The number of U.S. banks under foreign company control is now much less than it was 15 years ago, but the assets at some of those banks, particularly those with Canadian company ownership, have grown tremendously.
Canadian firms own currently just eight U.S. banks but the assets represent nearly $825 billion. In other words, the average size went from less than $18 billion to over $100 billion in those 15 years.
Deposit-taking U.S. banks that are under foreign company control can be found on page 5 of this week's Jumbo Rate News.
Cross Border Banking, Double the Fines
In 2022, BMO Financial (parent of the mega-bank 5-Star BMO Bank, N.A., Chicago, IL) announced plans to acquire the $92 billion asset Bank of the West, San Francisco, CA from then owner, BNP Paribas, Paris, France. That transaction was completed last February (JRN 41:02).
This transaction gave BMO Bank, N.A. enough assets to became the 14th largest bank in the U.S. as its U.S. parent, BMO Financial Corp., became the 15th largest bank holding company in the states. Interestingly, neither the buyer nor seller of this California bank were U.S. companies. BMO is ultimately controlled by the Bank of Montreal.
Another recent cross-border acquisition involved yet another California bank. In November 2022, the $100 billion asset MUFG Bank, San Francisco, was acquired by the $590 billion asset 5-Star U.S. Bank, Cincinnati, OH. When the integration was completed (in May 2023), the ownership of MUFG came back to the U.S. from Japan. This transaction bolstered U.S. Bank into the 5th largest bank spot in the U.S. with $651 billion in total assets.
Back in 2009 (15 years ago), Japanese companies owned nine U.S. banks with assets totaling $79 billion (JRN 26:26). By 2015, the count was down to five U.S. banks, but combined assets totaled $124 billion (JRN 32:43). After divestiture of MUFG, Japanese companies now own just three U.S. banks with combined assets of $15.7 billion.
Foreign companies still control a number U.S. banks (assets total more than $1 trillion). Those that take deposits are listed on page 5. We also know there are at least two foreign companies that have their sites set on gaining a U.S. bank charter (one from Canada, the other from the United Kingdom).
In the last 15 years, however, while the number of U.S. banks under foreign company control have lessened notably, the assets at some of those banks, particularly those with Canadian company ownership, have grown tremendously.
For example, in 2009, Canadian Holding Companies controlled 12 U.S. banks with $213 billion in combined assets (JRN 32:43). Today, with consolidation, Canadian firms own just eight U.S. banks but the assets represent nearly $825 billion. In other words, the average size went from less than $18 billion to over $100 billion in 15 years.
Although the Bank of Montreal controls a lot of U.S. bank assets, it is bested by its rival, Toronto-Dominion Bank, which, in addition to the obvious two: 5-Star TD Bank NA, Wilmington, DE and 5-Star TD Bank USA NA, Wilmington, DE also has “an interest” in the three Charles Schwab Banks: 3-Star Charles Schwab Bank SSB; 3-Star Charles Schwab Premier Bank SSB; and 4-Star Charles Schwab Trust Bank. All three are headquartered in Westlake, TX and all three are under TD’s massive umbrella.
However, the Charles Schwab Banks are not listed on page 5 due to their layers of ownership. Their “top tier” owner (Toronto-Dominion) does not meet all definitions of “control”. We thought it was important to mention them, though, particularly since TD has been making the headlines recently.
The most scathing reports are of Chinese crime groups allegedly using TD for drug (fentanyl) money laundering (at least $653 million worth) in New Jersey and New York. Investigations are also underway relating to the taking of bribes for these services.
The bank is being hit from both sides of the border. It was already reportedly fined $6.7 million for violating Canada’s anti-money-laundering and anti-terrorist laws. That appears to be just the beginning in fines that some say could mount as high as $2 billion.
The bank is working with regulators and justice officials in both the United States and Canada and has thus far set aside $450 million to pay penalties. It may take years for TD to overcome this blow. In addition to fines, it also faces possible restrictions to growth. In fact, these investigations are quite possibly why TD Bank’s application to acquire 5-Star First Horizon Bank, Memphis, TN was never approved (JRN 40:04).
And that brings us to Royal Bank of Canada (RBC), Toronto, Canada. RBC, owns both the $93 billion asset 3-Star City National Bank, Los Angeles and the $6.4 billion asset 5-Star RBC Bank (Georgia) NA, Atlanta.
RBC has also been fined recently by both Canadian ($7.5 million) and U.S. ($65 million) officials. While the RBC fines were also related to gaps in money laundering controls, there was no bribery or drug money involved, at least that we know of.
City National Bank had already been struggling. It recently reduced its workforce by 5% and had a major re-work of its C-Suite. A $3 billion capital infusion late last year should help, but the bank still posted a 2023 loss of more than $1.5 billion. A preliminary look at first quarter 2024 results indicates City NB posted a very welcome first quarter profit of nearly $164 million.
With new leadership will come more changes. One very plausible change is moving as many employees as possible out of California and up to the much less-expensive Vancouver. Bank officials believe they can return the bank to its former glory. We are inclined to agree. It can be tough on foreign-owned banks though, especially if they run afoul of regulators. Double regulation, double fines.