Southern Exposure

Richards concurs. He says from an advisor’s perspective, the more players in the market, the better.”There’s more competition for advisors and more places for them to go,” he says.

Bill Downe the newly-appointed chief operating officer at BMO Financial Group says it has capital at the ready to do deals worth up to $2 billion. Its U.S. operations are anchored by Chicago-based Harris Bankcorp. Inc., which opened its 200th branch this past May in West Lincoln Park, one of the fastest-growing communities within the Chicagoland metropolitan market.

“There are lots of acquisition opportunities in the $50-million to $100-million range and in the $250-million to $500-million range. If we could buy a larger company that meets our criteria, we’d do it,” he says.

Those requirements include having a similar business model in terms of high customer service and relationship-based banking, as well as management with the same type of vision for building the business in the future.

“We know how to operate across five time zones and we have the confidence to run a bank branch system. Our focus at Harris on customer service allows us to compete in a sector typically occupied by independent community banks,” he says. Harris’s next goal is to add 20 more branches in the area by 2007 and grow to 350 to 400 branches across the Midwest within the next five years.

Downe says bank’s focal point for growth is in the U.S. Midwest, in large part because its culture is very similar to Canada’s. “The relationships with customers, the way we think about the communities we’re in, the employees’ work ethic and the commitment to customers is essentially the same,” he says. One-quarter of the bank’s business is currently in the U.S. but Downe expects that proportion to grow because “we won’t be bumping into ourselves” in the largely unconsolidated U.S. market.

Canadian institutions aren’t alone in their quest to pick up desirable players in the U.S. Capital One Bank, JP Morgan & Co. and Wachovia Corp. have added hundreds of new branches and billions of dollars of assets through acquisitions this year.

And you don’t have to be a behemoth to get into the acquisition game either. Less than a year ago, Winnipeg-based Wellington West Capital bought 50% of One Capital Management, an investment firm in Los Angeles with $450 million in assets under management. Charlie Spiring, CEO of Wellington West, which has about $6 billion in assets, says after branching out across Canada during the last six or seven years–it has more than 20 offices from coast to coast–the U.S. is the next frontier. The opportunity in California is as big as the opportunity in Canada,” he says.

Other regions of the country are similarly lucrative in the eyes of some Canadian firms. In April, TD Banknorth announced it had acquired Interchange Financial Services Corp. for $480.6 million. A year ago, Banknorth bought Hudson United for $1.9 billion, a move that added 590 branches, 751 ATMs and more than $26 billion in deposits across eight northeastern states.

Ed Clark, president and CEO of TD Bank, says the goal for its TD Ameritrade division is to be a top three player in the U.S. online brokerage business. He says combined with TD Waterhouse, it has significant strength in both the long-term investor and active trader space and that two-pronged approach gives it the best U.S. platform among Canadian banks.

“You can’t build a credible North American financial institution without a strong U.S. retail presence. We want to have sustainable positions in each of the markets in the northeastern United States where we choose to compete,” he says.

RBC Centura’s Custer has a similar philosophy and isn’t as concerned with the size of potential acquisitions as he is with their fit. “For us, selective acquisitions and opportunities for growth have to fit with our operating model and strategy in the right market,” he says. “We don’t just look for a bank with a ‘for sale’ sign on it. We try to find those companies that have a complementary culture,” he says, noting its banking, capital markets, and wealth management divisions have their own individual business strategies for expansion.

Unlike BMO, RBC hasn’t said what it would consider spending for the right acquisition. “You don’t grow yourself to greatness,” Custer says. “A small company may fit a niche you want to fill. We’re going to be very selective, very patient, and very measured in how we [grow in the U.S.],” he says.

That was evident in July when RBC Centura announced plans to open 12 branches in high-growth markets in Georgia, primarily in the Atlanta area, and in south Florida, by the end of the summer. Another 10 are on tap for next year. With $21 billion in assets and nearly 300 branches in the U.S., the majority of which are in North Carolina, RBC Centura is the 50th largest bank in the U.S., according to a 2005 study by the Federal Reserve.

Great-West Lifeco’s McFeetors is a big believer in the idea that success begets success when it comes to building a North American powerhouse. He says the fact Lifeco was the winner in a very competitive bidding process for the MetLife business will significantly increase its profile in the U.S.

He says it’s unlikely Lifeco will be able to duplicate its success in Canada–where it is the largest provider of insurance products, touching one in three Canadians–south of the border. The U.S., however, is a market where he feels the company can grow in two critical segments: the lucrative 401(k) retirement and healthcare businesses.

“We don’t think we’re at the most efficient size or most sustainable size (in the U.S.) yet. You need to add scale to continue to improve your expenses. In financial services, we’re much better positioned. We’re currently looking at a number of deals in the healthcare space. We’d like to conclude on those,” McFeetors says, noting that he believes the sweet spot in financial markets, not only in the United States but in Canada and Europe as well, is the asset accumulation business, primarily related to pension plans. “It’s the area where the population has wealth and needs to invest it for retirement.”

According to McFeetors, Lifeco has a history of using independent advisors to sell and service 401(k) plans. “That’s how we sell the 401(k) business. We have wholesalers who are employed by us and they interface with the independent brokers who sell and service the plans,” he says. “The great flexibility of our processing system allows us to easily add new investment options and it allows plan participants to easily manage their investments and make changes. We believe we can deliver a much better package to individual plan participants and to employers offering 401(k) plans.”

Bob Wuelfing, president of RG Wuelfing & Associates, a Connecticut-based market research and consulting firm, says Lifeco “absolutely” has the potential to be a top five player in the trillion-dollar U.S. 401(k) marketplace. He says despite Great-West beating the bushes for deals in the U.K., the American market represents the company’s greatest opportunity.

“I would think Great-West Lifeco increasing its market share in the U.S. by one per cent would be more valuable than anything it could do in the U.K. The retirement dollars are here. The U.S. market will probably see more change in the next five to seven years than it’s seen in the past 15 or 20 years,” he says.

Geoff Kirbyson is a business reporter and personal finance columnist for the Winnipeg Free Press, an IA contributing editor, and a freelance business writer. He can be reached at [email protected].