There’s a lot to like about Canada: passionate hockey fans, abundant maple syrup, universal health insurance. Oh yes, and boring, very successful banks. Their winning formula is rooted in a consistent strategy, strong messages and solid execution. It’s enough to make us consider an office north of the border.
I was in Vancouver last week, a delightful city near mountains and sea. And while riding out my jet lag with some evening television, my attention was riveted not by the US-Canada women’s hockey game (won by the Canadians in a thrilling comeback) or the international curling championship but by something quite different: a panel discussion on Canadian banking.
The program was the sort of thing you could find on any business-news channel, with four panelists representing a spectrum of opinion, and a serious-minded moderator. But the conversation was completely different from what you’d see in the US, in both tone and substance.
First, there was not a fierce discussion of “too-big-to-fail” or separating trading and lending or calls to break up the biggest banks. There was none of the raw anger toward banks over bailouts, excessive pay or home foreclosures. In fact, nearly all of the issues that have preoccupied – and divided – public debate on the financial sector in the US were absent. For the most part, Canada simply doesn’t have them.
Canada’s banks largely avoided the excesses that brought disaster to their US brethren, like sub-prime lending, complex securitizations and excessive leverage.
They also have operated within a longstanding public consensus on the role of banks in the economy, which has meant more regulation than in the US and steady if unspectacular profitability. But they have also kept to their strategies and executed. Their success shows the power of having a simple message backed by strong performance.
There’s no better example than Toronto-Dominion bank. Through a steady push into the US over the past decade, it is now the eighth largest bank in the US, with more branches than Citibank.
It announced last week that Bharat Marani, the executive who led the bank’s push in the US, would succeed Ed Clark as CEO next year, in a long-planned succession. In a call with investors, In a Financial Times article, Masrani stressed the messages that have been at the core of the bank’s strategy:
“Our message here is continuity. This is not a change that entails changing what we stand for, what our strategy is or what we deliver day in and day out…. We have made it clear that we are a North American bank. We are an organic growth engine. We will continue to grow and take share. And 10 years from now I expect the bank to be much larger than what it is today.”
TD Bank has made its share of acquisitions, too, but its core message of organic growth and expansion in North America have been remarkably consistent over the past decade. And TD Bank has delivered the goods, with its US assets growing from $21 billion in 2000 to more than $170 billion today. Contrast that with the stumbles of big American banks like Citibank and Bank of America, or the retreat by European banks in the wake of the financial crisis.
The Canadian panel had its moments of drama, to be sure. There were mild (and polite!) disagreements on whether Canadian banks were lending enough to support the economic recovery, and some panelists voiced worries over the dangers of derivatives and proprietary trading. But those moments were nothing like the flame-throwing seen on countless similar panels in the US when these issues are discussed.
Canadians prefer to leave passionate battles for the hockey rink.
See the panel discussion here.