1. 34 • monitor • JAN/FEB 2016
“These factors are creating stable demand across
many industries and lifting business,” Fink says. “This,
of course, must be balanced by recent events such as the
significant decline in commodity prices and volatility in
the bond and equity market, stemming from uncertainty
about certain foreign economies. Provided these current
market challenges are short-term in nature, I believe a
fundamental optimism will remain among executives
throughout 2016.”
“The optimism is primarily being driven by pent-up
demand and growth aspirations that were delayed due
to the impact of the Great Recession,” adds Greg Braca,
head of Corporate and Specialty Banking at TD Bank.
“CFOs can now implement their plans as the economy
slowly strengthens, supported by greater access to
capital and improvement in the labor force.”
Climbing CAPEX
With blueprints for growth on the drawing board, 61%
of CFOs expect to increase capital expenditures within
the next year, up 11 percentage points from 2014 when
only 50% of respondents had similar plans.
Anthony Sasso, president of TD Equipment Finance,
says CFO optimism, coupled with plans for increased
CAPEX, bodes well for the equipment finance industry.
“Notwithstanding concerns about the global economy
and current dynamics in sectors such as oil, the U.S.
economy continues to grow and employment statistics
continue to improve,” he says. “Economic growth, which
is increasing equipment spending, coupled with a favor-
able rate environment should also drive growth in the
equipment finance industry.”
“CFOs largely believe that the U.S. economy has
turned the corner, evidenced by the Federal Reserve
raising interest rates in December of 2015,” Braca says.
“The U.S. economy is an outlier on the world’s stage,
with relatively cheap access to capital and a job market
and employment situation that continues to improve.”
Fink shares another statistic that demonstrates
financial executives’ confidence in their companies’
performance this year: 69% of CFOs expressed opti-
mism that 2016 would be an even better year than
2015. “We’ve also seen companies holding on to cash
reserves for a few years, and they now realize it’s a good
time to reinvest in the business to increase efficiencies
and enhance productivity,” Fink says. “Investments
T
he new year is upon us, and with it comes the urge to speculate
what the future will hold. Thanks to the results of TD Bank’s
Annual CFO Survey — conducted to understand the outlooks of
east coast financial executives on the state of their companies’ health
— we won’t have to resort to crystal balls, tarot cards or eenie meenie
miney mo. Instead, TD executives interpret data collected from 300
executives who make financial decisions for companies with annual
sales of $50 million to $500 million or more.
Economic Confidence
This year, 56% of CFOs reported optimism in the U.S. economy and
planned to invest in their companies to expand growth. Bill Fink, chief
lending officer and head of Credit Management at TD Bank attributes
this optimism to a myriad of factors, including little or no upward
pressure on wages in most industries, stabilized or increased housing
values in most markets, a continued decline in the unemployment rate
and reduced gasoline prices, which have contributed to an increase in
consumer discretionary income and spending.
TD Bank’s Annual CFO Survey:
Confidence & CAPEX on the Rise
BY RITA E. GARWOOD
TD Bank executives interpret data from TD’s Annual CFO Survey, which reports increased confidence in
the U.S. economy and plans to increase capital expenditures. Though optimism is high, CFOs expressed
concern regarding data security and the outcome of the presidential race.
GREG BRACA
Head, Corporate &
Specialty Banking,
TD Bank
BILL FINK
&
Head, Credit Management,
TD Bank
ANTHONY SASSO
President,
TD Equipment Finance
“No matter the industry vertical or market, folks we speak with are
doubling down on data security. They’re investing in technology to protect
data in order to make their own processes more efficient and for ‘ease of
use’ and peace of mind for customers. In fact, data security is not just a
practical risk, there is headline risk involved. Reputational risk incurred
during a hack or breach can be extremely damaging.”
— Greg Braca, Head, Corporate & Specialty Banking, TD Bank

2. JAN/FEB 2016 • monitor • 35
“Despite the turmoil in the markets to begin 2016, rates are still at historic all-time
lows and will be for the foreseeable future,” Braca says. “CFOs will continue to look
past this and realize that the combination of an improving economy, coupled with low
rates equate to a great time to deploy capital.”
“The Federal Reserve interest rate increase was one of the most ‘unanticipated
events’ economically,” Fink adds. “The Fed forecasted this was coming for a long time,
so it wasn’t a surprise when it finally happened. Even with a 25 basis-point increase
in interest rates, rates are still at historic lows, especially long-term rates. Companies
with fixed-rate debt should have refinanced already, but since there hasn’t been a
strong sense of urgency, many businesses who are eligible to refinance have failed to
do so. December’s rate hike will motivate many of those businesses to act and take
advantage of the low interest rates before any additional increases.”
Fink says there is a bigger-picture question at hand: business owners need to
determine what will have more impact on their business — interest rates or the value
of the dollar — and how that will influence their operations. “U.S.-oriented busi-
nesses will be most affected by the rate hike, while the strength of the dollar is more
worrisome for companies that work internationally,” Fink says. “A company that
maintains modest debt and adequate cash reserves will be better equipped to weather
the downturn in export markets like Europe and Asia.”
Important Campaign Issues
Another concern on the minds of just about everyone in the U.S. — including CFOs
— is the presidential election. Healthcare reform was the most prevalent economic
issue, with 24% of respondents indicating a desire to have this issue addressed by
presidential candidates.
“There has been an increased complexity placed on employers of size to provide
adequate healthcare to employees, and by necessity it is an important topic for all
companies to get right,” Braca says.
Other economic issues that CFOs would like to see addressed during this election
include government efficiency (19%), job creation (14%), corporate taxes (13%), global
competitiveness (8%), wage/income inequality (8%), business regulation (7%) and
energy prices (5%).
While the results of TD’s CFO survey provide a forecast for a variety of issues
that will affect financial executives in 2016, unfortunately, it could not predict the
winner of the 2016 presidential election. That’s why we have Monitor’s mystery writer,
Dexter Van Dango. Read his presidential predictions and TOP picks for the new year
on page 22. m
RITA E. GARWOOD is editor of Monitor.
in capital equipment, whether through purchasing
or leasing, also are especially important to do before
interest rates climb even more.”
So where do these confident CFOs plan to spend
their money in 2016? According to the survey results,
58% plan to invest in technology (including hardware),
44% will improve existing facilities, 41% will amp up
their data security, 35% will hire new employees, 28%
will invest in new facilities, 24% will spend on non-
technology office equipment, 20% will purchase heavy
equipment, 19% will focus on M&A and 15% will fund
environmental or sustainability projects.
Data Security Concerns
Although it is a new item on the survey, the number
of CFOs who plan to invest in data security capital
expenditures (41%) demonstrates the fact that risk
management is definitely a critical concern for execu-
tives this year.
“No matter the industry vertical or market, folks we
speak with are doubling down on data security,” says
Braca. “They’re investing in technology to protect data
in order to make their own processes more efficient
and for ‘ease of use’ and peace of mind for customers.
In fact, data security is not just a practical risk, there
is headline risk involved. Reputational risk incurred
during a hack or breach can be extremely damaging, so
it’s no surprise that nearly half of survey respondents
deem it a high priority.”
“There have been a number of high-profile incidents
in the headlines over the past couple of years involving
data security, so it’s no surprise that companies are
taking this seriously to protect the business and their
customers’ information,” Fink adds, noting that smaller
firms —those with $50 million to $250 million in
revenue — expressed more concern with risk liability
in TD’s survey than large corporations. “This may be
because smaller companies could be more vulnerable to
attack and could be more greatly impacted financially in
such an event. Along with making internal investments
in data security, businesses should speak with their
financial institutions to ensure proper controls are in
place on accounts to limit unauthorized access.”
Borrowing Despite Rate Increases
According to the survey results, 74% of respondents
indicated that an increase in interest rates would not
impact their inclination to borrow. However, the survey
was conducted in the fall of 2015, prior to the Fed’s
first interest rate hike. Now that interest rates have
increased, will CFOs still be inclined to borrow?
“Notwithstanding concerns about the global economy and current
dynamics in sectors such as oil, the U.S. economy continues to grow and
employment statistics continue to improve. Economic growth, which is
increasing equipment spending, coupled with a favorable rate environment
should also drive growth in the equipment finance industry.”
— Anthony Sasso, President, TD Equipment Finance
“We’ve also seen companies holding on to cash reserves for a few years, and they now realize it’s
a good time to reinvest in the business to increase efficiencies and enhance productivity. Investments
in capital equipment, whether through purchasing or leasing, also are especially important to do
before interest rates climb even more.” — Bill Fink, , Credit Management, TD Bank