Cash-rich Canada banks shy away from acquisitions

Thu Jan 14, 2010 4:19pm EST
 
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TORONTO (Reuters) - The heads of Canada's four largest banks said on Thursday they remain focused on capital conservation because of uncertainty over global regulatory changes and the riskiness of making acquisitions.

Gord Nixon, chief executive of Royal Bank of Canada, the nation's biggest bank, and Ed Clark, chief executive of Toronto Dominion Bank, the No. 2 bank, both said Canadian banks have strong capital levels compared with global rivals, but that there is no rush to spend it on acquisitions.

"I don't think most Canadian bank CEOs are going to be rushing to burn through their capital until they have some certainty of (global rules)," Clark told investors at an RBC Capital Markets banking conference in Toronto.

TD, which has focused its expansion strategy on the U.S. retail banking market, said it has mostly ruled out a blockbuster purchase in the United States.

"We've always said, not that everything would absolutely have to be an FDIC (Federal Deposit Insurance Corp)-assisted deal, but it would have to be a small deal where we thought the catastrophic risk was estimable, so the idea that we would go out and do a big acquisition -- I just don't think it is in the cards."

RBC's Nixon said the lack of mergers and acquisitions in financial services generally, particularly in the U.S. market, is due to a lack of clarity about asset values and risks. He said it is "almost irresponsible" to go out and invest in the current uncertain environment.

Sabi Marwah, chief operating officer at Canada's third-largest lender, Bank of Nova Scotia, said there were only two areas that might offer the internationally focused bank the opportunity for a large acquisition: Mexico, where it already has a strong presence; and Canada, where it has a stake in CI Financial Corp.

Bill Downe, CEO of Bank of Montreal, the nation's No. 4 bank, said there is no question that Canadian banks in general, and BMO in particular, are far better capitalized than global rivals. He said that puts BMO in a good position to expand as peers work to rebuild their cash reserves.

BMO has focused its expansion goals on the U.S. Midwest. (Reporting by Andrea Hopkins; editing by Peter Galloway)

 
<p>Buildings are shrouded in fog in the financial district of Toronto in this April 3, 2009 file photo. REUTERS/Jumana El Heloueh</p>