Tim Hockey of Toronto-Dominion Bank is shown in this 2011 photo.Fred Lum/The Globe and Mail
Few bank executive departures will make heads turn as much as Tim Hockey's from Toronto-Dominion Bank. The man helped build a profit powerhouse.
Since he became a group head of Canadian banking in 2008, Mr. Hockey was constantly given more responsibility, including insurance in 2010 and wealth management in 2013. By leaving to run TD Ameritrade, one of the few people to touch almost every aspect of the bank's core domestic franchise has vanished.
Because Mr. Hockey was consistently given more business units to run, it is tricky to compare his recent performance to past results; the bank kept changing the way it reported earnings. But in 2008, the year he got full responsibility for Canadian banking, the unit made $2.4-billion. In 2013, the year before wealth was wrapped into this business, Canadian banking made $3.8-billion – and that's without accounting for the insurance business, which was wrapped into another division.
Dissecting the unit's revenues can help explain where this expansion came from. From 2008 to 2014, the last full year for which earnings are available, business banking revenue climbed 27 per cent. And from 2008 to 2013, consumer lending revenues nearly doubled (2013 is the last year this income line was isolated in TD's annual report.)
Mr. Hockey also helped TD's domestic crown jewel be better run. In banking, the efficiency ratio is a measure of expenses to total revenue: in 2008, this figure for the Canadian arm stood at 51 per cent; by 2014 it had fallen to 44 per cent.
No one would argue Mr. Hockey did all of this himself. TD's Canadian banking division has 39,000 employees. The unit also got major profit boosts from acquisitions, such as the purchases of Chrysler Financial's auto lending business as well as credit card portfolios from MBNA Canada and Aimia, which runs the Aeroplan business.
Like its peers, TD also benefited from a massive surge in personal lending across Canada, spurred by incredibly low interest rates. For years, bank CEOs have expected the party to end, but it keeps raging – albeit at quieter levels now.
Mr. Hockey was particularly keen on expanding TD's credit card footprint, an area the bank had historically lagged. When acquiring the MBNA portfolio in 2011, Mr. Hockey admitted the bank's total credit card business was "below what we would perceive as our natural market share." That's a nice way of saying "we're really far behind."
Arguably, what Mr. Hockey will be most remembered for is TD's commitment to customer service – something that stemmed from his close relationship with former bank CEO Ed Clark, who strongly believed top-notch service could be a profit driver. Mr. Hockey embraced that view – and proved it to be true. It's now something the bank is very proud of. When Mr. Hockey took over the unit, TD used to refer to its customer service as "superior" to rivals. Today it openly calls it "legendary." What no one knows is whether it will make TD stand out in a more digitally focused future.
Until now, though, it worked, and that's been a big boon to TD. The bank has struggled to derive sizable profits from its U.S. business, which it built by spending roughly $20-billion south of the border since 2004. The U.S. personal and commercial banking market is incredibly competitive right now, and interest rates haven't ticked higher in years, which makes it hard to earn decent spreads.
But because TD's Canadian equivalent business has been so strong, investors haven't had to worry all that much about the United States. Mr. Hockey maintained the bank's domestic leadership position for personal deposit market share, despite fierce competition from rivals, and that helped fund the loan growth that boosted profits.
To appreciate how respected Mr. Hockey is on Bay Street, remember that his name was floated as a possible candidate when Canadian Imperial Bank of Commerce was searching for a new CEO last year. (Asked about it at the time, Mr. Hockey declined to comment.) Now he's gone from Canadian banking altogether.
Editor's note: An earlier version of this article said the MBNA credit card purchase occurred in 2010. In fact, it happened in 2011. This version has been corrected.