The Toronto-Dominion Bank

The Toronto-Dominion Bank

Post Office Box 1
King Street West and Bay Street
Toronto, Ontario M5K 1A2
Canada
(416) 982-8222

Public Company
Incorporated: 1955
Employees: 22,853
Assets: C$58.1 billion (US$48.7 billion)
Stock Index: Toronto Winnipeg Montreal Tokyo Vancouver London Alberta

The Toronto-Dominion Bank’s hyphenated name suggests its origins: the amalgamation of the Bank of Toronto and of the Dominion Bank. The Bank of Toronto missed celebrating its centennial by six weeks when the new bank’s charter was signed on February 1, 1955. Today, the Toronto-Dominion Bank leads Canada’s banks in profits although it is only fifth in assets. Strong leadership has enabled the bank to endure economic contraction and to prosper during expansion.

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

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

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

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

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

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

Over the next several decades, through a series of booms and busts, Canada’s economy grew and new industries were established: dairying, textiles, pulpwood, mining, and petroleum. The Canadian frontier advanced through Manitoba, Saskatchewan, Alberta, and British Columbia. Both the Bank of Toronto and the Dominion Bank responded to this expansion with a pioneering spirit. Many a new office shared the counter of a town’s one general store, while a one-man staff slept with deposits beneath his mattress and a revolver under his pillow.

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

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

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

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

On opening day, the Toronto-Dominion Bank operated 450 branches, including offices in New York and London. It controlled assets of $1.1 billion and a loan portfolio of $479 million. During its first 15 years the new bank devoted a great deal of effort to establishing a unified image. In 1967, it moved into the 56-story Toronto-Dominion Bank Tower of the Toronto-Dominion Centre.

During the 1970s, the Toronto-Dominion Bank began to expand internationally. Within three years, it opened branches in such diverse locations as Bangkok, Frankfurt, and Beirut. During the mid-1970s, the Toronto-Dominion issued the $65 million offering for the Toronto Eaton Centre, a 15-acre urban redevelopment project in downtown Toronto.

The past 15 years form one distinct chapter in Toronto-Dominion’s history, in the person of Richard Murray Thomson, who has guided the institution as president and, since the end of 1976, as chairman. The bank has consistently outperformed its rivals both in return on assets and in stock performance for the past decade and is one of only two non-regional banks in North America to enjoy an AAA credit rating. Yet Thomson is independent enough to have refused the government’s request to provide free services to retail depositors and to have led the opposition against the bailout of two regional banks in Alberta. On the other hand, he willingly stopped the flow of money to Canadian firms for the purchase of foreign oil companies because it was causing a run on the already weak dollar in 1981. Thomson boasts that the Canadian system of banking is the envy of the world. During the current decade the Toronto-Dominion Bank helped solve two major concerns threatening Canadian banks: Third World debt and the debt of Dome Petroleum.

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

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

The outlook for Toronto-Dominion is bright. Overseas operations have been trimmed to eight and U.S. offices to six as Thomson works to capitalize on strengths. It has taken the lead in lending to the cable-television industry and will continue to explore industries in which it can play a leadership role. There is every reason to expect that the little bank of the Big Five will continue to outperform its older, bigger colleagues.

Principal Subsidiaries

Chargex Ltd. (25%); The Edmonton Centre Ltd. (30%); Export Finance Corporation of Canada, Ltd. (11%); Pacific Centre Ltd. (33.3%); Scotia-Toronto Dominion Leasing Ltd. (50%); TD Capital Group Ltd.; Torcred Developments Ltd. (50%); TD Mortgage Corp.; Toronto-Dominion Centre Ltd. (50%); Toronto-Dominion Export Finance Co. Ltd.; Toronto-Dominion Leasing Ltd.; Toronto-Dominion Realty Co. Ltd.; 82195 Canada Ltd. (25%); TD Factors Ltd.; TD Financial Futures Ltd.; TD Forest Investments Ltd.; Green Line Investor Services Inc.; TD Securities, Inc. Foreign: Commercial Pacific Trust Co. Ltd. (12.5%); Dominbank Nominees Ltd.; Toronto Dominion Nominees Ltd.; Tordom Nominees (H.K.) Ltd.; Tordom Nominees (Pte) Ltd.; Toronto-Dominion Holdings (U.S.A.), Inc.; Toronto Dominion Investments B.V.; Toronto Dominion (South East Asia) Ltd.; 3637 Indian Creek Drive Corp.; Toronto Dominion Australia Ltd.

Further Reading

Schull, Joseph. 100 Years of Banking in Canada: A History of the Toronto-Dominion Bank, Copp Clark, Toronto, 1958.