Winnipeg Free Press - PRINT EDITION

Canada's banks face challenges as some prepare for new leaders

  • Print

TORONTO -- Change is afoot at the big Canadian banks, as some of its top leaders near retirement age just as the economy runs into fresh challenges with the pace of growth.

Two weeks ago, TD Bank chief executive Ed Clark disclosed a succession plan that will lead to his exit in November 2014, but his move also raises questions about how the other big banks are planning for their next generation of leaders.

"Succession is always of interest, especially to shareholders," said Dan Werner, Canadian bank analyst at Morningstar, based in Chicago.

"You're not going to see the growth that you saw five or six years ago," he added.

During the past few years, the Canadian banking sector has thrived on its lack of surprises, having endured the financial crisis without suffering any major stumbles and keeping its dividends reliable for investors.

Those days could be over as expectations of slower growth overtake Canadian retail banking and questions arise over where each bank will choose to turn in an attempt to drive its profits higher.

Clark told TD's annual meeting two weeks ago that slower growth in the Canadian economy will pressure the sector and make it tougher for the bank to meet its earnings targets of seven to 10 per cent in 2013.

While the other banks haven't shared their specific outlooks yet, the list of headwinds runs long, from high consumer debt to weakness in the housing market and a stubborn recovery in the U.S. economy.

"You've got natural slowing of growth in your core business, you've got a highly leveraged customer... and you've got very few switches to pull to allocate capital on a cost-effective basis and feel comfortable it will return," said Stonecap Securities analyst Brad Smith.

"Those are pretty big challenges for incoming CEOs."

TD Bank appears to be embarking on its next chapter with an incredible amount of caution. The bank launched an 18-month transition period that will ease Bharat Masrani into the CEO role, even though he's been at the bank in various roles for 25 years.

Masrani has been in the eye of the financial storm as head of TD's U.S. operations for the past seven years, when he helped grow the bank's presence in New England and the U.S. northeastern and mid-Atlantic states mostly through acquisitions.

Other Canadian banks could fall in lockstep by looking outside the Canadian executive ranks to find their next CEOs, Werner said.

"It's a clear signal, from the boards at least, that this is where they see the company moving in terms of growth," he said.

Depending on the bank, the leaders may come from a variety of different places.

"Each one of these banks has some areas of specialty that they can continue to pick away at," he said.

Nailing down when a CEO is going to retire can be a difficult task for observers, who typically rely on rumours or more tangible evidence, such as in the case of Scotiabank head Rick Waugh who has been easing off some of his responsibilities.

Last October, Waugh -- who like TD's Clark is 65 -- handed his title of president to longtime Scotiabank executive Brian Porter, a move seen by many that makes him the leading candidate for the top job.

At Bank of Montreal, CEO Bill Downe is 61, which could still give him several more years in the job.

Then there's Gord Nixon, chief executive at Royal Bank, who has served as CEO for 12 years, but is only 56 years old, which suggests he could keep going for several more years, as his counterpart at CIBC Gerald McCaughey is expected to do.

Regardless of how long each remains as CEO at the bank, it is clear that within the next five to eight years, the leadership at Canada's banks will look quite different.

"You've got people underneath them and you don't want to lose them to other organizations," said Chris King, portfolio manager at Morgan, Meighen and Associates.

"I think you're really looking at two tiers (of departure)."

King believes it's likely Waugh will be the next to leave, while the other three CEOs will depart during another wave closer to the end of the decade.

-- The Canadian Press


Republished from the Winnipeg Free Press print edition April 19, 2013 B4

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Red River flooding north of Selkik at McIvor Lane

View more like this

Photo Store Gallery

  • Marc Gallant / Winnipeg Free Press.  Local/Standup- Morning Fog. Horse prances in field by McPhillips Road, north of Winnipeg. 060605.
  • horse in sunset - marc gallant

View More Gallery Photos

Poll

Do you support a proposed ban on tanning beds for youth under 18?

View Results

View Related Story

Ads by Google