Canada rules in investment banking, but U.S. pushing in key area

Share

Four of Canada's biggest banks won top marks in a recent survey for their overall domestic investment banking prowess, but U.S. financial firms are making inroads in cash management, a key market segment.

Greenwich Associates, a U.S. advisory and research firm, surveyed 255 major corporations in Canada between May and July, to find out who executives turn to for certain services. Specifically, they asked about their preferred firms for mergers and acquisitions advice, raising money in the equity or debt markets and cash management services.

The lone challenge to Canadian banks' dominance came in cash management. That includes overseeing a firm's day to day receivables, payables and foreign exchange, and can be a dizzyingly complicated undertaking, much of which is done electronically. Canada's big banks currently have a lock on the market, but U.S. and global firms are gaining traction.

"The U.S. banks have a lead when it comes to technology and efficiency and platform superiority compared to perhaps many of the Canadian banks" said Peter Kane, principal with Greenwich Associates in an interview.

He said Canadian banks are keenly aware of the threat American firms pose, especially when it comes to running cash management systems for cross-border operations, and are responding by investing in technology to protect their turf.

"These stepped-up investments are needed for the banks to compete with the likes of Citi, HSBC and Bank of America Merrill Lynch," said Mr. Kane.

On the full suite of investment banking services, BMO Nesbitt Burns Inc., CIBC World Markets Inc., RBC Dominion Securities Inc. and Scotia Capital Inc. came out on top in the survey. Between 58 and 61 percent of large Canadian corporations said they had "important" relationships with these four banks.

"These banks provide such high levels of service and intense coverage that, when large Canadian companies rotate their business in these functions, it is generally to another provider within the Big Four," said Greenwich Associates consultant Jay Bennett in a release.

RBC was the clear winner in debt capital markets versus other players in the market. Meantime, BMO and RBC had a slight edge in the survey in equity capital markets -- One reason for that, is the perceived quality of their analyst research coverage.

"Companies have clear opinions about who provides the best analyst research coverage, and because BMO and RBC are so highly regarded in that space, the firms get a consistent lift." said Mr. Bennett.