TORONTO Reuters - Canada's top six banks have ample liquidity and manageable credit risks, which will help them emerge largely unaffected by the crisis that has rocked the global banks over the last two weeks, analysts said on Monday.
The collapse of two of the U.S. regional banks -- the Silicon Valley Bank and Signature Bank this month -- and the Swiss government-brokered deal for UBS to buy Credit Suisse have raised concerns about the health of the global banking sector.
James Shanahan, banking analyst with Edward Jones said that the U.S. contagion is unlikely to spill over to Canadian banks as the issues in the U.S. are unique and specific to certain business models or lending activities.
In the last two weeks, the six big banks have lost 9% or C $57 billion $41.7 billion in market value, according to DBRS Morningstar. The U.S. bank index has fallen 21.5% in the last two weeks.
The U.S. subsidiaries of Canadian banks have uninsured deposits in the range of 30% to 60%, but they can depend on their parent to withstand uncertainty, according to Morningstar.
The financial sub-index of Canada went up by 0.7% on Monday.
The Bank of Canada, including the Central Banks, has set up daily dollar taps to boost the cash flow to banks dealing with liquidity issues. That hasn't reassured investors.
Carl De Souza senior vice-president, DBRS Morningstar, said that Canadian banks generally have less exposure to fixed-income securities diversified and stable funding, which should enable them to navigate current market turbulence.
Market analysts gave positive assurances after two weeks of market fears and uncertainty. In Canada, the financial regulators took control of the assets of the Canadian branch of Silicon Valley Bank, according to a report by financiers that Canada's technology start-ups would find it harder to get funding.
Canadian banks have built a reputation for financial stability because of the 2008 global financial crisis. The banks, including Royal Bank of Canada Toronto Dominion Bank, and Bank of Montreal, account for about 80% of Canada's banking assets and have avoided scandals or failures that plague banks their European and U.S. counterparts.
Canadian banks have a focus on domestic lending and a majority of their earnings come from serving local clients. In recent years, Royal Bank, BMO, TD Bank and CIBC have expanded into the United States by buying regional lenders to benefit from strong growth in second-tier U.S. cities.
Since the current bank crisis in the United States was caused by problems at regional lenders, the strategy has been under scrutiny.
A year ago, TD Bank opened a $13.4 billion bid for Memphis-based First Horizon Corp, which is still awaiting regulatory approval. The regional bank's stock was hit last week after the SVB collapse.
By Monday night, TD shares rose 0.2% and First Horizon was up 3% at $15.28 - still 38% lower than TD's offer price.
The market is thinking that TD is in a good position to negotiate the deal, because First Horizon is in a tough spot now, Shanahan said.
The closing date for the acquisition was pushed by TD and First Horizon to end of May, with the potential for an extension.
TD was not available for immediate comment.