Bharat Masrani praised Canadian leaders for appearing to react faster to the pandemic by introducing social distancing and business closings earlier than many of their U.S. counterparts.The Globe and Mail
Bharat Masrani predicts that by late summer, the North American economy will take the first steps in a spirited recovery from a global pandemic. But Toronto-Dominion Bank’s chief executive expects some dark days between now and then, based on the “terrible” times the bank’s customers are experiencing as the new coronavirus sweeps through New York City.
TD has more branches along the U.S. eastern seaboard – 1,220 – than in all of Canada, and Mr. Masrani said New York is like the bank’s second home. That puts TD at the front lines in the United States as it helps customers cope with the COVID-19 pandemic.
Before he became CEO, Mr. Masrani spent seven years running the bank’s U.S. operations, with 26,000 employees, and built deep ties with employees and clients in the Big Apple. The situation he’s watching unfold in New York is having a “deep psychological impact” on one of the world’s leading financial centres, he said in an interview on Friday.
“New York is going through a really rough patch,” Mr. Masrani said. “The [pandemic] peak is going to probably be earlier, but it’s going to be a much steeper and a higher peak than what people were expecting."
He praised Canadian leaders for appearing to react faster to the pandemic by introducing social distancing and business closings earlier than many of their U.S. counterparts. “Now, let’s hope that [New York] is not the picture in other major metropolitan areas like Toronto. It does not appear to be, but this is so unpredictable.”
Looking a few months down the road, TD’s boss said he thinks individuals and businesses should be able to bounce back relatively quickly from this crisis, as it stems from a health care problem, rather than the deep-seated economic issues responsible for most recessions. Mr. Masrani said internal models show the North American economy growing by the third or fourth quarter this year and back to precrisis levels early in 2021. But he cautioned: The model is only as good as the data, and “every day it changes, based on new data.”
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TD bankers are already talking to corporate clients about the financial support needed to get their businesses running once restrictions are lifted, Mr. Masrani said: “We have to make sure the number of permanent job losses in minimal.”
Right now, job one at TD and rival banks is keeping employees safe and working with government agencies to deliver money from support programs to customers as quickly as possible. When it comes to getting cash to clients, Mr. Masrani said its building of U.S. branches – or what TD calls “stores” – now seems prescient, with their drive-through outlets that resemble fast-food restaurants. At some of those branches, TD has pneumatic tubes to shoot transaction documents from the customer’s car to the teller and back with no direct human contact.
TD is ramping up the digital services it offers to clients, a shift that Mr. Masrani said he expects will be permanent. As part of its response to COVID-19, TD is making greater use of predictive artificial intelligence software, much of which the bank acquired in 2018 when it bought AI company Layer 6. “We were able to predict which of our customers are going to go through financial hardship even before the customer knew,” he said.
Since the pandemic began to have a significant impact on North American businesses last month, Mr. Masrani said credit markets have closed, then re-opened. In mid-March, TD’s corporate clients, including Alberta-based energy companies, aggressively tapped lines of credit and other borrowing facilities, because other sources of capital, such issuing corporate bonds, dried up. He said TD was able to meet this demand because it went into the crisis without “the baggage" of large numbers of bad loans, with strong capital ratios and experienced credit teams.
“We have this motto at TD for many years now that we don’t make bad loans during good times, in order to allow us to make good loans in bad times," said Mr. Masrani, who is also the bank’s former chief risk officer.
In the past two weeks, Mr. Masrani said the investment-grade bond market “has been on fire,” and companies have been able to issue debt, lessening the demand for credit facilities at banks. He said corporate borrowers are paying higher interest rates compared to earlier this year – “it’s the new normal” – but capital is available to companies with solid credit ratings.
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Andrew Willis
James Bradshaw