* TD, National have added assets shed by foreign banks
* Economic worries, capital requirements force sales
* Canadian banks can't merge, but seek domestic growth
By Cameron French
TORONTO, Aug 29 Facing limited domestic growth
options because of their inability to merge, Canadian banks are
finding opportunity to build domestic market share in the
troubles of capital-challenged European and U.S. banks.
Toronto-Dominion Bank (TD.TO) and National Bank of Canada
(NA.TO) have both bought Canadian assets from foreign-based
banks that are trimming down operations to boost their capital
positions. And observers say more deals are likely.
"I think there's a lot of need to shed non-core assets by
global banks," said Juliette John, a portfolio manager at
Bissett Investment Management.
"The Canadians I think are in a very good position."
The deals announced to date are hardly blockbusters, but
they are allowing domestic banks to gain market share in a
sector where growth opportunities are scarce.
Canadian banking is dominated by six large lenders, who
have been prevented from merging with each other since the
government stopped two blockbuster deals in 1998.
Since then, most of the banks have turned to international
expansion to drive growth, but all covet an increased presence
in the highly profitable and economically stable Canadian
Banks in the United States and particularly Europe,
however, are facing a rough economic environment and worries
about sovereign debt. Their path has been made bumpier by the
requirement to raise capital levels to meet tougher new
regulations put in place to forestall a repeat of the financial
"When you look at the Canadian operations of these players,
they're not material contributors," said Barclays Capital
analyst John Aiken.
"So it's: 'Why bother with this headache when we need
capital to either shore up our (capital) ratios or deploy in
areas that are showing better growth?'"
TD Bank recently agreed to buy Bank of America's (BAC.N)
$8.6 billion Canadian credit card portfolio as the U.S. lender
moved to rebuild its battered capital base.
And National Bank recently picked up three mortgage
portfolios from banks located in Europe, Asia, and the United
Speaking on a conference call to discuss the bank's
earnings last week, National Bank Chief Executive Louis Vachon
said divestitures of Canadian assets by foreign banks was a
"major trend" in Canadian banking.
MORE DEALS LIKELY
HSBC Holdings Plc (HSBA.L), the foreign bank with the
largest Canadian presence, is in talks to possibly sell its
Canadian wealth management unit -- seen valued at C$200 million
to C$300 million -- as part of a restructuring effort, a source
said last week.
And National Bank CFO Patricia Curadeau-Grou told Reuters
last week that several foreign banks still hold credit
portfolios in Canada, and some are actively shopping the
Continued global economic uncertainty means the pace of
deals could increase.
"I think you're seeing a lot of banks taking a sober second
look at some of the businesses that they've been operating in
in the past," said John MacKinlay, lead banking adviser at
PricewaterhouseCoopers in Toronto.
(Reporting by Cameron French; editing by Rob Wilson)