TD Bank Group President and CEO Bharat Masrani speaks during the bank's annual meeting of shareholders in Toronto on March 30, 2017.Peter Power/Reuters
Toronto-Dominion Bank TD-T chief executive officer Bharat Masrani says that the lender is still committed to its US$13.4-billion deal to scoop up First Horizon Corp. FHN-N even after the collapse of two regional banks in the United States sent the Tennessee-based lender’s shares tumbling.
At the end of TD’s two-hour annual shareholder meeting Thursday, investors peppered the bank with questions about the delayed closing of the second-largest Canadian takeover of a U.S. bank.
“We see the benefits of the merger,” Mr. Masrani said. “That’s why we are into an extension and a discussion with First Horizon.”
Shareholders asked an array of questions about whether TD believes it is now overpaying to acquire the regional bank, the cause of the delays in regulatory approvals and if it should consider walking away and turning its focus to an alternative acquisition.
In response to the questions, Mr. Masrani said the bank is continuing to engage in discussions with First Horizon and U.S. regulators, and that he is unable to provide any further update.
Shares of First Horizon have plunged since Silicon Valley Bank’s collapse sent U.S. regional lenders spiralling. The bank’s stock has tumbled 13 per cent since early March.
Last February, TD agreed to buy First Horizon for US$25 a share, higher than the US$18 range where it has been stuck in previous weeks. The wider spread between TD’s offer price and First Horizon’s deflated market value has prompted concerns around whether the Canadian bank should renegotiate the terms of the deal.
The deal has also faced challenges in getting regulatory approvals. In March, TD said in a filing that it does not expect to receive regulatory approvals in time to complete the deal before its merger deadline of May 27. Just three weeks earlier, the two banks said that they had “mutually agreed” to extend the merger deadline to May 27 from Feb. 27.
The fallout from two bank failures has also cast a spotlight on bank stability. Even without the First Horizon deal, TD already has a sizable retail and business banking operation in the U.S. One shareholder asked whether TD’s relatively large exposure to the U.S. banking market put it at greater risk of a liquidity crunch.
Mr. Masrani said that the lender must maintain liquidity and capital levels set by Canada’s banking regulator, which has tighter requirements than its U.S. counterparts.
“A lot of folks think of strategy as increasing market share, or increasing the balance sheet, but for us, it’s a tradition at the bank to have very strong capital levels, very strong liquidity, and a conservative risk appetite.”
Shareholder groups also moved several proposals, asking the bank to implement various measures including increasing its disclosures on issues including its impact on climate change and the pay gap between senior executives and its average employees. Each of the proposals were rejected.