* 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"
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. firms.
"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 improves.
"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. Northeast.
"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 issue."
($1=$1.02 Canadian) (Reporting by John McCrank and Andrea Hopkins; editing by Peter Galloway)