Dominion Bond Rating Service has confirmed the ratings of Toronto-Dominion Bank, with stable trends.

The ratings are supported by TD’s leadership position in Canadian personal banking, low business risk profile, and strong credit risk profile, DBRS says. “During fiscal 2005, TD has been executing on its growth strategy while generating operating efficiencies in its Canadian retail banking franchise,” DBRS notes, adding that its views TD’s non-domestic growth strategies as contributing positively to the rating in the long term, provided they are properly executed.

On the downside, DBRS says that the ratings are limited by the bank’s ability to grow in under-represented retail markets in Canada and challenges associated with its U.S. retail banking growth strategy.

The rating agency says that it expects TD’s Canadian retail banking franchise to provide ongoing earnings stability given its low business risk profile. Challenges include leveraging its personal customer base to grow its market shares in credit cards, P&C insurance, small business, and commercial banking.

On March 1, 2005, TD closed the acquisition of 51% of the outstanding stock of Banknorth Group Inc. Subsequently, TD Banknorth announced the acquisition of 100% of the common shares of Hudson United Bancorp DBRS says it views these acquisitions as consistent with TD’s U.S. retail banking growth strategy to position it to benefit from U.S. banking consolidation. “Although TD Banknorth has been an active consolidator of U.S. Northeast community banks, Hudson carries higher integration risks, given the size relative to historic purchases and being outside of TD Banknorth’s existing footprint, but TD and TD Banknorth have experience in executing acquisitions successfully,” it notes.

In June 2005, TD announced the sale of TD Waterhouse USA to Ameritrade in exchange for a 32% ownership in the combined entity. DBRS also says it believes that transaction is consistent with TD’s strategy to obtain scale for its U.S. discount brokerage operations, better positioning it to defend against future industry consolidation and generating efficiencies, while continuing to benefit from favourable long-term industry trends.