On this season of The Canadian Bank Bachelorette, 177-year-old Laurentian is looking to give its final rose to the perfect deep-pocketed suitor.
What happened: Laurentian Bank, Canada’s ninth-largest lender, is looking for a potential buyer. With branches all across Québec (plus one in Ontario) and $51 billion in assets, it could be an attractive target for banks looking to expand in the province.
-
Based on recent transactions, The Globe and Mail has estimated that acquiring Laurentian could cost somewhere in the ballpark of $2 billion to $2.8 billion.
- Shares of Laurentian surged by over 27% yesterday on the back of the news.
Why it’s happening: As the old saying goes, if you can’t beat ‘em, join ‘em. Laurentian’s board concluded that the best way to maximize value for shareholders was to sell and get a piece of a larger enterprise rather than trying in vain to compete against its bigger rivals.
Why it matters: If you take into account HSBC’s proposed $13.5 billion sale to RBC, there seems to be a trend of increasing consolidation in the Canadian banking sector. While a banking sector with so few banks has its pros (Canada hasn’t seen a bank failure in over 20 years), more consolidation means even fewer banking options for consumers.
- The Big Six control about 93% of all Canadian banking assets and are on track to snap up more as their deep pockets make it difficult for competitors to get a leg up.
Zoom out: RBC is awaiting results from the Competition Bureau’s probe into its acquisition of HSBC’s Canadian arm. If the Bureau moves to challenge the deal on the grounds that it diminishes sector competition, that could pump the brakes on future consolidation.—QH