Canadian lender shows interest in AIB's 22.5pc M&T stake
Canada's second largest bank, Toronto Dominion, could emerge as a suitor for AIB's 22.5pc stake in American lender M&T, according to market sources.
Senior executives from the Canadian bank said this week at an investors' conference that they were looking at expanding their US operations, with a preference for smaller deals, possibly in the north-east of the US.
The bank, which has one of the strongest capital positions in North American banking, has been expanding its footprint in the US and would like to grow it further. AIB has so far been reluctant to sell the M&T stake, but if private capital does not emerge post-NAMA, it may have little option.
Brokers estimate the stake to be worth about €1.4bn, although AIB had its stake valued at €1.5bn on its books at the end of 2008. Another shareholder in M&T is Warren Buffett, who could also emerge as a buyer.
Toronto Dominion currently has a market cap of CA$54bn (€40bn) and is the sixth-largest bank in North America. At an investors' conference, hosted by Morgan Stanley, this week the bank's president and CEO Ed Clark said his preference was for smaller deals, possibly of distressed lenders.
Explaining the rationale for smaller deals, Clark said even if the acquisition went wrong its balance sheet could "take the hit". Asked what kind of areas he would like to operate in, Clark said the north-east.
"That is where you put the new branches because that is where you get instant payback, and not that it takes a year or so, but the fact is you have tremendous growth because you already have the marketing area covered for those. So we really see acquisitions, these small acquisitions, as a way to extend our geography."
Last August AIB shares rose sharply when a report circulated that the bank could be acquired entirely by Royal Bank of Canada (RBC). A report in the 'Wall Street Journal' suggested RBC was already in discussions with AIB about acquiring a large stake post-NAMA.