* TD says hard-hit competitors look to regain some ground
* Banks still looking at FDIC-assisted deals in U.S.
* Canada bank mergers called a "dead issue"
By John McCrank and Andrea Hopkins
TORONTO, March 30 Canada's big banks, better
capitalized than their global peers, took advantage of the
disarray during the financial crisis by snapping up market
share from distressed rivals, but good deals and rapid growth
are becoming harder to come by.
Some U.S. banks that were in danger of collapsing a year
ago are in better shape now and are seeking to win back market
share, while others are being offered for sale by U.S.
regulators but are becoming more expensive as the economy
improves. Canadian banks say both trends could work against
them as they try to make further inroads in the United States.
Toronto-Dominion Bank (TD.TO), Canada's No. 2 lender, was
the only big bank in the United States to expand its lending
book in 2009. TD Chief Executive Ed Clark said on Tuesday that
the bank's TD Ameritrade discount brokerage took "huge" U.S.
market share from Fidelity and Charles Schwab (SCHW.N) as they
pulled back during the financial turmoil.
But Clark told analysts and investors that opportunities
are fading as the industry rights itself.
"We have to accept that going into 2010 as you roll into
2011, everywhere in the world, the banks that were hurt are
going to come back into the market and say, 'we're going to try
to take some of that market share back from you ... we
certainly are not going to give it away to you as easily as we
did in the 2009 period'," he said.
Clark, speaking at National Bank Financial's Canadian
Financial Services Conference in Montreal, said competition is
increasing in every market, from the Canadian personal
commercial market, to the wholesale market, the U.S. discount
brokerage market and the U.S. banking market.
"Everywhere we go, we see competitors saying, 'I am no
longer trying to survive, I'm now trying to regain my
position'," he said.
TD has roughly as many branches in the United States as in
Canada, though the U.S. deposit base is smaller and the
branches offer fewer products, making them less profitable.
Bank of Montreal (BMO.TO) Chief Executive Bill Downe also
warned that time is running out to make the best deals in the
United States. BMO, Canada's No. 4 bank, is a player in the
U.S. Midwest with its Harris Bank unit.
Downe told the conference that while BMO is primarily
looking to grow organically as the market recovers, there will
still be some opportunities to make deals for recovering U.S.
"I do think that one of the things we are going to see
start to develop is banks that have good strong customer bases
and good reputations, and which have essentially repaired their
capital coming out of the period of 2009, are going to be
restrained with respect to their ability to grow," he said.
"And I think that's where you might see the opportunity to
combine banks if they had a growth strategy, but don't have the
capital to follow up on it."
The other area where opportunities still exist are through
U.S. Federal Deposit Insurance Corp-assisted deals, he said.
"The good news on FDIC transactions is that the volume has
risen. It's clear that in the pipeline, there will be some FDIC
banks that do have good locations and good customers."
FDIC deals offer greater risk certainty because acquiring
banks can pick up deposits at relatively low or zero premiums
and also be shielded from toxic assets.
TD's Clark said his firm is also still looking at FDIC
deals, but he added they are becoming costly as the market
"We look at them as deals in which we have the
opportunities to extend our franchise, and so we are
particularly interested in going down the East Coast," he said.
TD's U.S. banking operations are concentrated in the U.S.
"We bid on a number of situations but haven't won, probably
haven't been as aggressive as perhaps we should have been. The
market is clearly making those deals a little less economic
than they were before, and so we'll continue to bid and
hopefully we'll do a few."
By contrast, Canadian Imperial Bank of Commerce (CM.TO)
said it sees only limited opportunities for acquisitions
outside of Canada, especially in terms of anything large.
If the bank does deploy outside of Canada, it would be in
areas where it has a high degree of familiarity and comfort,
which have similar regulatory structures to what it has had
experience with, said Gerald McCaughey, president and chief
executive of Canada's fifth-largest bank.
"It basically confines us to Canada, certain elements of
the Caribbean, and very, very limited areas of the United
States," he said. "We are, have been and will continue to be
lenders on a limited basis in the United States."
George Lewis, head of the wealth management arm of Royal
Bank of Canada (RY.TO), said his firm is on the lookout for
asset management buys in Europe and the United States.
While the prospects for deals with foreign banks may be
getting fewer, the chance of a merger between any of Canada's
big banks is pretty much nonexistent, TD's Clark said.
"The financial crisis, I thought, would have killed that
question for all time," he said. "I think that's a dead
(Reporting by John McCrank and Andrea Hopkins; editing by