Toronto-Dominion
Bank and Bank of Montreal could take a breather from big U.S. buys
after two deals in the last week, but Canadian banks will still troll
for assets in a recovering U.S. economy.
After emerging
from the financial crisis largely unbruised, Canadian lenders have used
large capital positions to snap up bargain-price players.
BMO
said last week it would buy troubled Wisconsin lender Marshall &
Ilsley for US$4.1 billion, fast-tracking a U.S. growth plan that had
been stuck in neutral.
TD said on Tuesday it would buy
Chrysler Financial for US$6.3 billion, betting that the recovering U.S.
auto sector will boost loan demand for its U.S. branch network.
"This
latest move by TD shows that the Canadian banks are very well
positioned," said Anthony Michael Sabino, a law and business professor
at St. John's University in New York.
"I think they realize
that eventually we will come out of the great recession, and doing
so... consumers will start spending money again."
Before
BMO's move, the largest recent deals were Royal Bank of Canada's US$1.5
billion bid for British fund manager BlueBay Asset Management in October
and Bank of Nova Scotia's $2.3 billion purchase of DundeeWealth.
STOCKPILED CAPITAL
After
stockpiling capital during the financial crisis, the banks now need to
put it to work, said John Kinsey, a portfolio manager and Caldwell
Securities in Toronto.
"They're still in good shape and they have the money and there's not a lot of room to expand in Canada," he said.
"They have to really go outside if they want to grow."
The
Canadian banks have now carved out three distinct areas of retail
banking influence south of the border: BMO in the Illinois-Wisconsin
area, TD on the east coast, and Royal Bank of Canada in the southeast.
The
housing crisis hammered Royal's North Carolina-based retail bank, and
the bank recently suggested it is no longer focused on growing the bank.
But Royal and BMO could make small moves to expand its capital markets or wealth management presence, analysts said.
TD
expects strong growth from its new auto lending platform, although
Chief Executive Ed Clark said further acquisitions on the auto front
were unlikely.
"I don't think you have to do any more
acquisitions to do this," he said in an interview. Within 2 or 3 years,
this will be originating US$1 billion in loans a month, so you wouldn't
spend any money buying something.
Observers also said BMO will have its hands full integrating its acquisition for the next months.
But the window of opportunity is not yet closed.
"There
is a limit to how much they are going to do here, I suspect. But I
doubt that they are at that limit yet," said Chip MacDonald, a financial
institutions lawyer at Jones Day.
