[Northern Light]

Interesting move out today as TD terminated its 13B+ purchase of U.S. regional bank First Horizon.

https://www.cbc.ca/news/business/td-bank-first-horizon-1.6831855

While this will slow TD's U.S. expansion and comes with a $200M break-fee for walking away from the deal; its not a surprise or a bad move.

The recent turmoil in U.S. regional banks has caused their stock prices to sink. First Horizon is now worth 1/3 less than what TD agreed to pay for it.

(~ $16USD per share vs $25)

I expect (but don't know) that TD tried to re-open the deal and get a lower price in light of the changed market conditions, but couldn't come to a new deal.

In that context, walking away makes sense.

It wouldn't surprise me to see TD take another run at it though at a much lower price point.

The stock was down up to 50% more (from the lower level) in pre-market trading.

 

[jje1000]

Thoughts on the banking crisis south of the border? Hopefully it won't spread here.

 

[Mr.Tang]

The only impact will be seen in knock on effects in a US sub for the 4 that have a meaningful presence there...some deposit flight (to the largest US banks), some unrealized losses being recognized (commercial real estate the likely candidate) and increased regulatory costs (the regulators are rightly taking a fair amount of the blame here and can not let themselves be open to accusations again - so will over rotate).

 

[Mr.Tang]

Also - in any discussion on Toronto as a financial centre - one really should not overtly focus on the Banks but also consider the very large LifeCo's, Canada's somewhat uniquely large and dynamic public pension funds and Brookfield AM. At the end of the day - what makes you global is that it is more than just a nationally focused system - unfortunately, there is not much reason for US, European or Asian capital (providers of capital or users of capital) to seek out Toronto from a size of market, regulatory regime or any other driver.

 

[Northern Light]

- unfortunately, there is not much reason for US, European or Asian capital (providers of capital or users of capital) to seek out Toronto from a size of market, regulatory regime or any other driver.

I'm going to have to differ here on a couple of points.

Canada's banks are leaders in financing mining globally, they're big players in the sector.

The other thing I would note is that there are a number of U.S. banks with very significant back office operations in Toronto. The pool of talent is huge, the linguistic diversity best in class, and all at less than .80c on the dollar vs paying those staff in NYC. (less than because there is both an exchange rate issue and higher typical rate of comparable pay). The ability to shift global staff in/out of Toronto w/ease is also notable.

 

[Mr.Tang]

I'm going to have to differ here on a couple of points.

Canada's banks are leaders in financing mining globally, they're big players in the sector.

The other thing I would note is that there are a number of U.S. banks with very significant back office operations in Toronto. The pool of talent is huge, the linguistic diversity best in class, and all at less than .80c on the dollar vs paying those staff in NYC. (less than because there is both an exchange rate issue and higher typical rate of comparable pay). The ability to shift global staff in/out of Toronto w/ease is also notable.

take your point on raising capital for mining (Toronto and London would be the leaders) - but that is a pretty small sector of the global economy (and not buzzy, high growth one like say technology). Also agree we have great talent at 70% the cost - but I dont think we have a lot of global players meaningfully outsourcing operations to Toronto that I am aware of. They could do it in India or wherever for 10% the cost. I do think our talent pool, and maybe more significantly our immigration laws are a differentiator in the Tech space (at least in the Trump years) -but in Banking I have not really come across it in any scale.

 

[jje1000]

Implications for the possible future office buildings proposed downtown- perhaps we may see some put on the backburner or converted to residential? Same goes for the older, smaller footage office stock downtown- primed for conversion or redevelopment?

Toronto expected to have way too much office space until 2040s

An increasing number of Toronto companies continue to adopt hybrid work models despite lockdowns fading into the past, meaning nine-to-fivers are spe…

www.blogto.com

SIGNFICIANT OVERSUPPLY OF OFFICE SPACE PREDICTED IN GTA UNTIL 2041

/CNW/ - A new report released today by NAIOP Greater Toronto shows that given weak post-pandemic demand for office space there is a sharp risk of a significant...

www.newswire.ca

 

[Northern Light]

Implications for the possible future office buildings proposed downtown- perhaps we may see some put on the backburner or converted to residential? Same goes for the older, smaller footage office stock downtown- primed for conversion or redevelopment?

Toronto expected to have way too much office space until 2040s

An increasing number of Toronto companies continue to adopt hybrid work models despite lockdowns fading into the past, meaning nine-to-fivers are spe…

www.blogto.com

SIGNFICIANT OVERSUPPLY OF OFFICE SPACE PREDICTED IN GTA UNTIL 2041

/CNW/ - A new report released today by NAIOP Greater Toronto shows that given weak post-pandemic demand for office space there is a sharp risk of a significant...

www.newswire.ca

I disagree w/the extent of Altus' prediction....... however......

Yes, most major conventional new projects will be deferred. Very few will be considered as residential sites, though one could never rule that out.

I do need expect to see, some Class B and Class C buildings (extant) converted to residential.

 

[Northern Light]

A potentially very big play announced yesterday with Scotiabank taking a 15% stake in U.S. based (Cleveland) Key Bank.

I've long expected Scotia to make a play for the U.S. market, but I'm honestly surprised to see they went for Key.

I would have thought their potential strength was all the Americans who have either come from Mexico and points south in the Americas where Scotia is major player, as well as more broadly Spanish speaking Americans as Scotia is increasingly a fully trilingual bank with great facility in English, French and Spanish (more so the latter than French at this point).

Instead, they went for a regional players out of Cleveland, very much a midwestern powerhouse but also significant New York presence as well.

Key Bank is the number 23 player in the U.S. by asset size.

****

Speculation is rampant based on the agreement that SB is going to make a play for full ownership and control of Key Bank in 5 years time.

That's a big purchase of Scotia, but one they can afford if they manage capital well.

Should this all come to fruition, this would likely see a lot of new jobs in Toronto as some leadership jobs would shift to Toronto an likely many back end functions as well.

****

This will likely put pressure on TD to revisit a further expansion in the U.S. following the collapse of their last attempt with First Horizon.

 

[Northern Light]

How is @Jonny5 not in this thread?

 

[Jonny5]

How is @Jonny5 not in this thread?

Too busy with work!
It's amasing how from the outside people think the summer is the slow time of the year in banking and investments, but I often find it the busiest. If you want any big project done that involves lots of people, especially both inside and outside your own company, if you don't launch it by August it probably won't get done by year end, so in August everyone who still has something big to do wakes up and then dumps it all out in a panic on my desk (then that person goes on a two week vacation and says "hope you have made lots of progress when I get back!").

I concur Scotia will likely go for all of it at some point. Maybe this first step is to get boots on the ground and especially the direct experience with regulatory requirements in the US, which I'm sure they have some of already, but not the equivalent to when you actually have skin in the game. Then when they have that experience internalised they can make the full jump over the lakes.

 

[Jonny5]

Toronto, Canada & Global Breaking News – CP24

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This isn't really anything new as regulators have really cracked down on this now that using your own personal device to communicate for work has become normalised, but you simply have to use the authorised apps from the bank like Microsoft Teams such that they can data harvest everything you send out for work as opposed to talking to a client on something like WhatsApp which they cannot see.

Interestingly in response to this, my bank was highly pressured by employees to then compensate for personal data use, so they will now start paying a stipend of $40/month to all employees that use Microsoft Teams on their personal phones, and apparently its a non-taxable benefit.