The Deal: Canadian Banks Seek More Cross-Border Deals

Canadian banks look to improve growth beyond the limited domestic opportunities.
By The Deal ,

NEW YORK (TheStreet) -- Canadian banks will announce acquisitions this summer, as lenders in the country remain hungry for cross-border M&A, dealmakers say.

Specialized loan businesses linked to natural resources and energy are attractive targets, with one major Canadian bank working on an acquisition in this area, sources said. Commodities businesses and asset management are other sectors of interest, given their relatively stable revenues as well as an aging demographic.

TD Bank Financial Group

,

Canadian Imperial Bank of Commerce

,

National Bank of Canada

,

Royal Bank of Canada

,

Bank of Montreal

and

Bank of Nova Scotia

account for over 90% of banking assets in Canada and are keen on M&A given limited domestic growth opportunities.

Banks in Canada did not suffer losses to the same extent as U.S. banks from the credit crisis, given better national regulation, stronger capitalization and less exposure to risky mortgage securities.

The chief financial officer of Canada's largest lender by assets,

RBC Capital Markets LLC

, has said it would consider acquisitions as large as $4.9 billion to expand its wealth management operations. CFO Janice Fukakusa has described takeovers from C$500 million ($474 million) up to C$2 billion ($1.9 billion) as "pretty manageable" and voiced enthusiasm for growth by M&A.

Last October, Royal Bank of Canada paid $4.1 billion for

Ally Financial Inc.

's Canadian assets, while

TD Bank

scooped up the credit card operations for

Target Corp.

as it tries to build a retail business in the United States. The following month,

Scotiabank

completed its acquisition of

ING

DIRECT Canada from its Amsterdam-based parent

ING Groep NV

for C$3.13 billion.

Sources said regions such as Mexico, Latin America and the United States are attractive to Canadian banks, with many U.S. lenders still divesting business units after the credit crisis amid a stricter regulatory backdrop. By contrast, major Wall Street banks are seen as more likely to conduct "product add" transactions as they grapple with tougher new capital requirements due to their status as banks of global systemic importance.

Last year saw Canadian banks dominate deal advisory in that country, with

RBC Capital Markets

,

BMO Capital Markets Corp.

,

Goldman, Sachs & Co.

, Scotiabank and TD Securities being the top five M&A advisers, according to data provider Dealogic. However, for 2013, U.S. banks have elbowed in, with

Goldman Sachs

,

Morgan Stanley

and

JPMorgan

Chase & Co. taking the top three spots ahead of Scotiabank and Canaccord Genuity Corp.

Total deal value that Canadian banks advised on year to date is $78.5 billion, down 29% from the prior corresponding period, while the number of deals announced has dropped 25% to 1,227.

-- Written by Jane Searle in New York

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