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BLOOMBERG
The fallout from Silicon Valley Bank’s collapse has led to a continent-wide selloff in financial stocks erasing C$19.7 billion ($14.2 billion) in value from Canada’s top banks in the last four days.
Some of the nation’s biggest lenders, including Bank of Nova Scotia, Bank of Montreal and Toronto-Dominion Bank fell more than 2%. With banking equities far and away the largest sector by weighting of the S&P/Toronto Stock Exchange Composite Index, Canada’s main stock benchmark slumped more than the S&P 500 as the biggest US bank failure in more than a decade roiled the market.
Large Canadian banks have acquired regional US banks in recent years, increasing their exposure to the fallout from the failure of Silicon Valley Bank, which entered receivership. SVB Financial Group had opened a Canadian office in 2019 and listed e-commerce darling Shopify Inc. as a client. Shopify did not respond to a request for comment and was among the biggest decliners in Toronto.
Deposits in the US fell 2% in the latter half of last year while Canadian deposits rose 4%.
There could be other consequences though. TD is the largest shareholder in Charles Schwab. The Texas-based brokerage posted its worst two-day drop on record.
TD is also in the process of acquiring First Horizon Corp., where deposits have fallen by 10% over the past two quarters. The Canadian financial giant may seek to renegotiate terms, CIBC Capital Markets analyst Paul Holden said.
“Risk premiums for US regional banks have increased materially,†he said. First Horizon shares fell 4% Friday.