Canadian Banks Eye Expansion Opportunities

How financial institutions on both sides of the border are amping up their North American banking presence

News that Canadian banking giant BMO is expanding further into U.S.  geographies – especially in opportunity-rich California – may have come as a surprise to direct competitors like U.S.-based Wells Fargo. But it’s actually part of a well-coordinated strategy for the Canadian big bank to turbocharge its growth across the continent. According to the Financial Post: “The purchase of San Francisco-based Bank of the West will double its U.S. retail presence and give BMO a strong position in California, which has been resilient economically during the pandemic.”

This recent move is part of a cross-border trend, with some U.S. banks seeking inroads in Canada – currently dominated by “The Big Six” banks. However, with stiffer banking regulations in the provinces, Canadian banks seeking southern opportunities are at a distinct advantage over their U.S. counterparts. “The current push comes at a time of relative strength,” according to reporting on banking opportunities in the U.S. “Once dubbed the world’s best boring banks, Canada’s biggest lenders are more profitable than ever, thanks to years of low-interest rates, robust consumer borrowing and a red-hot housing market fuelling demand for mortgages.”

The BMO deal brings additional branch heft with 514 retail, commercial and wealth locations in the states, already the 8th largest bank, by assets, in North America. The North American banking focus is clear, according to their CEO Darryl White, Chief Executive Officer, who says in a press statement: “With the strength of our performance and our integrated North American foundation, we have never been better positioned to take this next step in our growth strategy and to deliver for the new customers and colleagues we look forward to welcoming to BMO.”

According to American Banker, eyes are on additional Canadian banks, especially among expansion-minded institutions like TD, which already has a $420 billion asset U.S. subsidiary. “If you look at our history, we are good acquirers,” says TD CEO Bharat Masrani. He says if the bank looks at growth through a strategic lens with compelling opportunities “defined as to make financial sense, to make strategic sense, frankly, risk sense and cultural sense.” While expansion is expensive, Canadian banks plan to leverage favorable conditions in the form of “billions of dollars of excess capital and share prices close to record highs” according to Reuters.

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