TORONTO (Reuters) - Canadian banks say the time is not right to rush into large acquisitions in the United States or abroad, even though the global economic downturn has made banking assets look like relative bargains.
Royal Bank of Canada, the country’s biggest bank, Toronto-Dominion Bank, the No. 2, and Bank of Montreal, the No. 4, said on Thursday they will be cautious and patient when it comes to making any major deals, but will watch for small acquisitions that complement their businesses.
They said the economic climate that has tightened credit conditions means now is not the time to unload large amounts of cash on a big purchase.
Royal Bank said it will continue to look for opportunities in areas that will add to its established businesses but it does not anticipate any blockbuster deals.
“We’re looking at opportunities as a result of the turmoil to add to our existing franchises in a sensible way where we can take advantage of them,” Royal Bank President and Chief Executive Gordon Nixon said at an investor conference in Toronto.
“But in terms of significant dramatic transformational acquisitions, whether it be the U.S., Europe or Asia, we just don’t believe in this environment that it’s the appropriate time to be aggressively deploying capital.”
BMO Financial Group President and Chief Executive Bill Downe said taking on another bank’s loan book and having to work it out is not a very attractive proposition.
“We’ve been very cautious in the last 18 months with respect to making acquisitions in the U.S. and I still think it’s early ... I think you can be quite patient,” Downe said.
TD Bank President and Chief Executive Ed Clark said he does not have “enough visibility” on asset risk in the United States to determine whether to make a deal.
Clark also said he does not expect that to change during the first half of 2009 unless he gets a clearer sense of when the economic downturn will bottom out.
TD Bank said all of Canada’s banks are going through their loans to determine whether they are being prudent enough when it comes to lending, but he was quick to add that does not mean they are tightening credit.
“What we are not going to do, though, is turn down people who we think could repay us,” Clark said.
“I do want to take advantage of this and take market share. I mean, this is a one-time opportunity to change the game and why wouldn’t I do that if I could do it prudently.”
RBC’s Nixon added that to a large degree it is “business as usual” even though credit in some sectors, namely the automotive sector, has become much tighter.
Nixon said RBC continues to see growth across most of its business, including residential mortgages, home equity loans, credit cards and small business lending.
“We’re trying to manage it from a risk perspective in a prudent fashion, but we are continuing to see business growth across most of those lines,” he said.