TD Bank Targets U.S. Expansion -- Again


You've got to hand it to Toronto-Dominion Bank (NYS: TD) . Less than two weeks after they admitted to a months-ago loss of sensitive data related to its U.S. customers' accounts, the Canadian bank announces its deal to buy Target's (NYS: TGT) credit card business.

Well, that's certainly one way to move some negative news out of the headlines.

U.S. growth is on track
Seriously, TD Bank has been aggressively pressing its way into U.S. financial markets for some time, and its expansive reach has helped it become the second largest bank in Canada. The deal with Targe encompasses $5.9 billion of outstanding card balances, exactly the amount that TD has agreed to pay. TD will also become the issuer of all Target-branded credit cards, including its Visa (NYS: V) card, for the next seven years. This certainly sounds like a sweet arrangement for TD, and Target's nearly 1,800 stores across the U.S. should help spread the bank's presence further still.

But wait; there's more. TD has recently taken on another sparkly credit card deal: The bank will now manage the private-label credit card businesses of retail giant Kroger's (NYS: KR) , Fred Meyer Jewelers, and its subsidiary, Littman Jewelers. This agreement will apply to 344 locations in 32 states.

In addition, there are strong rumors that Royal Bank of Scotland's (NYS: RBS) jewel in the crown, Citizens Financial Group, may be going up for sale to plump RBS' skimpy capital reserves. Citizens is based in Rhode Island, but has 1,500 branches in 13 states. Guess which bank is the favorite among analysts to scoop up this gem if it goes on the market? That's right -- TD Bank.

It looks like the great closer lost out on one recent acquisition, however. Both TD and Royal Bank of Canada (NYS: RY) locked horns over the one-time financing unit of General Motors (NYS: GM) . When the smoke cleared, RBC emerged victorious, buying Ally Financial for $4.1 billion. For RBC, this transaction represented the biggest undertaking in the bank's history.

One Fool's take
Canadian banks like TD are a healthy lot, having weathered the financial crisis in fine form, and dodging the subprime meltdown entirely. This has given them a nice capital cushion with which to hunt down attractive deals in the U.S., where the domestic big banks are still nursing their crisis-era wounds.

For TD, there seems no end to their expansion plans, and the growth that these deals produce just might set up another battle with Royal Bank of Canada -- this time, for the position of No. 1 bank in Canada. TD likes to share the spoils with its investors, too -- the bank will pay out a tasty nugget of $0.77 per share for the third quarter, an increase of 7% from the previous quarter. Now that's something for investors to chew on.

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