Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal, flush with about $18 billion in excess capital and a currency that's at near parity with the U.S. dollar, favor building from within to snapping up troubled banks south of the border.

"Most of our focus is on just building the business through organic growth in a market that we think is going to recover," Bank of Montreal Chief Executive Officer William Downe told investors at a conference in Montreal.

Canadian lenders are treading carefully after pouring more than $20 billion to expand their U.S. consumer business over the past decade. The banks, leading the world's soundest financial system according to the World Economic Forum, face pressure from regulators to conserve capital, while some are concerned about the quality of U.S. assets.

"It's quite simple," said Downe, speaking at the conference last week. "Unless acquisitions fit in with the strategy of the bank; unless they bring the quality of the customers and the quality of the franchise we're trying to build, we don't think it's the right way to grow."

In the interim, Canada's fourth-largest bank plans to expand its Chicago-based Harris Bank's 288-branch network in the U.S. Midwest, increasing business lending and making "small and medium-sized acquisitions over time."

Royal Bank has spent a year trying to fix its U.S. consumer-banking business, which has contributed to seven straight quarterly losses at the company's international banking unit. Canada's biggest bank recorded a C$1 billion ($998 million) writedown related to its RBC Bank in Raleigh in April 2009, and is focusing on reviving profit before considering acquisitions.

"There's going to be lots of opportunities for many years to come," Royal Bank CEO Gordon Nixon said in an interview in New York in late March. "I'm by no means concerned about missed opportunities."

Royal Bank wants to add to its wealth management business through takeovers in the United States and Europe, and plans on expanding its RBC Capital Markets investment banking business by hiring more senior bankers and attracting business from larger companies.

Toronto-Dominion Bank, which spent more than $15 billion over five years buying TD Banknorth of Portland, Maine, and Commerce Bancorp of Cherry Hill, N.J., is content to expand its network of about 1,000 branches in the United States, CEO Edmund Clark said. Canada's second-biggest bank, which has as many branches in the United States as in Canada, will open about 30 new U.S. locations per year.

"If we didn't make a single acquisition after this, it wouldn't kill us," Clark told reporters in Quebec City in late March.

Any acquisitions for the Toronto-based bank will come from bids on Federal Deposit Insurance Corp.-assisted transactions for banks with less than $10 billion in assets, Clark said.

Clark told investors that he expects "sort of flat" earnings from its U.S. consumer bank before an increase in 2011 and 2012.

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