O Canada
Our home and native land!
True patriot love in all thy sons command.
Thousands of bankers in Philadelphia and New Jersey may soon be learning the lyrics of their new owner's national anthem. Commerce Bancorp (NYSE:CBH) has signed an agreement to be purchased by TD Bank Financial Group (NYSE:TD), one of Canada's largest banking and financial companies.
From the Philadelphia region's perspective, this sale is probably good. It puts Commerce in the hands of some very deep-pocketed folk who can fund, if they wish, continued branch and employment expansion. It lets Commerce move past the era of Vernon Hill and any drag he may still have on the bank after his resignation. And, possibly most importantly, it gets the regulators out of the boardroom and leaves management time to manage.
But all that glitters is not gold. Both customers and employees will likely see new policies. And shareholders will be subject to a new risk: currency exchange risk. As a Canadian business with most of its earnings in Canadian dollars, TD Bank shareholders in the United State will see the value of their stock rise or fall in part based on exchange rates between the U.S. and Canadian dollars. And, as the Canadian dollar is near historic highs against the U.S. dollar, we may well expect to see some strengthening of the U.S. dollar in the years ahead, to the detriment of owners of Canadian businesses including TD Bank.
If I were a gambling man, I'd now keep an eye on Commerce's Pennsylvania look-alike bank, Commerce Bank/Harrisburg N.A. (NASDAQ:COBH). It may follow its parent and minority owner in joining with TD Bank. TD Bank will own 10.8 percent of Commerce/Harrisburg stock and 100 percent of its Series A preferred stock. And it's a logical direction for TD Bank to expand. Wait and see! Such a move would certainly be most welcome by many Pennsylvania regional banks who may be looking for a "sugar daddy" to buy them out and solve their credit, sub-prime mortgage, earnings and other challenges.
- Larry Jilk is a former Pennsylvania bank executive, who does not own any CBH or COBH but does own stock in several commercial banks headquartered in Pennsylvania.
Comments (2)
As a US based financial analyst who spends much of the year at my second home in Canada, I'd say that the assumption that the US$ will strengthen against the CA$ is faulty.
Canada is an exporter of the natural resources demanded by rapidly growing emerging markets. The Canadian government runs budget surpluses, not endless deficits as the US does. The CAD tends to trade in the direction of oil and other natural resource prices. The CAD could easily be at $1.20 by this time next year.
I hope not, because it hurts like hell when you get paid in US dollars and your expenses are in CA$,but that's the way it looks.
The idea that this could be a bad deal for investors because of a possible reversal in exchange rate trends just doesn't hold up in my view.
Posted by Lee Adler | October 3, 2007 10:28 AM
Posted on October 3, 2007 10:28
Does this acquisition do anything to the new Commerce bank being built on City Ave. next to the new Target?
Posted by Joe D | October 2, 2007 10:20 PM
Posted on October 2, 2007 22:20