Focus: TD on deal hunt after BancWest bid as Canadian lenders pursue U.S. growth

First Hawaiian

23/12/2021 18:47

* BancWest triggered bidding war between TD, BMO -sources
    * TD on the lookout for targets after narrow loss -sources
    * BMO now 16th bank by assets in the United States
    * Excess cash, high share prices fuel Canadian banks

    By Pamela Barbaglia and Nichola Saminather
    LONDON/TORONTO, Dec 23 (Reuters) - Toronto-Dominion Bank
 TD.TO  is leading the charge of cash-rich Canadian banks
seeking to make a foray in the United States and find growth
away from their home turf where the Big Six banks already
control nearly 90% of the market.
    Billions of dollars of excess cash amassed during a nearly
two-year moratorium on capital redistributions that was only
lifted last month, and share prices close to record highs have
given Canadian banks an acquisition currency to bet on the exit
and downsizings of several European and international banks.
 urn:newsml:reuters.com:*:nL1N2RV29W  urn:newsml:reuters.com:*:nL4N2J23NZ
    The sale of BNP Paribas'  BNPP.PA  U.S. unit, Bank of the
West (BancWest), is the latest example of pent-up demand, with
Toronto-Dominion Bank battling it out with rival Canadian lender
Bank of Montreal  BMO.TO , two sources familiar with the matter
said.  urn:newsml:reuters.com:*:nL1N2T50CA
    Bank of Montreal said on Monday it will buy BNP Paribas'
unit, Bank of the West, for $16.3 billion in its biggest deal
ever.  urn:newsml:reuters.com:*:nL1N2T50CA
    TD, Canada's second-largest bank by market value, had looked
at every major asset portfolio that came up for sale, including
the U.S. businesses sold by Mitsubishi UFJ (MUFG)  8306.T  in
September and BBVA  BBVA.MC  in November 2020, the sources said.
 urn:newsml:reuters.com:*:nL1N2QN0CH urn:newsml:reuters.com:*:nL4N2I204Z
    It remains on the hunt for acquisitions in the United States
after its narrow loss to BMO.  urn:newsml:reuters.com:*:nL1N2QN0CH urn:newsml:reuters.com:*:nL4N2I204Z
    TD and BMO spokespersons did not comment on the bidding
process or future growth plans in the United States. MUFG
declined comment on the Canadian banks' interest in their assets
and BBVA did not immediately respond to a request for comment.  
    "Banking is a scale, technology and sophistication game,"
said Brian Madden, portfolio manager at Goodreid Investment
Counsel.
    He added that Canadian banks already in the United States
are well placed to scale up their U.S. operations since they
"happen to be directly adjacent to the largest banking market on
the planet."
    TD executives said earlier this year that the bank "will not
be shy" to do a bank deal in the U.S. Southeast or in any area
where it currently has operations, primarily on the East Coast.
    Having missed out on some big acquisitions, TD is now likely
to turn its attention to smaller banks, one of the sources said.
    Along with TD and BMO, Royal Bank of Canada  RY.TO ,
Canadian Imperial Bank of Commerce (CIBC)  CM.TO , Bank of Nova
Scotia  BNS.TO  and National Bank of Canada  NA.TO  round out
Canada's Big Six banks.
    TD is one of the top 10 banks in the United States, and
Royal Bank owns City National, the ninth-largest bank in
California by deposits.
    Royal Bank has also been undergoing U.S. expansion, 
although Canada's biggest lender is more focused on its wealth
management https://www.reuters.com/article/us-rbc-wealth-idUSKBN25U1I6
 business in the United States. 
    And CIBC, which entered the United States in 2017 with its
acquisition of PrivateBancorp, has said it is aiming for
increased earnings from the country in the coming years. 
    Royal Bank did not respond to a request for comment. CIBC
declined to comment.
    
    BMO'S CHASE
    BMO had pursued BancWest after losing out on the U.S. retail
business of MUFG, Japan's biggest lender, one of the sources
said. MUFG ended up selling its U.S. retail business to U.S.
Bancorp  USB.N  for $8 billion. 
    BMO made a competitive bid for MUFG's assets, and its
disappointment at losing out propelled Canada's fourth-largest
bank to move fast on the BancWest sale, the source said.
    BNP Paribas, advised by Goldman Sachs  GS.N  and JPMorgan
 JPM.N , entered parallel discussions with both TD and BMO,
raising pressure on both bidders to finalise their offers as it
fretted that regulatory headwinds could hamper the sale, the
sources said.
    BNP Paribas did not respond to a request for comment.
    While TD initially made a low bid and subsequently raised
it, BMO was more aggressive with its first proposal and was
quick at declaring its offer "best and final" in December after
offering a final sweetener, one of the sources said.
    The deal will make BMO the 16th biggest bank by assets in
the United States, up from 19th now, and lifts its assets to
nearly $300 billion.  urn:newsml:reuters.com:*:nL1N2T50CA
    By merging with U.S. rivals, Canadian banks with an existing
U.S. presence are expected to extract better returns from these
businesses than smaller players, even when they appear to pay a
premium as BMO did for BancWest, said Anthony Visano, portfolio
manager at Kingwest & Co.
    "Sometimes the strategic value trumps the financial
consideration," Goodreid Investment's Madden said.     

 (Reporting by Pamela Barbaglia in London and Nichola Saminather
in Toronto; Editing by Megan Davies and Matthew Lewis)
 ((pamela.barbaglia@thomsonreuters.com ; +44 207 542 7723;
Nichola.Saminather@thomsonreuters.com; +1 647 480 7519;))