Bulletin
Investor Alert

New York Markets Open in:

July 25, 2014, 8:15 a.m. EDT

Canadian banks map next stage of U.S. invasion

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Bank of Montreal (BMO)
  • X
    Royal Bank of Canada (RY)
  • X
    Toronto-Dominion Bank (TD)

or Cancel Already have a watchlist? Log In

By Sital S. Patel, MarketWatch


Bloomberg

NEW YORK (MarketWatch) — Canadian banks are moving to scoop up market share in the United States, as the big U.S. banks deleverage to comply with new regulations and European banks retrench to meet stringent new capital requirements, according to analysts.

‘There has been a vacuum created in the U.S.’

Richard Bove

Banks including Bank of Montreal /zigman2/quotes/203180563/delayed CA:BMO -0.96% , Royal Bank of Canada /zigman2/quotes/200638870/delayed CA:RY +0.47% , and Toronto-Dominion Bank /zigman2/quotes/209283160/delayed CA:TD +0.47% have been expanding south of their border, either by acquiring businesses or networks or hiring executives freed up by the cutbacks at rival lenders.

“There has been a vacuum created in the U.S.,” said Richard Bove, analyst at Rafferty Capital. “European banks are pulling out, and American banks are not being allowed to expand, but the economy is bigger and the financial system is growing much larger.

“And the Canadians are taking advantage — RBC more so than the others.”

The big five Canadian banks — comprising BMO, RBC and TD plus Canadian Imperial Bank of Commerce /zigman2/quotes/206423838/delayed CA:CM -1.08%   and Bank of Nova Scotia /zigman2/quotes/206642548/delayed CA:BNS +0.22%  — have strong domestic franchises and dominate retail and commercial banking in their home market. But that very strength, combined with government efforts to cool an overheating housing market and encourage consumers to trim debt, has limited their ability to grow.

“Shareholders like growth,” said David Beattie, Canadian bank analyst at Moody’s. “So Canadian banks are looking to grow away from their positions.”

Canadian banks have made stop-and-start attempts to build U.S. presences in the past with mixed results. But the current push comes at a time of relative strength. The Canadians came through the financial crisis relatively unscathed, having stayed away from the subprime lending and mortgage securitization that created havoc in the U.S. and elsewhere. That has left them in good shape, while overseas banks like Barclays PLC, Credit Suisse and UBS AG are scaling back their U.S. operations.

“It’s an opportunity for [Canadian banks] to take the strong financial position that they have, and pretty stellar reputations [for] navigating through the crisis, and look for other opportunities,” said Jack Ablin, chief investment officer at BMO Private Bank.

The country’s biggest bank by assets, Royal Bank of Canada, has focused on expanding its U.S. investment-banking arm, after an unsuccessful attempt to build a retail network.

RBC bought North Carolina–based Centura Banks Inc in 2001 and expanded its network to Minnesota, Florida and Georgia through add-on acquisitions over the next several years. In 2011, when the collapse of the U.S. real-estate market forced it to take a $1 billion write-down, it sold the retail network to Pittsburgh-based PNC /zigman2/quotes/203416310/composite PNC -0.51% .

At the same time, it restructured its U.S. operations to focus better on Canadian cross-border clients, including about 180,000 so-called snowbirds — Canadians who spend the colder part of the year in Florida and other southern U.S. states.

RBC Capital Markets has increased its share of the overall U.S. investment-banking fee pool by 3% over the past 3 1/2 years, according to a company representative.

/zigman2/quotes/200638870/delayed RY 142.13, +0.67, +0.47%
RBC shares
One-year performance

The bank now ranks 10th in U.S. equity capital markets underwriting, 11th in U.S. high yield, 10th in U.S. leveraged loans and is in 15th place in M&A advisory work, according to research firm Dealogic. RBC shares have gained 22% in the past 12 months.

/zigman2/quotes/203180563/delayed
CA : Canada: Toronto
$ 144.85
-1.41 -0.96%
Volume: 4.84M
Jan. 27, 2022 4:18p
P/E Ratio
12.51
Dividend Yield
3.67%
Market Cap
$94.79 billion
Rev. per Employee
$737,478
loading...
/zigman2/quotes/200638870/delayed
CA : Canada: Toronto
$ 142.13
+0.67 +0.47%
Volume: 9.21M
Jan. 27, 2022 4:00p
P/E Ratio
12.85
Dividend Yield
3.38%
Market Cap
$201.53 billion
Rev. per Employee
$651,034
loading...
/zigman2/quotes/209283160/delayed
CA : Canada: Toronto
$ 100.69
+0.47 +0.47%
Volume: 3.88M
Jan. 27, 2022 4:00p
P/E Ratio
13.05
Dividend Yield
3.54%
Market Cap
$182.27 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/206423838/delayed
CA : Canada: Toronto
$ 159.39
-1.74 -1.08%
Volume: 1.30M
Jan. 27, 2022 4:16p
P/E Ratio
11.44
Dividend Yield
3.76%
Market Cap
$72.66 billion
Rev. per Employee
$507,221
loading...
/zigman2/quotes/206642548/delayed
CA : Canada: Toronto
$ 90.68
+0.20 +0.22%
Volume: 5.51M
Jan. 27, 2022 4:00p
P/E Ratio
11.76
Dividend Yield
4.41%
Market Cap
$109.96 billion
Rev. per Employee
$426,325
loading...
/zigman2/quotes/203416310/composite
US : U.S.: NYSE
$ 204.96
-1.05 -0.51%
Volume: 1.88M
Jan. 27, 2022 4:00p
P/E Ratio
16.13
Dividend Yield
2.44%
Market Cap
$86.52 billion
Rev. per Employee
$384,299
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Markets

Story Conversation

Commenting FAQs »

Partner Center

World News from MarketWatch

Link to MarketWatch's Slice.