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TD Bank Closes Epoch Acquisition

Zacks Equity Research

Late last month, The Toronto-Dominion Bank (TD) – also known as TD Bank – closed the acquisition of U.S. based Epoch Holding Corporation and its fully owned subsidiary Epoch Investment Partners, Inc. The closure of this deal reinforces the company’s strategy to expand its footprints in the U.S.’s wealth management sector.

TD Bank is likely to add about $25.9 billion in assets under management to C$$211 billion, already being managed by TD Asset Management. Meanwhile, Epoch will continue working under its present brand name and operating structure.

Further, the acquisition will be accretive to the earnings of TD Bank in fiscal 2014, besides having a minimal impact on the earnings in fiscal 2013. Also, the company’s Basel III Tier 1 common equity ratio is expected to decline nearly 25 basis points from 8.8% as of Jan 31, 2013.

Moreover, the acquisition will considerably strengthen the U.S.-based wealth management unit of TD Bank and significantly widen the variety of product it offers to institutional and retail clients in Canada.

With over 20 years of expertise in investment management, Epoch is one of the highly successful asset management firms in the U.S. Further, management at TD Bank believes that this deal will provide both the firms an excellent opportunity to serve the clients in a more efficient manner.

Earlier in Mar 2013, TD Bank closed an acquisition with Target Corp. (TGT) to acquire Target's U.S. Visa and private label card portfolio with gross outstanding balance of $5.7 billion. Moreover, the company also entered into a 7-year agreement to be the exclusive issuer of Target-branded Visa and private label credit cards.

We expect TD Bank’s strategy to expand in the U.S. market through acquisitions and will enable it to improve overall earnings, going forward. Further, the aforesaid acquisition will likely be accretive to the revenue of the company’s Wealth and Insurance segment.

Currently, TD Bank retains a Zacks #4 Rank (Sell). However, other foreign banks like Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) and ICICI Bank Ltd. (IBN) carrying a Zacks Rank #1 (Strong Buy) are worth considering.

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