Wednesday, December 29, 2010

Deep thought

This report in the New York Times the other day on Canadian banks expanding south prompted a second look:
Now several of the banks are taking advantage of their solid balance sheets as well as the current revamping and consolidation of the American banking system to again look south for expansion. Last week, the Toronto-Dominion Bank agreed to pay $6.3 billion for Chrysler Financial. And earlier this month the Bank of Montreal bought Marshall & Ilsley, a bank based in Milwaukee, for $4.1 billion.
...Canadian banks have few other options for expansion.

“The banks simply have no choice,” said Louis Gagnon, an associate professor of finance at Queen’s University in Kingston, Ontario. “They have to go beyond our borders to grow and the only market that makes sense is the United States.”
While that has made for a orderly financial system for Canada that is very profitable for bank investors, the banks now find themselves accumulating substantial capital without effective ways to use it to increase their businesses within Canada.
Seems to me that some enterprising minds of the economic variety might want to think about all that investment money going south and come up with some new avenues for that substantial capital to make more of a difference here in Canada. I don't know what that could mean, honestly, but I throw it out there.