Allyn Keiser is one of the relatively few bankers in New York City who has a basis for optimism. One of Keiser's main responsibilities, as executive vice-president of the Canadian Imperial Bank of Commerce’s U.S-based corporate bank, is to arrange loans to large U.S. borrowers—a task that he says is easier now because of the weak state of the American banking system. Facing large real estate loan losses, many U.S. banks are reluctant to lend money to new borrowers and they are refusing to refinance some of their existing loans. Keiser says that he is taking advantage of that situation in order to increase the CEBC’s portfolio of U.S. loans. He added: “A lot of our competitors are focusing on their problems, rather than on opportunities.” Canadian bank executives in the United
States say that one of the reasons they are attracting new customers is that their U.S. rivals are laying off staff and curtailing services in order to lower expenses. They add that this cost cutting is jeopardizing relationships with clients. Says Arthur English, the TorontoDominion Bank’s senior vice-president for U.S. operations: “Once you lose relationships, you lose business.” As a result, a growing number of U.S. companies are borrowing money from Canada’s Big Six banks—a measure used in the past only as a last resort. Added English: “The quality business is just flooding through the door.”
Another clear opportunity for Canadian bankers lies in buying existing loans from struggling U.S. banks. In some cases, banks are trying to offset their real estate losses by selling off loans to healthy businesses. Last year, the CIBC bought about $860 million of the Bank of New England’s loans to local television stations, cable operators and other communications companies.
Canadian banks can also buy U.S. institu-
tions outright. The Montreal-based National Bank of Canada, for one, last year assumed control of New England Commercial Finance Corp., a Bank of New England subsidiary that has about $750 million in loans outstanding to small and mediumsized businesses, mainly in the Midwest and Southeast.
Other major Canadian banks have declined to become involved in loan buying. Says English: “They haven’t been willing to sell the good stuff. They've been selling the junk.” Keiser, however, says that the CIBC’s deal with the Bank of New England was sound. He added: “They had one major problem—their real estate loans. Some of the other [loans] were real gems.” But Keiser acknowledges that opportunities for similar purchases of good loans are becoming scarcer. Still, the challenge for Canadian banks will be to retain their new business when their U.S. rivals regain strength.
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.