Toronto-Dominion Bank’s (TSX:TD) latest acquisition of a U.S. bank should not have much impact on its earnings or capital, and the added credit risk should be manageable, says rating agency DBRS Limited.

On Monday TD Bank said that it is buying The South Financial Group, Inc. DBRS said it believes the deal “will not have a material impact on the bank’s earnings and the impact on its capital will be modest.”

DBRS notes that TD’s credit risk profile “remains solid, notwithstanding the credit risk concerns at South Financial given its exposure to commercial real estate.”

DBRS believes this transaction is consistent with TD’s desire to bolster its presence in Florida, as well as helping implement a Maine-to-Florida U.S. footprint. “Given the focus on commercial lending at South Financial, there are opportunities for TD to expand and leverage its retail banking model in these geographies,” it adds.

The transaction is expected to have some credit risk concerns, DBRS notes, but it believes that risk will be manageable. It says that TD believes it has conservatively valued the loan portfolio, and that commercial real estate remains a small portion of TD’s overall loan mix. Additionally, the transaction would have only a very modest impact on capital.

DBRS believes one of the challenges facing TD is the number of bank conversions over the next 12 to 18 months, two from the current acquisition (Mercantile Bank and Carolina First Bank) and three from the previous acquisition (Riverside National Bank of Florida, First Federal Bank of North Florida and AmericanFirst Bank). “Mitigating this concern is the bank’s breadth of integration experience and proven track record,” it adds.