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TD hunts deal after BancWest bids as Canadian lenders chase US growth

FILE PHOTO: The Toronto-Dominion Bank logo is seen outside a branch in Ottawa
FILE PHOTO: The logo of the Bank of Toronto-Dominion (TD) is seen outside a branch in Ottawa, Ontario, Canada, May 26, 2016. REUTERS/Chris Wattie

December 23, 2021

By Pamela Barbaglia and Nichola Saminather

LONDON/TORONTO (Reuters) – Toronto-Dominion Bank is taking the lead in cash-rich Canadian banks looking to disrupt the U.S. and seek growth right from their home turf, where the Big Banks Six already controls nearly 90% of the market.

Billions of dollars in excess cash accumulated during nearly two years of capital redistribution bans lifted only last month and near-record stock prices have given Canadian banks a run for their money. acquired to bet on the departure and downsize of a number of European and international banks.

The sale of BNP Paribas’ US unit, Bank of the West (BancWest), is the latest example of pent-up demand, with Bank of Toronto-Dominion battling rival Canadian lender Canada Bank of Montreal, two sources familiar with the matter said.

The Bank of Montreal on Monday said it would buy BNP Paribas’ unit, Bank of the West, for $16.3 billion in its biggest-ever deal.

TD, Canada’s second-largest bank by market value, reviewed every major portfolio of assets coming up for sale, including US businesses sold by Mitsubishi UFJ (MUFG) in September and BBVA in November 2020, the sources said.

It continues to be hunted for acquisition in the United States after narrowly losing out to BMO.

Spokespersons for TD and BMO would not comment on the bidding process or future growth plans in the United States. MUFG declined to comment on the Canadian banks’ interest in their assets, and BBVA did not immediately respond to a request for comment.

“Banking is a game of scale, technology and complexity,” said Brian Madden, portfolio manager at Goodreid Investment Counsel.

He added that Canadian banks already in the United States are eligible to scale their operations in the United States because they ” happen to be directly adjacent to the largest banking market on the planet.”

TD executives said earlier this year that the bank “would not shy away” from doing a banking transaction in the US Southeast or in any other region where the bank currently operates. weak on the East Coast.

Having missed out on some major acquisitions, TD is now likely to turn its attention to smaller banks, one of the sources said.

Along with TD and BMO, Royal Bank of Canada, Royal Canadian Bank of Commerce (CIBC), Nova Scotia Bank and National Bank of Canada completed Canada’s Big Six banks.

TD is one of the top 10 banks in the United States, and Royal Bank owns City National, the ninth largest bank in California in terms of deposits.

Royal Bank is also in the process of expanding in the US, although Canada’s largest lender is more focused on managing its wealth https://www.reuters.com/article/us- rbc-wealth-idUSKBN25U1I6 does business in the United States.

And CIBC, which entered the US in 2017 with the acquisition of PrivateBancorp, says it is aiming to increase earnings from the country in the coming years.

Royal Bank did not respond to a request for comment. CIBC declined to comment.

CASE OF BMO

BMO went after BancWest after it suffered a setback to the retail business of MUFG, Japan’s largest lender, one of the sources said. MUFG eventually sold its retail business to US Bancorp for $8 billion.

BMO has launched a competitive auction for MUFG assets, and the disappointment of the loss prompted Canada’s fourth-largest bank to move fast in the sale of BancWest, the source said.

BNP Paribas, consulted by Goldman Sachs and JPMorgan, entered parallel discussions with both TD and BMO, putting pressure on both bidders to finalize their offers because of concerns that obstacles Regulatory concerns could hinder sales, the sources said.

BNP Paribas did not respond to a request for comment.

While TD initially offered a low bid and then increased it, BMO was more aggressive with its first offer and promptly declared its offer “best and last” in December after offer the final sweetener, one of the sources said.

The deal will make BMO the 16th largest bank by assets in the United States, up from 19th today, and bring its assets to nearly $300 billion.

Anthony Visano, portfolio manager at Kingwest & Co, said that by consolidating with US rivals, Canadian banks with a presence in the US are expected to garner better returns from these businesses compared to smaller companies, even if they pay a premium like BMO did for BancWest. .

“Sometimes the strategic value outweighs the financial considerations,” says Madden of Goodreid Investment.

(Reporting by Pamela Barbaglia in London and Nichola Saminather in Toronto; Editing by Megan Davies and Matthew Lewis)

https://www.oann.com/td-on-deal-hunt-after-bancwest-bid-as-canadian-lenders-pursue-u-s-growth/?utm_source=rss&utm_medium=rss&utm_campaign=td-on-deal-hunt-after-bancwest-bid-as-canadian-lenders-pursue-u-s-growth TD hunts deal after BancWest bids as Canadian lenders chase US growth

Bobby Allyn

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