Toronto-Dominion Bank’s (TD) acquisition of St. Louis-based Scottrade Bank and its increased stake in TD Ameritrade is in line with the bank’s U.S. expansion strategy and doesn’t impact its credit profile, says Toronto-based credit rating agency DBRS Ltd. in a report published Monday.

TD’s agreement to acquire Scottrade and to make an additional equity investment in TD Ameritrade Holding Corp. doesn’t change the bank’s credit ratings.

“DBRS views the acquisition as consistent with TD’s strategy of expanding its U.S. operations and is complimentary to existing business lines,” the report says.

Additionally, Scottrade’s US$15 billion of sweep deposits is considered a reliable, low cost source of funding, the report says, which boosts TD’s already strong U.S. deposit funding profile.

On the downside, the deal will shave about 30 basis points from TD’s common equity Tier 1 ratio, the report notes. “However, given TD’s solid capital levels and strong ability to generate capital, DBRS views this decline in capital as reasonable,” the report concludes.

See: TD Bank, TD Ameritrade to buy Scottrade Financial Services for US$4 billion

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