Nichola Saminather & Pamela Barbaglia

LONDON/TORONTO -Toronto Dominion Bank leads the charge for cash-rich Canadian banks looking to expand their reach in America and grow outside of Canada, where they are already dominated by the Big Six.

Excess cash in excess of $2.5 billion that had been amassed over a two-year period of capital redistributions was lifted only last month. Share prices near record highs gave Canadian banks an acquisition currency with which to wager on the downsizing of many European and other international banks.

Two sources close to the matter stated that the sale of BNP Paribas’ U.S. subsidiary, Bank of the West (BancWest), was the latest sign of pent-up demand. Toronto-Dominion Bank is battling for the title with Bank of Montreal.

Bank of Montreal announced Monday that it would buy Bank of the West from BNP Paribas in the largest deal of its kind ever.

According to sources, TD Canada was the second largest bank in Canada by market value. It had examined every portfolio of major assets that were up for sale.

After its close loss to BMO, it continues to search for acquisitions in America.

TD and BMO spokespeople did not respond to a request for comment about the bidding process, or any future plans of growth in the United States. MUFG refused to comment on Canadian banks’ interests in assets. BBVA also did not respond immediately to a request.

Brian Madden is the portfolio manager for Goodreid Investment Counsel. “Banking can be a scale and technology game,” he said.

He said that Canadian banks in America are in a good position to expand their operations, as they have “directly adjacent to the biggest banking market on Earth.”

Earlier this year, TD executives stated that they “will not hesitate” to make a deal with a bank in the U.S. Southeast and in other areas where its operations are currently concentrated on the East Coast.

According to one source, TD will now be focusing its attention on smaller banks after it missed several big acquisitions.

Canada’s six largest banks are TD, BMO and Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada, Bank of Nova Scotia, National Bank of Canada (OTC) and Bank of Toronto.

TD Bank is one of America’s top 10 banks. Royal Bank also owns City National Bank, California’s 9th-largest bank, 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.

CIBC also entered the United States through the purchase of PrivateBancorp. It stated it aims to earn more from the country over the years.

Royal Bank declined to comment. CIBC did not respond to a request for comment.

BMO’S CHASE

According to one source, BMO pursued BancWest, having lost the U.S. retail company of MUFG in Japan, the largest lender. MUFG was forced to sell its U.S. retail operations to U.S. Bancorp in exchange for $8B.

Source said that BMO offered a strong bid to acquire MUFG’s assets. The bank’s dismay at not being selected prompted Canada’s fourth-largest Bank to swiftly move forward with the BancWest sale.

BNP Paribas (advised by Goldman Sachs and JPMorgan) entered into parallel negotiations with TD and BMO. The pressure was on them to make their final offers, as they feared regulatory obstacles could hinder the sale.

BNP Paribas has not responded to my request for comment.

TD offered a lower bid initially and then raised the price, but BMO responded quicker to its initial proposal by declaring it “best and final” and offering a sweetener in December.

BMO, which was previously ranked 19th in assets, will now be 16th.

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.

Madden of Goodreid Investment stated, “Sometimes strategic value overrides the financial consideration.”