Toronto-Dominion (TD) Bank has walked away from its planned acquisition of First Horizon Corp., but experts told BNN Bloomberg that the crisis among mid-sized U.S. banks may open up more buying opportunities for Canadian financial institutions. 

“These Canadian banks are going to have a field day in the United States over the next 12 months,” D*ck Bove, chief financial strategist at Odeon Capital, said in a Thursday television interview.

TD said both parties agreed to scrap the deal as it could not see a clear path to regulatory approval for the US$13.4-billion sale, which was announced in 2022 before central banks began hiking interest rates to fight inflation.

Bove said he sees the failure of several U.S. regional banks and sensitivity of similar institutions as a direct result of that high interest rate environment brought on by the U.S. Federal Reserve’s aggressive monetary tightening cycle.

That cycle continued on Wednesday with another quarter-point rate hike, days after U.S. regulators facilitated a deal for JPMorgan Chase & Co., the country’s largest lender, to buy troubled First Republic Bank.

 

Bove said TD executives likely looked at the situation in the U.S. banking system and decided they could likely make better deals for similar banks at lower prices – and other Canadian banks may be able to cash in, too, as U.S. regulators may be seeking more stable buyers in the near future.

“The United States regulators are going to be begging them to come in, because they have money, they're untainted by this, and they're going to have an ability to do considerable acquiring in this country, which they will do,” he said.

Brian Madden, chief investment officer at First Avenue Investment Counsel, had a similar perspective on future possibilities for TD in U.S. banking.

He told BNN Bloomberg in a television interview that he expects the banking volatility is not over in the United States, leading to a “buyer’s market” that could turn into a positive for TD despite the First Horizon deal not going through.

“In uncertain times, it's good to have deep pockets, which TD now is abundantly blessed with, a lot of excess capital and a lot of options in the market that might offer up some fire sales,” he said, pointing to JP Morgan’s recent First Republic deal as an example of that.

Jim Thorne, chief market strategist at Wellington-Altus Private Wealth, said the termination of TD’s First Horizon sale shows that “Canadians are finally figuring out that you don’t have to pay full price for U.S. banks.”

“Once we get through this, the banks that survive are going to be able to get market share,” he said.