DEALTALK-Canadian banks spreading global footprint

* RBC, Scotiabank in several recent deals

* Banks increasing global presence, buying cheap assets

* More wholesale banking adds growth and risk

By Cameron French

TORONTO, Nov 10 (BestGrowthStock) – After escaping the financial
crisis in better shape than most of their international peers,
Canada’s big banks are pushing to boost their global market
presence through a flurry of deals that looks set to continue.

The banks have been helped by the strength of the Canadian
dollar and a glut of cheap targets, as lenders hurt by the
financial crisis seek to rebuild balance sheets.

“(Canada’s banks) have come out of this financial downturn
in very strong shape and able to maybe a little more
opportunistic than a lot of the U.S. banks or European banks,
whose capital bases are still being repaired,” said John
MacKinlay, lead advisor in banking at PricewaterhouseCoopers.

Most of Canada’s big lenders have had some sort of
international expansion strategy for some years, but the
frequency of deals picked up after early September, when
Canada’s banking regulator signaled the banks were free to
resume large capital deployments.

Royal Bank of Canada (RY.TO: ), Canada’s biggest, said this
week it had bought the Hong Kong wealth management assets of
Fortis Bank (FORTS.IS: ). That followed a deal last month to buy
British fund manager BlueBay Asset Management (BBAY.L: ) for
about $1.5 billion.

The bank received primary dealer status in France and
Germany in late October, which should help it expand its
European wholesale banking reach.

Bank of Nova Scotia (BNS.TO: ), the country’s No. 3 bank,
recently bought South America banking operations from both
Commerzbank AG (CBKG.DE: ) and Royal Bank of Scotland (RBS.L: ),
and said last week it would establish a fixed-income rates desk
in London, after recently being named a UK primary dealer.

No. 2 lender Toronto-Dominion Bank (TD.TO: ) has signaled it
wants to continue to add to its growing U.S. retail bank.

Bank of Montreal (BMO.TO: ) last month became the first
Canadian bank to be incorporated in China. The bank has said it
is seeking acquisitions in China and in the United States,
through its Chicago-based retail and wholesale bank presence.

Most recent moves have been small, perhaps due to lingering
uncertainty over stricter capital rules that global regulators
will soon implement. But some uncertainty could disappear at
this week’s G20 meeting in Seoul, where some of the rules are
expected to be finalized.

“I’m not entirely surprised at the volume of deals,” said
Juliette John, portfolio manager at Bissett Investment
Management in Calgary. “They’re taking advantage of some of the
market heft that they now have.”

MORE GROWTH, MORE RISK?

While the banks’ strength is rooted in their domestic
retail bank networks, the moves by Royal, Scotiabank, and BMO
show a willingness to bulk up on foreign wholesale banking
assets, which promise more growth, but also more risk.

“There’s a risk that the earnings become more volatile, no
question about that,” said John. “The question becomes how much
do you want to pay for a more volatile earnings stream.”

One analyst said the banks are offsetting the higher risk
of market-related results with geographical diversity, which
spreads risk out.

The analyst, who is not permitted to speak publicly on
merger-related issues, said the recent moves show the banks are
serious about leveraging their advantage for growth.

“I think they’re being opportunistic… If you’re assuming
the world’s not going to hell in a handbasket, they’re picking
up some bargains.”
(Additional reporting by Pav Jordan; editing by Janet
Guttsman)

DEALTALK-Canadian banks spreading global footprint