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A person walks past a sign for TD Canada Trust in Toronto, Ontario.
TD needs a new plan
As ConocoPhillips invested in Canada, Toronto Dominion, one of Canada’s biggest banks, struggled to outline a new expansion strategy after its planned acquisition of Tennessee-based First Horizon fell through amid reports of regulatory difficulties. Instead of expanding all at once by buying First Horizon, TD plans to open more branches in the United States, 150 by 2027.
The failed acquisition looks like a setback for TD, since they will expand in the US more slowly than planned. But overall the Canadian banking sector, which is dominated by five big players, looks stable when compared with the creeping crisis in the United States, where three banks — First Republic Bank, Silicon Valley Bank, and Signature (representing about $559 billion in assets) — have failed this year.
The fallout from US bank failures has had an impact on Canadian banks, pushing them to be more cautious about lending amid fears of a recession. Canada has not had a bank failure since 1996 and was spared the worst of the financial crisis of 2008 because there are a smaller number of more heavily regulated banks than in the United States.Toronto Dominion bank logo is seen outside of a branch in Ottawa, Ontario, Canada.
Failed merger amid banking crisis
Toronto Dominion Bank and Tennessee-based First Horizon Corporation had been set on a $13.4 billion merger for over a year. But last week, the two banks called things off, citing TD’s “regulatory hurdles” and offering few details. Early this week, it was reported that TD’s anti-money laundering efforts might have soured the U.S. Office of the Comptroller of the Currency and the Federal Reserve on the deal.
Investors had been getting First Horizon’s securities at a discount owing to delays in the merger and the overall banking crisis. The scuppered deal sent First Horizon shares south by 33%. Now, TD must pay First Horizon a $225 million termination fee, which can help the US bank boost its capital ratios.
First Horizon says the abandoned deal is unrelated to the banking crisis, which has hit three mid-size banks since March and undermined market confidence. However, the failed merger is unlikely to boost anyone’s faith in the stability of the sector anytime soon.
For more on the banking crisis, check out last week’s column by Evan Solomon, Super banker, where are you?