A few weeks ago, in a story on Nortel (NYSE:NT), I asked people to submit a Canadian joke to me. This is as good a place as any to reveal the winner. And I received hundreds, almost all of them from Canadians. Though I did receive one from Brunei, something for which I have absolutely no explanation. The winner of a copy of Tom and David Gardner's Money After 40 was Karl Walters, who submitted the following:
Q: How does a lifeguard get 50 rowdy Canadians out of a pool?
A: He says, "Please get out of the pool."
(My addendum is that he then repeats it in French.)
Thanks to all who submitted jokes. They were priceless. I felt like running out for Tim Horton's and poutine afterward.
Canadian banking giant Toronto-Dominion Bank (NYSE:TD) made its first banking foray below the border when it agreed to take a 51% stake in Portland, Maine-based Banknorth (NYSE:BNK) in a cash and stock deal that values Banknorth at more than $7 billion.
In a measure that the market is skeptical of either the strategy or the price the Canadian bank is paying, both Toronto-Dominion and Banknorth stocks fell yesterday after the transaction became public knowledge. Toronto-Dominion Bank has previously lacked a banking presence in the United States, though it does own one of the largest brokerages in the country, TDWaterhouse.
In entering the U.S. market, TDWaterhouse follows a number of its Canadian brethren, including the Royal Bank of Canada (NYSE:RY), the National Bank of Canada (Toronto: NA), and the Bank of Montreal (NYSE:BMO).
Six companies, the four mentioned above plus Canadian Imperial Bank of Commerce (NYSE:BCM) and Bank of Nova Scotia (NYSE:BNS), dominate the Canadian banking industry. In response to what the Canadian government fears is too much concentration in only a few companies, Canadian regulators have put banking mergers on hold in the country. While National Bank's expansion into the U.S. is limited to serving Canadian banking customers on holiday in Florida, the other companies have made a concerted decision to transcend being big Canadian banks in favor of being leading North American banks.
This transaction comes after a brutal two-year turnaround for Toronto-Dominion. Two years ago the company turned in its first quarterly loss in more than a decade, caused in no small part by a lack of lending discipline to corporations. The interesting thing about this transaction is that Toronto-Dominion is taking a controlling stake in Banknorth, though it is leaving management in place at the company. Banknorth is an interesting story, a Wachovia (NYSE:WB) in miniature, with its only two conditions over the last 10 years to be pre-merger and post-merger. It has grown from being a tiny Maine bank to one with more than $29 billion in assets and nearly 400 branches throughout New England and Eastern New York. Though Toronto-Dominion now has a controlling stake in Banknorth, its managers have strict instructions to "carry on."
Most of the negativity surrounding the deal is based on the fact that the premium on assets Toronto-Dominion is paying is fairly generous. But Banknorth is a true success story, with its stock having risen from just less than a buck in 1991 to yesterday's close of $33.90, providing substantial gains and a juicy dividend to boot. Toronto-Dominion Bank knows its home market of Canada quite well -- it doesn't have much experience in the U.S. By making its foothold in the U.S. by leaving a management team in place that has shown itself to know a thing or two about running a banking corporation, Toronto-Dominion shows that it has learned to recognize the things that it does not know.
The Canadian banks are making strong moves into the U.S. market, and if Toronto-Dominion's latest gambit is any indication, they're being smart about it.
Bill posted all of the other non-vulgar Canadian jokes on the Fool's Humor and Urban Legends discussion board, which you can access with a free 30-day trial .
Bill Mann owns no shares of any company mentioned in this story.
