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The unbelievable meltdown at Royal Bank of Scotland Group plc means that all or part of the bank's U.S. business may be on the block soon, and some of the bidders are likely to be Canadian banks. Globe and Mail columnist Andrew Willis raised the possibility of Canada's big banks -- the cornerstone of what President Barack Obama recently called the best financial system in the world -- bidding for Providence, R.I.-based Citizens Financial Inc., if RBS puts it up for sale.
RBS on Thursday secured its third tranche of state funding and agreed to put £325 billion ($469.1 billion) of assets into the government's "toxic" insurance scheme as it announced a £24.1 billion net loss for 2008. Reports in Britain have suggested the Edinburgh, Scotland-based bank will try to keep Citizens, once known as a gem of a northeastern bank with more than 1,600 branches, 3,500 ATMs and 24,000 employees. But RBS may sell Charter One, the Cleveland bank it bought for $10.5 billion in 2004, effectively halting Citizen's 14-year buying rampage. The most likely Canadian bank to bid for Charter One would be Toronto-Dominion Bank, as it has been growing strongly in the northeastern U.S. since it took control of Portland, Maine-based Banknorth Group Inc. in 2004. The bank has been building up its capital, and the purchase of Charter One would allow it to move into the Midwest. The purchase of all of Citizens may be out of its reach as regulators could object. The second most logical buyer would be Bank of Montreal, which has been slowly expanding its Harris Bank unit from its home base in Chicago, into the Midwest. The difficult for such a move is Citizens -- and even Charter One -- would be a massive acquisition for a bank that has shown little inclination for adventurous dealmaking. As Canada's largest bank, Royal Bank of Canada certainly has the financial muscle to lift Citizens or Charter One off the shoulders of the other Royal Bank. The problem with a Royal Bank-Royal Bank deal (other than the challenge it would pose for headline writers) would be the Canadian bank's U.S. network is concentrated in the Southeast, and the northern branches may prove a bit far flung for it. Bank of Nova Scotia -- for those of you who missed it above, "Nova Scotia'' is Latin for "New Scotland'' -- has expressed some interest in entering the U.S. market after focusing its growth strategy on emerging markets in recent year. And Canadian Imperial Bank of Commerce -- largely a domestic operation after a decade of missteps -- could also enter the U.S. market with the deal. Will any Canadian bank show its hand in such an auction? It's too soon to tell. After all, the reason these banks are in such good shape today is they are conservative by nature. - Peter Moreira See story from The Globe & Mail Categories Deal Video
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Could one Royal Bank's problems be another Royal Bank's opportunity? Could the bank of New Scotland capitalize on the problems in Old Scotland?
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