People wait on line outside of TD Bank on April 16, 2020, in the Harlem neighborhood of New York City.David Dee Delgado/Getty Images
Leo Salom is about to get in the hot seat.
The 54-year-old American is preparing to take the reins of Toronto-Dominion Bank’s U.S. business. It’s a red-letter promotion, recently announced as part of a broader executive shuffle at TD, that instantly makes Mr. Salom a rising star in the North American banking industry.
Mr. Salom, who currently runs TD’s wealth management and insurance businesses, already has plenty of retail banking cred. His previous roles at Barclays and Citibank immersed him in personal and commercial banking in international markets, including Europe, the Middle East and Northern Africa.
Still, America’s retail banking market is a special kind of beast. It has always been cutthroat but the economic fallout from the COVID-19 pandemic has created new setbacks for lenders across the industry. That change in fortune means that Mr. Salom will have his work cut out for him when he starts his new job on Jan. 1.
Financial institutions are navigating numerous challenges in the United States and TD is no exception. Not only is retail banking still a slog, the regulatory environment is becoming increasingly hawkish. U.S. President Joe Biden has taken a sharp left turn from his predecessor by championing pro-consumer policies and advocating a more utilitarian role for banks.
That means Mr. Salom faces baptism by fire when he replaces Greg Braca as head of TD’s U.S. retail bank. (Mr. Braca will still have a hand in the business as vice-chair of TD Bank in the United States.)
“I’m excited to be taking on a new role in the U.S. for TD,” Mr. Salom said in a statement. “I have always admired the passion and expertise of our TD Bank colleagues and I am excited to join one of the country’s top ranked financial institutions.”
His leadership challenge, of course, will be to translate that passion and expertise into improved profitability and growth.
Mr. Salom’s past achievements – such as increasing total assets managed for clients across TD’s Canadian and U.S. wealth platforms and spearheading the digital transformation of its Canadian direct investing and insurance businesses – provide insight into his moxie as an executive.
But the pressure to perform in his new job will be next level.
TD is the eighth-largest bank in the United States, where it has more than 1,140 branches, and retail banking is its bread and butter. But like other lenders, TD is grappling with sluggish demand for loans while its net interest margin – the difference between what it pays for deposits and what it earns on loans – is being squished by ultralow interest rates.
During TD’s fiscal third quarter, its U.S. retail bank recorded a 5-per-cent decrease in average loan volumes on a year-over-year basis. Conversely, average deposit volumes increased by 10 per cent.
Some relief is in sight because the U.S. Federal Reserve is expected to raise interest rates in 2022.
But investors, who have bid up TD’s stock price by more than 45 per cent over the past year, are notoriously impatient. They’ll be watching to see how TD fares against larger U.S. rivals, if it pursues acquisitions and how it plans to avoid the problems that have tripped up other foreign banks.
Over the past year, London-based HSBC Holdings, Spain’s Banco Bilbao Vizcaya Argentaria and Japan’s Mitsubishi UFJ Financial Group have all decided to exit their respective U.S. retail banking businesses.
Israel’s Bank Leumi, meanwhile, is reducing its exposure to the U.S. market. It announced in September that it plans to merge its U.S. operations with Valley National Bancorp and take a minority stake in the combined entity.
In addition to increased competition and rising costs, banks have also been spooked by a more contentious regulatory environment.
Saule Omarova, who is Mr. Biden’s nominee for Comptroller of the Currency, a key regulatory post, is regarded as anti-bank by many on Wall Street and by some Republicans. For her part, Ms. Omarova has shot back at her critics, accusing them of demonizing her for being a woman, immigrant and a visible minority.
Meanwhile, the new head of the Consumer Financial Protection Bureau, Rohit Chopra, plans to take a tougher line with lenders. In addition to cracking down on banks that repeatedly break the rules, he said he will pursue stricter enforcement of fair lending laws and review other consumer banking practices.
“I’m concerned that many Americans could be paying lower rates on their mortgages and credit cards and earning higher rates on their savings,” Mr. Chopra recently told the U.S. Senate Banking Committee.
That regulatory backdrop has real consequences for retail banks, including TD. They’ll be forced to adapt and that could constrain fee income.
In fact, TD has already faced questions from analysts about the revenue impact of its decision to introduce a new deposit product in the United States that doesn’t charge overdraft fees.
TD bills itself as “America’s most convenient bank” and that marketing claim is going to be put to the test like never before.
Mr. Salom has become the man to watch at TD. His promotion heralds much promise – just as long as he can navigate the pitfalls ahead.
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