Blue Monday for big banks
Canada's banks are bracing for bad news this morning with Finance Minister Paul Martin expected to block two proposed mergers.
Analysts unanimously expect the deals, which would see the marriages of CIBC and Toronto-Dominion and Bank of Montreal with the Royal Bank, to be rejected when Martin makes his announcement in Ottawa at an 8:30 a.m. ET news conference.
A Senate review committee and most politicians have roundly criticized the mergers as not in the interest of a public already cynical about service charges and record profits.
The banks say they need to get bigger to compete with foreign banks which have been allowed to enter the Canadian market. The Canadian banks warn that a thumbs-down to the mergers may force them to reduce staff and close less-profitable branches.
But that scenario is precisely why the merger proposals were rejected by the federal competition bureau, which Friday delivered its long-awaited report to Martin.
The report concluded that mergers would give birth to banks with too much control of branches, the credit card industry and retail brokerage market. The concentration could be eased only by closing hundreds of branches and slashing lines of business such as credit cards.
The Bank of Montreal and the Royal announced plans to merge last January, followed by CIBC and the Toronto Dominion in April.