highlighting its
U.S. personal and commercial banking strategy. The event is an opportunity to hear from key members
of the leadership team at TD Bank, Americas Most Convenient Bank(R) who are directly responsible
for executing strategic initiatives for the U.S. Personal and Commercial Banking business.
The event will be held on Wednesday, June 16, 2010 from 12 p.m. to 5 p.m. ET in New York City.
Bharat Masrani, Group Head U.S. Personal and Commercial Banking, and members of the U.S. leadership
team, will discuss and answer questions about the business strategies and growth opportunities for
TD Bank, Americas Most Convenient Bank.
A listen-only telephone line will be available at 416-644-3414 or 1-800-814-4859 (toll free). A
live webcast will be available at www.td.com/investor. The presentation material
referenced during the event will be posted on the TDBFG Investor Relations website on June 16 by
approximately 12 p.m. ET.
Recordings of the presentations will be archived following the webcast at
www.td.com/investor/calendar_arch.jsp. Replay of the teleconference will be available from 9 a.m.
on June 17, 2010 until July 17, 2010, by calling 416-640-1917 or 1-877-289-8525 (toll free). The
passcode is 4307909, followed by the pound key.
Page 8 of 14
7. |
|
Small Business Recovery Needed To Drive Larger Recovery |
|
|
May 30, 2010 Radio & Television Business Report (VA) |
A new report from TD Economics says that the recession has hurt small businesses particularly hard,
and says the creativity of small and medium businesses will likely be at the forefront of a
recovery. It also notes that conditions for such a thing to be possible are beginning to take
shape.
The report is called Small and Medium Sized Businesses Key to U.S. Economic Recovery, and it was
written by TD Economist James Marple.
Job loss and loss of access to credit have been major obstacles for smaller businesses to overcome,
according to the report, but the same group is also called a key to the recovery. Marple wrote that
economic growth over the longer-term is driven primarily by individuals taking risks and making
sacrifices in order to bring innovative ideas to market. He thinks resurgence in this class of
businesses could add 6 million jobs to the economy by the end of 2011.
He added, The Great Recession was not kind to small businesses in America. Small and medium-sized
businesses suffered a disproportionate share of the job losses and many still have difficulty
accessing credit from some lenders. Fortunately, things are beginning to look up.
TD Bank, a partner of TD Economics, produced a study earlier this year indicating that many of
these businesses are seeing light at the end of the tunnel. 87% expect to level off or improve 2010
over 2009, with 36% expecting growth this year.
Page 9 of 14
8. |
|
Whats Open/Closed On Memorial Day |
|
|
May 30, 2010 Glen Falls Post Star (NY) |
Most banks and credit unions will be closed Monday, with some exceptions. Citizens Bank in-store
banks at Price Chopper on upper Glen Street in Queensbury, and at Hannaford and Wal-Mart in Wilton
will be open 11 a.m. to 3 p.m. Monday. TD Bank branches, except the Glens Falls Maple Street
branch, will be open 8 a.m. to 1 p.m. Monday.
Page 10 of 14
INDUSTRY NEWS
1. |
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Battle Over Preemption Hinges on Fine Print |
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Senate language gets industry nod over houses |
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By Cheyenne Hopkins |
|
|
May 28, 2010 American Banker |
WASHINGTON While both the House and Senate financial reform bills claim to restore the so-called
Barnett standard for preemption of state law, that has not stopped federal and state regulators
from continuing to battle over the issue.
The Office of the Comptroller of the Currency and the banking industry are backing the Senate
version, which they argue more explicitly restores that standard and would protect decades of
precedent surrounding the issue. State regulators and consumer groups prefer the House provision,
which they view as more flexible and which would force the OCC to take additional steps before
preempting a law.
The Senate bill is in my mind just hugely preferable, said Howard Cayne, a partner at Arnold &
Porter. The benefit of the Senate version is it doesnt reopen for years of litigation questions,
close calls that have been resolved.
At issue is the 1996 Barnett Supreme Court case, which said that the OCC could preempt state law on
a case-by-case basis. Though lawmakers in both chambers claim that is their goal, the Senate bill
explicitly references the Barnett decision, while the House borrows some of its wording but does
not name it.
Instead, the House version says that the OCC can preempt a law if it prevents, significantly
interferes with, or materially impairs the business of banking.
Banking lawyers see that as a big difference, saying its failure to cite the case and addition of
new language could make it harder for the OCC to win a court fight over preemption.
The House bill establishes a new standard for determining if a state law is preempted, said Ray
Natter, a partner at Barnett Sivon & Natter PC. While this standard is intended to be the same as
the standard used by the Supreme Court in the Barnett case, the fact that it does not cite the case
can create some questions.
The House language also would force the OCC to take additional steps before preempting a statute,
including proving that a substantive federal law exists that tackles the same issue the state law
is trying to address. This creates a new requirement not found in current law, and no doubt that
would lead to extensive litigation over whether this hurdle had been met, Natter said. It is for
these reasons that the Senate bill is closer to the stated congressional goal of maintaining the
Barnett case.
Art Wilmarth, a professor at George Washington Law School, said there will be an increase in
litigation no matter which side prevails. If the House bill gets passed, the whole focus is going
to be on the words materially impair, he said. If the Senate language passes, the question is
going to be what is the Barnett standard. Either way, there is going to be a lot of litigation over
what the standard is.
The OCC and bankers said they would have a better shot of winning those court battles if the Senate
version were adopted. By explicitly referring to the Barnett case, the courts will defer to other
precedents concerning that decision. We think its important that precedent
thats been in place
for 150 years be preserved, said Ken Clayton, chief legislative counsel for the American Bankers
Association. We think the Senate version is clearer in directing the courts in what Congress
meant.
Several cases since Barnett have relied on that decision, including the 2007 Supreme Court case
Watters v. Wachovia, which said that the operating subsidiaries of national banks enjoy the same
preemption powers from state consumer protection laws as their national bank parents.
What we have with Barnett is a series of court cases that have followed Barnett so we know what
courts would likely do with Barnett, said Robert Cook, a partner at Hudson Cook LLP. You have to
think that a court looking at the House version will first say they didnt adopt the Senate
language, so they must mean something different, so right off the bat you are going to get
something different.
But John Ryan, an executive vice president at the Conference of State Bank Supervisors, said the
point of the bill is not to reaffirm existing law.
By that argument wed really be saying this is all for nothing, he said. I dont think weve had
such a big debate to come to a result that is purely a blessing of what the OCC has already done.
Some industry representatives said that no matter which version is included in the final bill,
bankers have already lost on the issue.
I dont like either quite frankly, because I think both will lead to confusion and litigation,
said Richard Hunt, president of the Consumer Bankers Association. Its like asking which sister do
I want to kiss. ... Dont think we are up here jumping for joy that the Senate measure was a little
more measured than the House language. If they accept the Senate language it will still be
problematic.
The House and Senate preemption provision also differ on how much power to give state attorneys
general. While both bills would give them more authority than they currently have, the House bill
would let state AGs enforce any federal law against national banks. The Senate bill, however, would
only allow states to enforce federal rules promulgated by a new consumer protection regulator. The
Senate bill also limits AGs to actions within their own states.
Although the OCC and bankers oppose both provisions, if forced to choose they would pick the Senate
version. Its not only the law thats out there, but its the types of cases you bring and the
positions you take in court, said Ron Glancz, a partner at Venable LLP. You need uniformity. If
you have 50 AGs, they are going to argue the same federal law, but they are going to have
discretion on their interpretation.
Clayton said that even if the Senate version prevails on that issue, there could be trouble.
We believe its an invitation to politicizing bank regulation, he said. In some respects it may
more greatly complicate it, because now you will have varying states seeking to litigate
enforcement in ways that may or not be consistent with what the [consumer agency] or OCC want to
do.
He suggested the change may not even be necessary if the administration is creating a strong
consumer agency. It does open the question of why you would need to up end the current state of
play of preemption, he said.
But Ryan said national banks should face additional enforcement, like other businesses. Why do
national banks deserve protection that almost no one else in our economy gets? he said. Why do
they get excluded from enforcement at the state level when the biggest car companies, oil
companies, Wal-Mart gets subjected to it? What social function are they performing that would
exempt them from the full range of possibilities our democracy presents?
What version will ultimately prevail remains unclear. Sen. Tom Carper, D-Del., who authored the
provision in the Senate bill, said last week he was confident it would be included in the final
bill. Some analysts agree.
I suspect the compromise on the Senate side will carry the day, said Raj Date, the chairman of
the Cambridge Winter Center for Financial Institutions Policy.
Page 11 of 14
2. |
|
White House Focuses on Five Regulatory Reform Priorities |
|
|
By Cheyenne Hopkins |
|
|
May 28, 2010 American Banker |
The Obama administration continued to push its priorities Thursday on what provisions should be
included in the final regulatory reform bill.
Neal Wolin, Treasury deputy secretary, said the administration was focused on several things,
including subjecting retail brokers to a fiduciary duty, preventing auto dealers from being
exempted from consumer protection and ensuring the so-called Volcker Rule is part of the final
bill.
As conferees begin the process of reconciling the remaining differences in the two bills, we will
continue to fight for the strongest financial reform bill possible, Wolin at a speech before the
Financial Industry Regulatory Authoritys conference in Baltimore. And we will oppose any attempts
by particular interests to use the conference process as an opportunity to weaken the final bill.
He said the administration will work to include the Volcker Rules ban of proprietary trading and
limit on the size of financial firms. The Volcker Rule is part of the Senate bill but not
explicitly included in the House.
Wolin also said that the administration will seek to maintain safeguards to prevent resolution
authority being used unless necessary but also maintain flexibility to act in a time of crisis.
In an interview on CNBC before the speech, Wolin once again dodged taking a position on a provision
in the Senate bill that would force banks to spin off their derivatives business. We want to make
sure dealers are well regulated, that we have transparency, central clearing and so forth, he
said.
Page 12 of 14
3. |
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Consumers Save More, Hold Spending Steady |
|
|
By Sara Murray and Luca Di Leo |
|
|
May 29, 2010 Wall Street Journal |
Consumer spending got off to a lackluster start in the second quarter as Americans focused more on
the extra income they earned in April.
Meanwhile, consumers views on the state of the economy grew increasingly optimistic in May, a
separate report showed.
Consumption remained flat in April, the Commerce Department said Friday, despite an increase in
incomes fueled by the job markets improvement last month. It was the first time in six months that
consumer spending didnt increase, and follows gains of 0.5% and 0.6% in February and March,
respectively.
I just think we saw some really outsized gains in February and March, said Michelle Girard, an
RBS Securities Inc. analyst, adding that the outlook for consumer spending remains strong thanks to
the labor-market rebound.
The slowly improving job market, which added 290,000 positions to payrolls last month, helped boost
personal income 0.4% in April from the prior month. Income also grew 0.4% in March, while the
saving rate rose to 3.6% in April from 3.1% in March.
Meanwhile, slack left from the recession is keeping a lid on prices. A price gauge closely watched
by the Federal Reserve was tame in April, giving the central bank continued reason to keep interest
rates near zero to support the recovery and bring unemployment down.
The core price index for personal-consumption expenditures, which excludes food and energy prices
because of their volatility, rose 0.1% in April. On a year-over-year basis, it rose 1.2%. The
overall price index, which includes food and energy prices, was flat last month and was up 2.0% on
a year-over-year basis.
Separately, the Thomson Reuters/University of Michigan gauge of consumer sentiment rose to 73.6 in
May from 72.2 in April. The improvement came entirely from consumers more positive feelings on
where the economy is headed. Their view of the current state of the economy remained the same.
Page 13 of 14
The Daily News Brief is published exclusively for the Employees of TD Bank; please do not
distribute outside the company.
The information presented may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and comparable safe harbour provisions of
applicable Canadian legislation, including, but not limited to, statements relating to anticipated
financial and operating results, the companies plans, objectives, expectations and intentions,
cost savings and other statements, including words such as anticipate, believe, plan,
estimate, expect, intend, will, should, may, and other similar expressions.
Such statements are based upon the current beliefs and expectations of our management and involve a
number of
significant risks and uncertainties. Actual results may differ materially from the
results anticipated in these forward-looking statements. The following factors, among others,
could cause or contribute to such material differences: the ability to obtain the approval of the
transaction by The South Financial Group, Inc. shareholders; the ability to realize the expected
synergies resulting from the transaction in the amounts or in the timeframe anticipated; the
ability to integrate The South Financial Group, Inc.s businesses into those of The
Toronto-Dominion Bank in a timely and cost-efficient manner; and the ability to obtain governmental
approvals of the transaction or to satisfy other conditions to the transaction on the proposed
terms and timeframe. Additional factors that could cause The Toronto-Dominion Banks and The South
Financial Group, Inc.s results to differ materially from those described in the forward-looking
statements can be found in the 2009 Annual Report on Form 40-F for The Toronto-Dominion Bank and
the 2009 Annual Report on Form 10-K of The South Financial Group, Inc. filed with the Securities
and Exchange Commission and available at the Securities and Exchange Commissions Internet site
(http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial Group,
Inc. will be submitted to The South Financial Group, Inc.s shareholders for their consideration.
Shareholders are encouraged to read the proxy statement/prospectus regarding the proposed
transaction when it becomes available because it will contain important information. Shareholders
will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings
containing information about The Toronto-Dominion Bank and The South Financial Group, Inc., without
charge, at the SECs internet site (http://www.sec.gov). Copies of the proxy statement/prospectus
and the filings with the SEC that will be incorporated by reference in the proxy
statement/prospectus can also be obtained, when available, without charge, by directing a request
to The Toronto-Dominion Bank, 15th floor, 66 Wellington Street West, Toronto, ON M5K 1A2,
Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc., Investor
Relations, 104 South Main Street Poinsett Plaza, 6th Floor, Greenville, South Carolina 29601,
1-888-592-3001.
The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
executive officers and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding The Toronto-Dominion Banks
directors and executive officers is available in its Annual Report on Form 40-F for the year ended
October 31, 2009, which was filed with the Securities and Exchange Commission on December 03, 2009,
and in its notice of annual meeting and proxy circular for its most recent annual meeting, which
was filed with the Securities and Exchange Commission on February 25, 2010. Information regarding
The South Financial Group, Inc.s directors and executive officers is available in The South
Financial Group, Inc.s proxy statement for its most recent annual meeting, which was filed with
the Securities and Exchange Commission on April 07, 2010. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become available.
Page 14 of 14