Canada banks carve into weakened US market (AFP)

MONTREAL (AFP) – Rich and eager to expand after weathering the global economic storm, Canada’s top banks are finding a wealth of investment targets in the United States, where the recovery has lagged.

The latest evidence came this week as Toronto-Dominion (TD) Bank moved to buy once-bankrupt Chrysler Financial for 6.3 billion dollars.

Even before the deal, TD was one of the 10 largest banks operating in the United States, with some 6.5 million customers.

It is now set to become one of the top five bank-owned auto lenders in North America, allowing it to tap a massive market.

“This transaction represents a unique opportunity to purchase a great organic growth platform at an attractive price,” said Ed Clark, group president and chief executive officer of TD.

Earlier this year, TD said it would buy troubled US lender South Financial Group for some 192 million dollars to expand its footprint in the southeast United States.

But TD is not the only Canadian bank looking to spread its wings.

The deal came just days after the Bank of Montreal (BMO) doubled its stake in the US banking market with the purchase of Marshall Ilsley for 4.1 billion dollars in stock.

“There is a short-term conjuncture, with the weakness of the US banks and the strength of the Canadian dollar, that encourages (banks) to take over financial institutions in the United States, which is after all the world’s biggest market,” said Bernard Elie, an economics professor at the University of Quebec at Montreal (UQAM).

“The second there is something on sale in the United States, the Canadian banks go for it,” he said.

Unlike Canada’s banking system, where the five largest banks control 85 percent of the market, the US system is much more fragmented, with scores of smaller banks that are extremely vulnerable in the wake of the recession.

“The Canadian banks are among the largest in the world with more than three trillion dollars in assets,” Elie said.

And their appetite for acquisitions is unlikely to abate in the near future, after the Canadian banks together posted a whopping 20 billion dollars in profits this year, he added.

Domestic restrictions are also pushing growth abroad.

After the government banned two mega-mergers between four of Canada’s top banks for political and anti-trust reasons in the 1990s, the banks had little choice but to turn to foreign markets in order to expand.

The growing strength of the Canadian dollar has only made foreign acquisitions more lucrative, and not only in Canada’s southern neighbor.

Earlier this year, Bank of Nova Scotia announced a series of mergers in Panama, Brazil and Chile, expanding its presence to 12 Latin American countries.

The breaking news, Canada banks carve into weakened US market
extract from US Economy

Short URL: http://www.usnews9.com/?p=5143

Posted by on Dec 26 2010. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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