As double marriages go, they would have been whoppers—four big banks becoming two even bigger ones with billions in assets, millions of customers, thousands of employees. For nearly 11 months, the post-engagement romances were front-page news—and so were their critics. Finance Minister Paul Martin had been annoyed when the Royal Bank of Canada and the Bank of Montreal announced last winter they were headed for the altar without asking for his blessing. Consumers, small business and backbench politicians began questioning the union. Imagine how they felt when the Canadian Imperial Bank of Commerce and the Toronto Dominion followed suit in April. Last week, however, the ardor appeared to have cooled. According to TD Bank spokeswoman Kym Robertson, the probability of the mergers being approved “is pretty low.” For a large segment of the Canadian banking industry, this Christmas season now promises to be less than merry. In addition to the possible demise of the
megamergers, two of the nation’s top six banks, CIBC and Montreal-based National Bank, reported a drop in profits so steep that it cut the combined take of all six— roughly $7 billion in 1997—by $480 million. CIBC’s profit for the last quarter was a mere $34 million, blamed largely on trading loss-
TD casts doubt on the mergers as profits take a beating at CIBC
es by its world markets unit. The weak performance by CIBC, some analysts said, may have helped persuade the healthier TD Bank that it would be prudent to cast doubt on the merger. At the same time, federal officials have denied telling the TD that the merger would not be approved.
Meanwhile, Martin is awaiting reports on bank mergers from the federal government’s competition bureau, the Commons
finance committee and the superintendent of financial institutions. All are expected to deliver their conclusions within weeks.
Late last week, the Senate banking committee beat the others to the punch. In a report backed by both Liberal and Conservative senators, the committee said that proposals for bank mergers should be dealt with in a fixed, four-month process. “The review should not be allowed to drag on,” the report said. At the outset, the banks should be given a month to explain how the amalgamation would benefit consumers—among the most vocal opponents of mergers so far.
After those statements are received, the committee said, there should be two months of public hearings and the finance minister should be given a month to reach a decision. However, the senators added, this review process should not begin until the competition bureau and the superintendent of financial institutions have made sure that proposals do not conflict with laws governing monopolies. Liberal Senator Michael Kirby wants the review process to be above politics. “We think the evaluation ought to be done reasonably objectively, which means a relatively nonpolitical process,” he said. That comment was about the only good news the would-be merger partners could cling to last week.
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