United States en­tices big banks in Canada

The Pak Banker - - Front Page -

OT­TAWA: The Bank of Nova Sco­tia is some­times praised for hav­ing a nearly per­fect record with its in­vest­ments in the United States. But it is the only one of Canada's five large banks that has largely avoided the Amer­i­can mar­ket.

Stephen Harper, the prime min­is­ter of Canada, is among the many Cana­di­ans who reg­u­larly re­mind the world that their coun­try's bank­ing sys­tem was left largely un­scathed by the global re­ces­sion and credit mar­ket col­lapse be­cause of its reg­u­la­tion and pru­dent man­age­ment.

Now sev­eral of the banks are tak­ing ad­van­tage of their solid bal­ance sheets as well as the cur­rent re­vamp­ing and con­sol­i­da­tion of the Amer­i­can bank­ing sys­tem to again look south for ex­pan­sion. Last week, the Toronto-Do­min­ion Bank agreed to pay $6.3 bil­lion for Chrysler Fi­nan­cial. And ear­lier this month the Bank of Mon­treal bought Mar­shall & Il­s­ley, a bank based in Mil­wau­kee, for $4.1 bil­lion.

Given the un­even suc­cess of pre­vi­ous for­ays south of the border, how­ever, few in­vestors ex­pect much good to come of ei­ther deal.

"We don't think it's a great idea for Cana­dian banks to be ex­pand­ing into the Amer­i­can mar­ket," said J. Bradley Smith, the head of re­search at Stonecap Se­cu­ri­ties in Toronto. "From a cul­tural per­spec­tive, we're very sim­i­lar. But from a man­age­ment per­spec­tive, the Amer­i­can mar­ket is not an easy thresh­old to cross."

Still, Cana­dian banks have few other op­tions for ex­pan­sion. "The banks sim­ply have no choice," said Louis Gagnon, an as­so­ci­ate pro­fes­sor of fi­nance at Queen's Uni­ver­sity in Kingston, On­tario. "They have to go be­yond our bor­ders to grow and the only mar­ket that makes sense is the United States." In their home mar­ket, Canada's top five banks - the Royal Bank of Canada, the Toronto-Do­min­ion Bank, the Bank of Nova Sco­tia, the Cana­dian Im­pe­rial Bank of Com­merce and the Bank of Mon­treal - of­fer a com­plete range of bank­ing, from re­tail to in­vest­ment bank­ing through a na­tion­wide chain of branches. Changes in reg­u­la­tion have also al­lowed them to ex­pand, on a limited ba­sis, into in­surance while most bro­ker­age houses be­came bank sub­sidiaries.

That mar­ket dom­i­nance, and some reg­u­la­tory re­stric­tions, mean that com­pe­ti­tion from for­eign-owned banks in Canada is limited. -PB News

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