I start by asking the classic opening question: What was it that influenced TD Bank’s Walter Owens to pursue a career in commercial finance? “I think it’s always easy to look back and make perfect sense of where you’ve ended up,” he says with slight amusement. “But, I think it was a series of moves that led me into commercial finance … really, I would call it a series of building blocks.” And while the building blocks are all finance related, the atypical progression of Owens’ career is worth noting.
Equipped with an accounting degree from Villanova University, Owens began his career in 1982 at Deloitte where he learned to apply the fundamentals. “But I knew I didn’t want to do that as a career and I met some folks at First Boston in the 1986-87 timeframe who were doing securitizations … early auto securitizations, in fact. And that looked a lot more exciting than public accounting. And the more we talked, the more I saw they were basically using accounting and tax expertise with some elementary commercial finance mechanics to create a new product. I was intrigued … so quite frankly, my introduction to commercial finance was through securitization.”
Drawn to securitization and eager to cross over into the capital markets, Owens obtained an M.B.A. from NYU’s Stern School of Business. He recalls, “Citibank was willing to hire me without a banking background to work on their structured transactions, but I grew a bit frustrated though, because most of the work was internal and I wanted to work on third-party transactions. That was tough to do at Citi, so when GE Capital was starting up their own securitization team, I was lucky enough to leverage my experience into a role there. With the power of the GE franchise, I figured it would be a chance to gain some great experience.”
Owens quickly learned that GE Capital’s leader, Gary Wendt, didn’t quite share his enthusiasm over the securitization product. Still, Owens persevered in figuring out ways to apply securitization in a way that wouldn’t encroach on GE’s core asset-based lending product. Owens admits, “Interestingly enough, I was able to learn the power of the commercial finance side of the business through my experience in securitizations and the capital markets. Most people go in the opposite direction. I found out how big the ABL market was … and I got pretty excited about that.”
A Turning Point
Owens recalls a “handwriting on the wall” moment. “I remember one day, someone at GE told me ‘I know you love [securitization], but if you’re serious about a career at GE Capital, you might want to get out of your comfort zone and do something different’ It was a real turning point for me, so I jumped into GE’s version of small-ticket lending.” The advice proved golden. Owens climbed the ladder quickly, eventually becoming the chief marketing officer at GE Capital developing marketing and sales deployment strategies.
In March 2005, Owens joined CIT as its chief sales officer to be part of its small management team then headed by Jeffrey Peek. He explains, “I was able to apply a lot of what I’d learned on the strategic marketing side of things and then moved on to be the head of CIT Corporate Finance. This was really middle-market corporate finance with a wide range of businesses, which made it another great opportunity.”
Toward the end of 2008, the industry learned he left his post at CIT, and quickly thereafter Owens was selected to head U.S. commercial banking at TD Bank, which had acquired Commerce Bank some six months earlier. “The move was like going to heaven from a business perspective,” he says. “If you look back at both TD Bank North and the Commerce Bank platforms, both had great commercial organizations. And we’ve continued that heritage with seasoned relationship managers who are empowered to deliver the bank to the customer. Those aren’t just words, this is how TD Bank operates Our senior management team from Bharat Masrani, our president and CEO, to our chief risk officer, and all of our commercial lenders are fully dedicated to preserving that value proposition.”
When Owens arrived at TD Bank, he quickly figured out that the path to success lay in taking commercial banking to the next level by servicing larger middle-market and corporate clients with a slightly different set of products, while keeping it all inside of the TD Bank model. “That’s what we’ve been at work on for the last two years and my vision is we can be a dominant player in the upper middle market and lower corporate spaces in the next three to five years. Everyone on board feels confident we can add this to the model and in fact, it will reinforce the existing model. And to me, that carries a lower execution risk than if we had to come up with a whole new model. We’ve been all about adding the product and ensuring the people we bring on board have the same culture and characteristics of the team we have in place.”
Collaboration Makes the List
So what makes the right person the right person? Owens explains, “When I tell you, it’s going to sound like what everyone else is looking for … you want someone who is focused and results oriented, someone who is highly networked with customers and has great relationship networks and someone with great credit skills. Everyone wants that, but I want someone who can actually work in the team environment. And not everyone can.”
While the tasks are simple and straightforward, the challenges are not. As such, Owens devotes much of his time coaching his team. He notes, “It’s easy to coach young kids and always a bit tougher to coach veterans. And one thing that’s an industry issue is that bankers stopped producing farm teams quite some time ago. So there are two challenges … we need to figure out how to create a pipeline of future bankers in asset-based lending and equipment finance as well as teach veterans that come on board the way we work. Both require a lot of time.”
And by many accounts, Owens has the ability to call forth the best in his team players. In late 2009, ABL Journal profiled Barry Kastner, who at that time had been appointed to lead TD Bank’s asset-based lending and equipment finance shops. In that interview, Kastner said, “I have tremendous respect for Walter. In my view, he’s one of the few visionaries in the business.”
When asked what he thought Kastner meant by the comment, he says, “I think part of this comes from the fact that I came at commercial finance, specifically ABL and equipment finance, from a different perspective … not through the traditional means. I didn’t start in the credit shop or audit shop and move up to the origination side. That’s given me the ability to look at things differently. Secondly, much has to do with the training I got at GE and it follows through at CIT and TD Bank. And that is, if you’re going to run the business, you need to be able to understand the markets, who your competition is and you’ve got to be convinced that you’re going to win. From there, you put together a simple way to execute it all.”
In terms of being a visionary, Owens attributes this to the training the received at GE Capital. He explains, “One of the best things I learned there was a rigorous strategy three-year planning session that takes place annually and is followed by a one-year look forward six months later. It’s a continuous process that forces all business leaders to articulate a three-year growth plan and has them constantly thinking about a number of things: the markets, the changes in the markets, what competitors are doing and how they can take advantage of all of these factors to grow in a double-digit kind of way.
“And then the management team puts you through the paces and while some thought it was a waste of time because the business leaders already know it, Mike Neal and Mike Gaudino both told me is that when real opportunity comes along and everyone’s not together, you’re going to be able to grab it.”
Ramping Up as Others Retrench
In 2008, Owens set forth to position TD Bank’s ABL shop for the inevitable rebound. “It was pretty obvious the ABL product would lead the way when the economy rebounded. At that time, the bank had a bit of dated view of the product and still viewed it as the last chance finance. I firmly believe it’s a core product that you absolutely have to have. In fact, certain industries find it to be an incredibly attractive form of finance. It was one of those perfect times were we could get into ABL in a meaningful way … the structures were the most conservative and the pricing was high. It was a great point of entry.”
Owens, whose world at TD Bank includes everything on the commercial banking side from ABL and equipment finance to derivatives and commercial real estate, is both mentor and coach to many. But who coached the coach? “That’s a tough question, because you learn so much from so many different people,” he says. “But right now it’s our CEO, Bharat Masrani. He’s taught me the value of discipline in a focused-growth execution strategy, and I think TD is really terrific at being both a great growth company and a well-managed risk company. The other big thing that Bharat’s taught me is that you can be a growth company and still be team based … and quite frankly, it’s a model I hadn’t experienced before.”
Looking back once again at GE Capital, Owens also credits the aforementioned Mikes — Mike Gaudino who ran the commercial banking business and Mike Neal, CEO of GE Capital. “They were both fantastic at taking strategies and making them really simple … so simple in fact that one could lower the execution risk to a very low degree. And lastly, they could communicate a fairly complicated strategy in a way that organizationally, it was easy for people to go out and implement.”
Dealing With the Dynamics
In making decisions that affect the direction of the TD’s Commercial Bank, Owen also relies on a very different tool kit, namely the resident expertise housed at TD Economics. After all, he notes, that team has proven to be a reliable tool given the uncertainties of late. “They actually are quite bullish from a commercial and industrial perspective. So bullish that they see C&I loans increasing year-over-year at a growth rate in the 8% to 10% range over the next two years. To put that in perspective, C&I loans over the last two years are down about 30% or more, so I’d say we feel much better about where things are headed.
“Looking closely at the growth of our business, we’re up close to 5% in C&I lending over the first four months of our fiscal year which starts November 1. We had a big December and I think a lot of other banks did too, so I suspect they are feeling much better as well. I think it’s safe to say we’re in the beginning of a growth trend even though it might be bumpy from month to month.”
But all things being equal, today’s bumps are preferable to the last recession’s free falls. So what were the lessons learned during the 2008/2009 period? He says, “From the bank’s perspective, we learned the importance of having a balanced deposit and loan book. When you actually look at the printed metrics of defaults and losses, this recession didn’t have as big an impact as we thought it would. Default rates at 20% or more and write-offs in the mid-to-high single digits didn’t happen. So what did we learn? I think some basic things that hold true in other recessionary periods held true in this last one: have a diversified portfolio and be disciplined in your underwriting.”
Still, he notes that today’s dynamics in the commercial loan marketplace present some unique challenges. “We’re in the beginning of a growth cycle and there’s a great deal of demand to grow loans on balance sheets, but there’s still low demand on the borrower side. We’re seeing banks taking on out-sized pieces on their balance sheets, particularly in the ABL space.” Owens concedes that there are two ways to look at it: one being lenders have very short memories and have already forgotten the last few years. But, he says, “The other way to approach it is by looking at the actual default and loss experiences and making a judgment call against an risk adjusted return. I think institutions are trying to work their way through it, but one thing I find curious is that after learning diversification was key in the downturn, I’m seeing lenders take on very big exposures. That’s something we’re not following.”
Aside from the relatively thin demand for loans these days, Owens expects regulatory requirements will have a significant impact for lenders to an extent never before experienced. “This is going to have a big impact on the industry, no doubt about it. The requirements on basic things like credit administration are taking institutions to levels at which they’ve never been managed. This is something I’ve never quite seen before.”
Looking back over his nearly 30-year career, heightened regulatory requirements and the yet-to-be-realized impacts notwithstanding, the move to commercial finance still makes perfect sense. Shortly before this interview, Owens called on one of TD Bank’s commercial customers. He reflects: “I just look at middle-market companies, at their needs and the impact you can have on them as a banker, and it’s incredibly rewarding. There are so many fantastic companies out there in all types of industries and every day you get to interact with them. Just yesterday, I got to listen to a customer’s story and how they have been able to effectively compete over the last 100 years and actually be a technology leader … it’s just remarkable.”