NEW YORK (
is a positive for all the parties involved
Keefe, Bruyette & Woods'
analyst Brian Klock told
"The U.S. bank subsidiary will benefit from this. These are higher yielding assets right now and the bank can take the excess deposits and put them to work. When the economy rebounds they could go as high as a billion in origination growth in three to four years," said Klock. "If this works, you get the growth out of the platform. If it doesn't work you can reassess to put them to work in bank's cash flows."
Klock also said that the move is good for Chrysler Financial because the auto company will get the backing that it needs to restart growth. Chrysler Financial has been in runoff while Cerberus was restructuring the unit. It has been able to resign a slightly over 2,000 of the 5,000 dealer network and will likely be able to sign on more after this deal.
"I just think that it wasn't working for
Cerberus. They didn't have the total platform and core funding. They had the TARP financing and control costs. They didn't have the core funding to take that platform and get the value out of it," said Klock.
Klock says that overall the deal is low risk, not dilutive to equity and with low integration costs. He says that TD's goals of making a return on invested capital of approximately 20% in three to four years is not impossible. The expectation is that more people will be purchasing cars as the economy recovers to get to their jobs.
Besides the growth in auto lending, TD is also poised to grow in banking. TD CEO Ed Clark said that the bank would likely make
Klock says that the bank will likely look at deals below $7 billion in the U.S.
--Written by Maria Woehr in New York.
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