The Canadian Press

While the Canadian economy is fundamentally strong, a tepid U.S. economic recovery leaves no room for accidents when it comes to TD Bank’s U.S. growth strategy, chief executive Ed Clark said Wednesday.

Clark said given the economic climate in the U.S., he has no appetite for large acquisitions in 2010, but he added TD (TSX:TD) doesn’t need them for growth this year.

“For 2010 the U.S. banks still have a way to go to work through their issues,” he told a Morgan Stanley banking conference in New York.

“We don’t see a rapid rebound in the economy and so we think 2010 will remain a struggle.”

Clark said he plans to expand the bank’s presence in the U.S., but only incrementally, noting he’ll still take a shot at less risky and smaller deals, which he put at under $10 billion, in areas where TD already operates.

“In our market in the Northeast and Mid-Atlantic that’s where you put your new branches cause that’s where you get instant pay back…we really see small acquisitions as a way to extend our geography.”

Clark said TD could pursue more aggressive growth when the U.S. market springs back, likely in 2011 and 2012.

Meanwhile, Clark lauded the strength of the Canadian economy and forecast Canada’s rebound in 2010 will continue to be more robust that in the U.S., “which remains a continually challenged world.”

A combination of better risk-management practices and stricter rules around the level of capital banks must keep on hand helped Canadian banks avoid the massive risky lending that battered many of their American counterparts.

Now, U.S. President Barack Obama is calling for aggressive measures to limit the size and range of activities of banks and investment firms.

Obama is also proposing to take $30 billion from the bank bailout program and funnel it to community banks for lending to small businesses that need loans.

But Clark predicted a slow return to growth on the lending side, and said he is not seeing the type of commercial loan growth that Obama is seeking.

“Mr. Obama many want to tell the world to go lend more, we have been trying to lend more, we’re the only of the top ten banks in the last year to actually grow our lending book, but were finding even us with our aggressive attitude, we’re not able to get loans out there.”

Bank of Montreal (TSX:BMO) chief executive Bill Downe earlier told the conference he sees a recovery in the U.S. housing market as supply and demand for new homes evens out, and lending returns to more traditional levels.

Downe predicted that the next two years will mark a gradual return to normal for the market.

He suggested that more borrowers will likely opt for fixed-rate mortgages instead of adjustable rate mortgages, as interest rates creep back to more normal levels over time.