For Canada's banks, the last ten years were all about U.S. retail growth. Now the scale is tipping in favour of international wealth management expansion.
Canadian Imperial Bank of Commerce is the latest bank to take the plunge, ploughing $848-million (U.S.) in cash into American Century Investments. The bet is surely a way to keep up with the Big Six's growing wealth management platforms, following deals like Scotia's purchase of DundeeWealth for $2.3-billion (Canadian).
But it is also a play on the U.S. "I believe that U.S. equities are going to be the asset class of choice in the years to come," CIBC executive officer Gerry McCaughey said on a conference call Friday.
That echoes the sentiments of RBC, which wants to double down on U.S. wealth management after selling off its U.S. retail platform. "We would be interested in many pieces of wealth management, I think notably, asset management is an area that we have earmarked for growth in the United States," James Westlake, RBC's head of international banking and insurance at RBC told Reuters last month.
But if the Canadian banks like the U.S. so much, why is JP Morgan Chase selling its stake in American Century to CIBC?
"Our interests have somewhat diverged," said Jonathan Thomas, American Century's CEO. Over the past few years, American Century has picked up more institutional assets, whereas JP Morgan has been ramping up on the retail side.
CIBC, on the other hand, likes that mix, and it's also intrigued by American Century's growth rate. While the U.S. wealth management industry is expected to grow assets by 2 to 2.5 per cent annually, American Century is targeting 5 per cent, net of market movements.
Their recent numbers support that. Last year they raised $6.1-billion in net investments, the highest growth since 2000, and are already up $4-billion this year. However, some of that growth comes from the firm's international strategy, leveraging its sales offices in London and Hong Kong.
Although CIBC is bullish on the U.S., Mr. McCaughey says he is content with where his bank stands in the U.S. after this deal. "While there are possibilities of further investments by us internationally, we are very satisfied with our U.S. position," he said.