U.S. subsidiaries of Canadian banks have uninsured deposits in the range of 30% to 60%, but they can depend on their parent to withstand uncertainty, according to Morningstar. On Monday, the Canada's financial sub-index rose 0.7%. Central Banks across the world, including the Bank of Canada have set up daily dollar taps to bolster the cash flow to banks dealing with liquidity issues. But that has failed to reassure investors. Canadian banks generally have lower exposure to fixed-income securities diversified and stable funding, capital buffers that "should enable these banks to navigate current market turbulence," said Carl De Souza senior vice-president, DBRS Morningstar. The positive assurances from market analysts comes after two weeks of market fears and uncertainty. In Canada, the financial regulator took permanent control of the assets of Silicon Valley Bank's Canadian branch, meanwhile financiers told Reuters that Canada's technology start-ups would find it more difficult to get funding.
REGIONAL BANK SCRUTINY
Canadian banks emerged stronger from the 2008 global
financial crisis due to prudent regulations and since built a
reputation for financial stability. The six big banks -
including Royal Bank of Canada Toronto Dominion Bank , and Bank of Montreal - account for about 80%
of Canada's banking assets and have avoided scandals or failures
that have plagued banks their European and U.S. peers.
The Canadian banks have kept their focus on domestic lending
and majority of their earnings come from serving local clients.
But in recent years, Royal Bank, BMO, TD Bank and CIBC have expanded into the United States by buying regional lenders
to benefit from strong growth in second-tier U.S. cities.
That strategy is now under scrutiny since the current bank
crisis in the United States was triggered by problems at the
regional lenders.
TD Bank, for instance, launched a $13.4 billion bid for
Memphis-based First Horizon Corp , more a year ago that
is still awaiting regulatory approval. However, last week the
regional bank's stock was hit after the SVB collapse.
By Monday late morning, TD shares rose 0.2% and First Horizon was up 3% at $15.28 -- still 38% lower than TD's offer price. "The market is thinking that TD is in a good position to re-negotiate the deal considering First Horizon is in a tough spot now," Shanahan said.
TD and First Horizon have pushed the closing date of the acquisition to end of May, with an potential for an extension. TD was unavailable for an immediate comment. ($1 = 1.3662 Canadian dollars) (Reporting by Divya Rajagopal Editing by Denny Thomas and)
