* CEO says flat earnings would be "big accomplishment"
* Earnings payout ratio could rise to maintain dividend
* Dividend growth unlikely for 2009
* Still wary of significant U.S. acquisition for now (Adds details, quotes, background)
By Jeffrey Hodgson
TORONTO, April 2 (Reuters) - Toronto-Dominion Bank (TD.TO) Chief Executive Ed Clark said on Thursday it would be a "big accomplishment" for Canada's No 2 lender to keep its earnings from falling in 2009, given the pressures of a weak economy.
Clark also said it would take far worse economic conditions before the bank would consider cutting its dividend, although the current outlook means a dividend hike is also unlikely.
"In 2009, our job may be to simply maintain flat earnings per share. And, frankly, that would be a big accomplishment in today's environment," he told investors at the bank's annual meeting, held in Saint John, New Brunswick.
Clark had warned in February that while TD Bank would like to increase earnings this year, this would be "tough." [ID:nN25325226]
RBC Capital Markets said in a research note last month that Canadian banks should consider suspending their common share dividends. It said this would increase internal capital generation and reduce the need to raise capital if loan losses and writedowns accelerate. [ID:nBNG491677]
Clark said that given their wide ownership by retail investors, the banks would be reluctant to cut their dividends and would do so "with agony".
"If the world turned out to be way more dire than any of us are contemplating, then you'd have a responsibility to look at those things. But I think we're a long way away from that," he told reporters after the meeting.
The chief executive had earlier told shareholders that TD has a policy of paying out 35 to 45 percent of earnings as dividends, but could go above this ratio in order to maintain its dividend.
"In the first quarter, we were right at the upper limit, the 45 percent," Clark said.
"If our earnings don't grow or if in fact they decline, as long as the economic environment remains reasonably stable, we can go above that ratio for a period of time, a considerable period of time, and not be in danger because of our strong capital base."
Clark also warned investors attending the meeting that they should not expect dividend hikes any time soon.
"We don't see this year, in 2009, that we will have significant earnings per share growth, so as a consequence of that it's unlikely that we would have dividend growth either."
Clark, who told Reuters early last month the bank was not considering U.S. acquisitions without regulatory assistance, said he was still wary of making big buys in the United States. [ID:nN04197193]
"The economic outlook remains sufficiently uncertain that other than deals where we can have significant protection against the assets that we acquired, we'd be reluctant to make a major acquisition now," he told reporters.
The bank is more interested in building out its U.S. branch network in its current geographic footprint, which it could fill out or expand with smaller "tack-on" acquisitions at some point, Clark said.
TD Bank shares were up 1 percent at C$45.07 on the Toronto Stock Exchange on Thursday afternoon. (Editing by Rob Wilson)