If boring is good when it comes to banking, then maybe this is just about as good as it gets.
BMO has joined TD Bank in the (very) creeping takeover of the U.S. financial system using small regulator-brokered purchases of failing U.S. banks, ignoring calls in the media and among analysts to parlay high stock prices and the soaring Canadian dollar into a big splash with what financial types always like to call a "transformative" deal.
Instead, the banks are buying small parcels of branches, homes to a few billion dollars of assets. The prices are so small they aren't material to the buyers, and often the acquisitions rate only a brief note in the newspaper.
Shareholders are loving it. Boring is now what passes for exciting.
RBC shares are jumping in part on the belief that Canada's biggest lender will be the next to do one of these takeovers.
BMO and TD are now members of a pretty exclusive club that RBC may be vying to join. TD and BMO are two of only four non-U.S. banks that have so far been allowed to purchase failing lenders in deals cobbled together by the U.S. Federal Deposit Insurance Corp., which seizes institutions that are about to go under and sells them.
It's a pretty striking lesson to management of any company post-crisis. No matter what pundits and analysts say, shareholders are excited not by the idea of a big exciting deal, but by its very opposite.
Splashy purchases in the U.S. haven't gone all that well, to put a typically understated Canadian spin on the situation. RBC's Centura acquisition in the Carolinas, and some of the add-ons since like Alabama National, have been nothing but headaches for the bank. TD's massive acquisition of Commerce Bancorp was at the top of the market.
The FDIC deals come with downside protection. The big advantage is an insurance policy because FDIC agrees to eat a share of any loan losses.
The prices until now have been advantageous to the buyer as well.
Carefully done, the purchases could be just the kind of acquisitions that help bank executives in Toronto rebound from those unfortunate buys that hit the front page just as hard as they hammered the bottom line. Well-priced, with that downside protection for loan losses, the FDIC deals can help raise sadly low return-on-equity numbers in the U.S.
While the overall numbers on TD's buy a little more than a week ago are small relative to the size of its U.S. operation, the Florida acquisitions saved the bank five years of organic growth in the state, according to TD chief executive officer Ed Clark.
Mr. Clark appears to be sending signals that he would like to do more, saying he's ready now that his bank has a team with experience on FDIC deals.
For BMO, the FDIC deal announced this weekend is even bigger relative to the bank's small U.S. operations. The Canadian bank is adding 52 branches in Illinois and Wisconsin to its Chicago-area Harris business.
Pity, then, that the window seems to be closing before the Canadian banks really had a chance to get going.
It's not for lack of supply. There have been 46 U.S. bank failures so far since year-end, when there were a mind-boggling 702 lenders on the FDIC's troubled bank list.
It's now about demand. Financiers are gloating on conference calls about their wins in FDIC auctions. The secret is out that the deals are good, and the bids are pouring in, driving up prices.
The amount of insurance in the form of loss guarantees that FDIC has to give is dropping, and the agency is even demanding a piece of the upside on some asset sales.
Given that these are failed banks that rivals are now paying up for, paying too much is a real possibility. Buyers that stay on the sideline much longer may miss the really sweet spot.
The South Financial Group, for example, is one that acquirers have an eye on, and that RBC could fancy. The money-losing lender needs capital this year, and has acknowledged that finding it is a "challenge." The bank has 176 branches, about a third in Florida and the remainder in the Carolinas, RBC's U.S. backyard.
But should South Financial end up being sold, there will be a long lineup and RBC will have a lot of competition. Banks are interested, and buyout firms are also trying to horn in on more FDIC buys.
In other words, it may just be too interesting.