DEALTALK-Canadian banks seek growth in foreign markets

Tue Jan 11, 2011 5:16pm EST

* Scotiabank eyes Mexico and Chile, TD buying in U.S.

* BMO buys Hong Kong firm in second takeover in 2 months,

* High capital levels, strong Canadian dollar drive growth

By Cameron French

TORONTO, Jan 11 (Reuters) - Canadian banks, which ended 2010 with a flurry of takeover announcements, are chomping at the bit to add assets in countries that promise more growth than the stagnant Canadian market.

Bank of Nova Scotia (BNS.TO) is looking to add to its already substantial presence in Mexico and Chile, an official said on Tuesday, while Toronto-Dominion Bank's (TD.TO) chief executive said the lender will look for opportunities to build on its 1,300-strong branch presence in the United States.

Their comments followed Bank of Montreal's (BMO.TO) announcement that it is buying Hong Kong-based wealth management firm Lloyd George Management to bulk up its presence in China's fast-growing financial sector.

The banks have been leveraging their strength in the wake of the financial crisis, which devastated the balance sheets of many U.S. and European lenders but left the well-capitalized Canadian banks largely unscathed.

"There's a limited amount of buyers with deeper pockets, so why wouldn't the Canadian banks look at this as the opportunity of a decade to get bigger?" said Tony Demarin, chief investment officer at BCV Asset Management in Winnipeg.

They've also enjoyed the benefit of the Canadian dollar's 7.5 percent rise against the U.S. dollar since late August, which gives them more spending power in international markets.

INTERNATIONAL GROWTH

Speaking at a banking conference in Toronto, Canadian bank executives identified international growth as a priority.

Scotiabank, which already has a substantial presence in Latin America, aims to add assets in regions in which it already operates, particularly those where it holds less than its target of a 10 percent market share, Chief Financial Officer Sabi Marwah said.

"Where we're not at 10 percent is really Chile and Mexico," he said. "So if something were to come up whereby one of the local banks were for sale, it's clearly something where we would step up."

TD Bank, which just three weeks ago said it was buying auto lender Chrysler Financial for $6.3 billion, hasn't decided whether it will push further into car loans, but it will eye a bigger footprint for its U.S. retail bank, CEO Ed Clark said.

"We will do opportunistic smaller deals," he told the conference, adding that he believes some smaller U.S. lenders who survived the financial crisis may now be thinking it is a good time to sell.

"I think there's a mood shift," he said.

The international push comes as the banks see few avenues for growth in Canada, where the retail banking market is crowded, and where loan growth is expected to fall as interest rates rise and economic growth stagnates.

"I think you'll see consumer debt levels start to stabilize and maybe even trend down a bit," said Royal Bank of Canada (RY.TO) CEO Gord Nixon, although he said he expected business borrowing to strengthen.

RBC, the country's largest bank, has been expanding its wealth management and wholesale banking presence internationally, with particular emphasis on wealth management in high growth markets such as Asia, Nixon said.

The bank also has a retail bank network in the southeastern United States that has struggled for several years.

Nixon said the bank is unsure at this point whether it will eventually add to the business or retreat from U.S. retail banking.

($1=$0.99 Canadian) (Reporting by Cameron French; editing by Peter Galloway)