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Canada's banks are collectively the soundest in the world, according to Moody's Investors Service, which recommended the financial institutions to jittery global investors. The agency rated all of Canada's big banks at double-A2 or better, higher than bank rankings in the U.S., Europe, the Asia-Pacific region and other areas of the world. Canada's big banks also posted good results in the first quarter of 2012, the agency noted. "The combination of strong underlying credit fundamentals, a prudent regulatory environment, sound government fiscal management policies, and a more stable real estate market have all contributed to the superior standing of Canada's banks," senior director Allerton Smith said in the report.
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The gap between healthy banks and those that remain in the doldrums will fuel acquisition activity in the coming years, a Virginia investment management firm predicts. FJ Capital Management published an updated version of a 2011 white paper that argues an M&A wave is coming, even though the activity last year was a letdown. In 2011, 159 open-bank deals were announced, down from 175 in 2010. The rebound could even eclipse 1994, a blockbuster year for M&A following the economic downturn of the late 1980s and early 1990s. That year 526 deals were announced.
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Canada's economic, fiscal and financial strengths are helping to increase business investment in the country, Finance Minister Jim Flaherty said. Flaherty said that Canada’s strong economic fundamentals, sound fiscal management and well-supervised financial sector support increasing business investment. Flaherty cited international recognition of Canada’s financial sector leadership, noting that for four consecutive years the World Economic Forum has rated Canada’s banking system as the world’s soundest.
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Canadian financial institutions are well represented in the latest ranking of the World’s 50 Safest Banks. Global Finance’s 20th annual ranking includes six Canadian financial institutions with winners selected through an evaluation of long-term credit ratings — from Moody’s, Standard & Poor’s and Fitch — and total assets of the 500 largest banks worldwide. Royal Bank of Canada leads the pack with the 11th spot, Toronto Dominion Bank is ranked 13th, Bank of Nova Scotia 18th, Caisse Centrale Desjardins 20th, Bank of Montreal 30th, and CIBC 31st.
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Bank of America agreed to sell an approximately $8.6 billion Canadian card unit to Toronto-Dominion Bank and exit U.K. and Irish card markets as the firm limits international consumer lending. TD will pay $7.6 billion for Bank of America’s MBNA Canada unit and assume about $1.1 billion in liabilities. Bank of America’s portfolios in the U.K. and Ireland have a combined $19 billion in credit card loans and more than 4,000 employees, the bank said.
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As Canadian hedge fund managers grab the attention of global investors, many are setting up offshore investment vehicles to capture the new money, reports The Wall Street Journal. The offshore products allow non-Canadians to invest in Canadian funds without being subject to a 25% tax on dividends. The heightened interest from foreign investors will likely give a boost to the $9 billion Canadian hedge fund industry. To global investors, Canadian funds, many of which invest in mining and resource businesses, represent a way to tap the commodity rally driven by growing emerging markets.
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A new wave of investment groups is flooding the ETF market in Canada; Vanguard Group and PowerShares are joining First Asset Capital in offering ETFs in Canada. BMO Western Canada ETF head Mark Webster, responding to Vanguard's announcement, said: "Obviously it's a huge competitor, but the reality is that when you have somebody of that stature coming into the Canadian marketplace, it's going to attract a lot of attention to the ETF world, and all the participants are going to be beneficiaries."
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Reuters reports that bank M&A in Asia is set to accelerate as small and inefficient lenders in the region look to attain scale and drive shareholder returns. In addition, cross-border deal activity will likely be limited by the foreign ownership restrictions in many countries in the region with an estimated $16 billion worth of live or planned deals between banks, bankers say. Overall, dealmaking in Asia grew at a healthy pace in the first half of 2011, driven largely by the material and industrial sectors and showing buyers were unfazed by slowing economic growth in China and India and rising interest rates in many parts of Asia.
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U.S. Bank announced the Canadian launch of its Payment Plus tool, which replaces traditional payment methods with cardless accounts that use dynamic credit adjustment, single use accounts or straight-through processing to pay vendor invoices.
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Kansas City-based DST Systems Inc. has bought Subserveo Inc., a broker-dealer and investment adviser firm in Vancouver. Subserveo's systems allow compliance officers and branch managers to conduct automated oversight of daily trading activity and the suitability of investments for customers.
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Pennsylvania-based investment management company Vanguard is expanding in Canada with the creation of Vanguard Investments Canada. The firm's focus will be to offer investment products to Canadian investors through investment advisors. The Canadian operation will have its head office in Toronto.
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A trade, tourism and investment trip in China led by Calgary Economic Development, as well as Tourism Calgary, generated a commitment from Industrial and Commercial Bank of China (ICBC), the country's biggest bank, to open a branch in Calgary. The bank does a lot work for oil companies and has a market capitalization of more than $250 billion.
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U.S. private equity firms are increasingly eager to buy assets in Canada, an RBC investment banker says. "I would say the M&A business right now is pretty robust in Canada," said Alan Hibben, a managing director for M&As at Royal Bank of Canada. Hibben said Canadian M&A activity also has been driven by healthy corporate balance sheets and a debt market nearly as open as it was before the U.S. credit crisis.
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Shareholders of Marshall & Ilsley (M&I) approved selling the Milwaukee-based company to BMO Financial. The closing remains subject to customary closing conditions, including regulatory approvals, M&I said. The $4 billion deal is expected to close by July 2011.
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Canadian banks have been widely recognized as the strongest in the industry, said a feature in Bloomberg Markets magazine. Five of the Big Six have made it into its list of the world's 20 best capitalized banks, with National Bank of Canada earning the best score of its Canadian peers, ending up at the number three spot. National is followed by CIBC in fourth spot and TD at 12. Next comes RBC (17) with BMO at 19th.
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Toronto has leapt into the number two spot in a ranking of 26 centres of global business and finance. In its "Cities of Opportunity" analysis, PwC ranked cities in 10 categories, to favour "holistic capital market centres with vibrant economies and strong quality of life." Toronto ranks particularly highly in two of the categories most closely correlated with global competitiveness: intellectual capital & innovation (2nd) and health, safety & security (2nd). Toronto is also ranked among the top ten global financial centres by Britain's influential financial magazine, The Banker.
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California-based Equinix, Inc., a provider of global data center services, announced that its Fidessa Canada unit, a provider of high-performance trading, investment management and information solutions for the financial community, will host its Canadian trading platform in its Toronto data centre. Fidessa’s Canadian trading platform provides access to all of the Canadian trading venues, including the Toronto Stock Exchange.
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The Globe and Mail reports that Jim O'Neill, chairman of Goldman Sachs Asset Management, found himself with nothing but nice things to say about Canada. "Today, Canada is arguably the role model for all troubled major nations that need to do something about their fiscal affairs and healthcare and pension systems," said O'Neill. By investing in Canada, "you gain exposure to some of the benefits of the forces driving global growth, good economic policies and, in most cases, highly credible governance. In addition, Canada seems to be especially well placed," he added.
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China Investment Corporation, China's $300 billion sovereign wealth fund, chose Toronto as the location of its first overseas representative office. The move is seen as a ringing endorsement of Canada's stable and secure investment climate and the rising profile of Toronto as one of the world's leading financial centres. The Banker's 2010 International Financial Centers Index ranks Toronto second of financial centres in North America and seventh of 53 centres globally.
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U.S.-based Numerix, a provider of cross-asset analytics for derivatives valuations and risk management, announced the opening and expansion of its Vancouver office. This will also include the hiring of several new inside sales, quantitative development and business analyst team members. The new Vancouver office immediately expands on Numerix’s existing sales force and quantitative development presence in North America.
