(Editor's note: An earlier version of this post incorrectly stated that RBC Dominion Securities placed second in bond financing. This has been corrected.)
Canadian financing, lending and deal making got off to a sluggish start this year, but activity in a few hot sectors such as real estate offered a lift for some investment bankers.
BMO Nesbitt Burns Inc. posted strong gains in the first quarter by focusing on markets beyond its usual comfort zone of mining and energy. BMO raised $1.4-billion in equity for its clients and was the only bank to cross the billion-dollar mark in the period, according to Thomson Reuters PLC.
BMO also scored top marks in initial public offerings and syndicated lending.
"Mining is a very challenging environment for raising equity, and new issue activity for mining is down to a trickle," said Peter Miller, who leads the Canadian equity capital markets group at BMO. "But we've been fortunate to be active in other sectors that are now coming to market." He pointed to real estate, financial service and technology sectors as examples.
The bank was also helped by its position as sole book runner on several deals, including two new real estate investment trusts that came to market, and its leading role in Great-West Lifeco Inc.'s acquisition of Irish Life Group Ltd. for $1.8-billion (for which it raised nearly $1.3-billion in equity).
For TD Securities Inc., the purchase of Primaris Retail REIT, which Thomson Reuters pegs at $4.5-billion including net debt, played a large role in propelling the bank to the top spot for mergers and acquisitions in the first-quarter tally. The bank worked on 10 deals, worth about $8-billion, in the quarter. The Toronto-based H&R REIT aligned with KingSett Capital Inc. earlier this year to buy Primaris, which owns large shopping malls.
"We've had an active presence in the real estate sector, and luckily that has been one of the sectors that has been the most active over the last quarter, and frankly, over the last year," said Bill Quinn, head of mergers and acquisitions at TD Securities. He expects real estate deals to be a strong point for the rest of the year given low interest rates, which have driven growth in the real estate sector.
Mr. Quinn anticipates more activity in the communications, media and technology sector, which has recently seen many smaller deals. "Generally we've seen more activity in the diversified industries, which is hopefully evidence of a pickup in economic activity in Ontario and Quebec, generally. And that has helped offset some of the slowness we've seen in the energy sector; that's the area that has been the weakest in the last little while."
Canaccord Genuity Corp. and CIBC World Markets followed TD in the M&A tables with $7.5-billion and $7-billion worth of deals, respectively.
It was a less inspiring quarter for RBC Dominion Securities Inc., which, as Canada's largest investment bank with a strong international presence, often tops many of the rankings. The bank came second in equity and was absent from the top-five IPO and M&A lists altogether. In the last quarter of 2013, the bank came first in all these lists.
The tough start to the year that the lending units of the Canadian banks anticipated months ago has largely materialized, since prices have stayed flat and demand for refinancing has tapered off. While the banks have the liquidity to lend, demand from new issuers has been soft.
But the debt market continues to be strong. "People are in this insatiable hunt for yield, and the bond market is one that, ultimately, people continue to try to uptick their yield by buying corporate bonds." said Glenn Gibson, global head of credit capital markets at TD Securities. "We're at all-time historic lows in terms of debt financing in the Canadian marketplace."
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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