March 31, 2016 / 5:12 PM / 2 years ago

UPDATE 1-TD Bank says oil loan losses manageable, eyes U.S. acquisitions

* TD CEO says “indirect exposure” to oil slump a concern

* TD CEO says bank would consider Southeast U.S. purchases

* TD CEO calls for tougher scrutiny of alternative lenders (Adds CEO comments from conference call)

By Matt Scuffham

TORONTO, March 31 (Reuters) - Toronto Dominion Bank, Canada’s second biggest bank, said on Thursday that it expected losses from bad loans in the oil and gas sector to be manageable and would consider acquisitions in the United States.

TD has set aside a comparatively low amount to cover loans that have turned sour. Gross impaired loans in the oil and gas sector fell to C$86 million in the first quarter from C$93 million in the fourth quarter. Other Canadian banks, such as Bank Nova Scotia, have warned of much higher losses.

“We remain confident that any losses in our oil and gas portfolio will be manageable given the small size of this exposure relative to our overall balance sheet,” Chief Executive Bharat Masrani told shareholders at the bank’s annual meeting.

However, Masrani acknowledged that the collapse in global commodity prices presented Canada with its biggest economic challenge, causing “a lot of pain in many parts of the country” and said he was concerned about the “indirect exposure” of the oil price slump on the bank’s customers.

“It is the indirect exposure, not just from a financial perspective but I think sometimes it is underestimated what it does to the local economy and what it does to our customers... Do I worry about it? Yes,” he told reporters on a conference call following the meeting.

Masrani said TD would consider acquisitions in the United States, especially in the Southeast, to accelerate growth.

“If there are compelling opportunities both from a strategic and a financial perspective that emerged we would certainly look at it seriously, particularly if there are opportunities in the Southeast of the U.S. where we are still relatively small compared to what our Northeast franchise might be,” he said.

TD has grown rapidly in the U.S. where it is now one of the 10 biggest banks with more than 1,300 branches and around $250 billion in assets.

Masrani also called for policymakers to consider subjecting alternative lenders to the same regulatory scrutiny as traditional banks. Peer-to-peer lenders have grown rapidly around the world, allowing investors to lend directly to individuals and businesses via low-cost online platforms.

“When you have providers that are more bank-like then I think it is important that they follow bank-like rules and standards that will make sure that their customers are protected from issues such as solvency,” he said. (Reporting by Matt Scuffham; Editing by Chizu Nomiyama and Phil Berlowitz)

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