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Toronto-Dominion Bank reported return on common equity in 2012 from U.S. banking of 6.4 per cent. In Canadian banking, return on equity was 43 per cent.

MARK BLINCH/REUTERS

One of the fastest growing books of business for Canadian banks is starting to show signs of slowing.

Commercial lending, the business driven by borrowing from small-to-mid-sized companies, exhibited extremely encouraging growth over the past few years, with annual expansion rates often in the low double digits. Even as personal lending started to cool, commercial borrowing stayed hot.

Lately, though, there have been indications that the market is starting to shift into a lower gear.

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Based on the market share numbers that Toronto-Dominion Bank sees, we "would say that growth in business lending in Canada is starting to slow down," Tim Hockey, the bank's head of personal and commercial borrowing said on a conference call last week. Growth is "starting to get in the high singles as opposed to low double-digit."

And of the existing growth, a good chunk is still tied to real estate. When asked what areas of business lending are hot, TD chief executive officer Ed Clark said: "I would love to be able to answer that 100 per cent of the business growth in loans in Canada [comes from] all productive investments in non-real estate sector. I don't think that would be an accurate description."

Royal Bank of Canada CEO Gord Nixon struck a similar tone during the bank's quarterly conference call – though he sounded a little more upbeat. The environment for business and commercial lending remains "pretty good," he said, adding that RBC's still experiencing "moderately positive growth. "It's not spectacular, but the base feels pretty strong in the United States, and even in Canada."

When assessing annual growth rates, the figures look rather compelling, with RBC's year-over-year growth in business lending up 10 per cent, and Bank of Montreal's up 11 per cent. However, quarter-over-quarter, RBC's business lending book was relatively flat, and BMO's climbed 2 per cent higher.

To Mr. Nixon's point, it appears that any stellar business lending growth is bound to come from the United States, where the economy is starting to kick into high gear. Canada's economic growth, by contrast, just doesn't look as promising. This quarter TD, BMO and RBC all talked about the encouraging prospects for commercial lending growth south of the border.

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