Canadian Banking Industry Overview

Canadian banks are different in their structure and organization compared to their U.S. counterparts. For instance, while their core activities remain the same -- collecting deposits and making loans -- there are fewer than 20 domestic commercial banks in Canada (compared to more than 7,600 in the US), and several of those belong to the same corporate families. Approximately 90% of the industry’s $1.8 trillion of assets are held by six financial institutions -- the Big Five: Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia (Scotiabank), Canadian Imperial Bank of Commerce (CIBC), and Bank of Montreal, plus National Bank of Canada. These six banks also are among the country’s largest employers.

However, other financial institutions such as credit unions and cooperative institutions (Vancity and Desjardins are the largest) remain significant provincial players, as are smaller commercial banks like Canadian Western Bank and Laurentian Bank. And there are actually more foreign banks with operations in Canada than domestics, with HSBC Bank Canada being the most prominent. That said, Canada's banking industry is one of the most technologically advanced in the world. It has the highest number of ATMs per capita in the world and also enjoys a high percentage of customers using low-cost access channels such as the Internet, telephone banking, and debit cards..

With their home market essentially saturated and government restrictions forbidding them from merging with each other (not that they haven’t tried over the years), Canada's banks are looking to the US for expansion. The Toronto-Dominion Bank (aka TD Financial) has been the most active, purchasing a majority stake in New England's Banknorth (now TD Banknorth) and arranging to acquire almost a third of online stock brokerage Ameritrade in 2005. Royal Bank of Canada owns RBC Centura Banks in the Southeast, while Bank of Montreal controls Chicago’s Harris Bank. Scotiabank and CIBC have corporate and investment banking offices south of the border and could be poised to make major US acquisitions as well. Each of the Big Five banks would rank among the ten largest in the US based on assets, so they have the size and wherewithal to continue to grow beyond their country's borders and give US banks a run for their money.

Sources: DTIA research (We are working in the Toronto area now.)