TD might be among foreign banks eyeing U.S. financial assets
TD Bank is reportedly kicking the tires of Washington Mutual, the largest savings and loan institution in the United States, with an eye to picking up valuable financial assets at distressed prices, according to news reports Tuesday.
Experts said a Toronto-Dominion Bank purchase would make sense.
There is little overlap with the bank's current U.S. acquisitions, Robert Sedran, an analyst with National Bank Financial, wrote in a note to clients Tuesday.
But in past statements, TD president and chief executive officer Ed Clark said he will be "extremely cautious" in purchasing assets from U.S. financial institutions hurt by the recent equity meltdown on Wall Street.
Financial companies lost value in the face of frenzied stock selling in September.(Canadian Press)"Until we actually get through and see this market stabilize, it's a brave person that says, 'I can call the bottom,'" Clark told a financial audience recently.
A spokesman said TD does not comment on rumours.
If true, however, TD is one of a growing list of international banks that have either bought or are examining the potential purchase of operations from brokerage houses, insurance firms and other financial service companies that have lost value in September's stock market turmoil.
In the past week and a half, Mizuo Financial Group purchased a portion of Merrill Lynch and Co. for $1.2 billion US. Mitsubishi UFJ Financial Group entered into a deal to buy as much as 20 per cent of Morgan Stanley. And Nomura Holdings snapped up the Asian assets of bankrupt brokerage house Lehman Brothers.
Citigroup is also reportedly interested in debt-ridden Washington Mutual, while the aggressive Spanish bank Santander could be on the hunt for U.S. bargains as well.
In Canada, Manulife Financial is apparently looking at pieces of insurer American International Group.
Industry watchers said, however, that anyone sifting through these financial companies has to be careful.
"Use this time to separate the wheat from the chaff among the bank stocks — and keep only the stuff that you are sure can weather the next crisis, because there is certainly another one just around the corner," Nancy Bush, a South Carolina-based bank analyst, said in a recent letter to clients.
Banking experts noted that companies such as Lehman Brothers and AIG that ran into financial difficulties have balance statements full of almost-worthless asset-backed commercial paper.
As a result, getting a true picture of the financial health of these entities will be difficult, experts said.
The U.S. government proposed a $700 billion US rescue package for financial firms last week after the bankruptcy of Lehman Brothers and the takeovers of AIG and Merrill Lynch within two days drove markets into a steep downward spiral.
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