Fitch Affirms Toronto Dominion Bank; Places TD Banknorth On Watch Positive

By Financial News

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Fitch Ratings has affirmed the 'AA-/F1+' long- and short-term ratings for Toronto-Dominion Bank (TD). TD's Rating Outlook remains Stable. Fitch has also placed TD Banknorth Inc. (BNK; 'A/F1') and its principal subsidiaries on Rating Watch Positive. These rating actions follow today's announcement that TD (BNK's majority stakeholder) and BNK have reached an agreement in which TD will acquire the remaining minority interest in BNK so that BNK will become a wholly owned subsidiary of TD when the transaction closes. A complete list of ratings follows at the end of this release.

TD has agreed to acquire the remaining minority interest in BNK at a price of US$32.33 per common share for total consideration of approximately US$3.2 billion. This is an all cash transaction and TD expects to fund the acquisition with the issuance of approximately CAD3 billion in subordinated debt and/or hybrid capital securities, issued in CAD, US$ or other currencies. The transaction is subject to the necessary shareholder approvals and is anticipated to close in TD's second quarter 2007. Fitch views the projected reduction in TD's capital levels and increased leverage as tolerable at TD's current ratings level. That said, Fitch expects that TD will remain acquisitive, particularly in the U.S., and Fitch will continue to closely monitor TD's capital position as it funds organic growth and potential acquisitions. Integration risk in this transaction should be virtually nonexistent as BNK has become more integrated with TD over time since TD purchased a controlling interest in BNK during March 2005. Key BNK personnel are expected to remain with BNK as scheduled. Placing BNK's ratings on Rating Watch Positive reflects the fact that at consummation, BNK will become a wholly owned subsidiary of TD. Fitch anticipates aligning BNK's ratings with those of TD's when the transaction closes.

TD's current ratings reflect its strong Canadian retail franchise, good revenue diversification, solid asset quality, satisfactory funding profile, adequate capitalization and sound risk management practices. Over the last few years, TD de-emphasized much of its corporate lending and has achieved its desired overall business mix of 80% retail and 20% wholesale. Revenue diversification has improved due to BNK and TD Ameritrade. Domestically, TD captures 21% of personal deposits in Canada and the franchise's retail deposit and loan market share has been stable to slightly improving.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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