Dominion Bond Rating Service has confirmed its ratings on the Toronto-Dominion Bank, saying the trends are stable.

The ratings are supported by TD’s leadership position in Canadian retail banking, it says. DBRS expects this Canadian retail franchise to provide earnings stability given its diversification and low business risk profile. During the year, TD has continued to make progress in transforming its Canadian operations into a predominantly retail bank through organic growth, smaller retail acquisitions (57 branches from Laurentian Bank of Canada and Liberty Insurance Services Corp.), and significant reductions in the size of its non-core corporate lending portfolio ($1.2 billion at Q4 2004 from $11.2 billion at Q4 2002).

The bank essentially exited this portfolio at the end of 2004, the rating agency says. While this is a positive development, DBRS had previously maintained ratings on the belief that a reduction of this magnitude was possible and as such, did not result in any positive rating action.

DBRS adds that it believes the ratings are limited by the bank’s ability to grow in under-represented retail markets in Canada and the challenges associated with its acquisition of Banknorth Group Inc., an active consolidator of U.S. northeast community banks. Despite the challenges, DBRS confirmed all TD ratings following a review of Banknorth.

The bank’s core activities are divided into three lines of business: personal and commercial banking, wealth management, and wholesale banking, representing 60%, 15%, and 25% of net income (excluding intangible amortization and corporate) in 2004, respectively.