Canadaian Banks, looking forward to expand in the USA market, are presently facing difficulties to keep up with high expenses of US bank acquisitions.
"Banks in Canada, looking forward to expand in the USA market, are presently facing difficulties to keep up with high expenses of US bank acquisitions and, therefore, might have to wait a bit longer when transaction values are expected to reach an affordable level in the coming two years." These remarks were made on September 20, 2006 in an RBC (Royal Bank of Canada) sponsored conference highlighting the expensive US acquisitions.
TD Banknorth's CEO, Bill Ryan said that they will prefer to move slowly at present. He termed the entire issue as a 'cycle' and was optimistic that proper time will come for the acquisitions. Seeing tremendous potential in US banks for Canada, he said that the US banks are currently demanding additional premiums that's refraining them from acquisitions.
Vice-Chairman of Bank of Montreal, Chuck Tonge, also had a similar opinion. He said that they are currently aiming for targets. However, additional premiums are causing problems in acquisitions at present.
RBC's Centura Banks Chief executive, Scott Custer said that macroeconomic & industry dynamics are expected to reduce transaction pricing. Owing to a strict regulatory environment, compliance expenses for small banks have risen. The margins for these banks have reduced following customer shifts to high-cost products from low-cost accounts. He said that firms would slowly realize that these acquisitions are not at all easy.
However, executives have ruled out the possibility for a complete stop in 'deal-making'.
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