Thanks to a long-standing commitment to the media and telecom industries, Canada's big banks have carved out an enviable share of the U.S. syndicated loan market for the two sectors.
According to Securities Data Co., Toronto Dominion Bank ranked fifth last year in syndicated lending to media and telecom companies. Canadian Imperial Bank of Commerce ranked 10th, Bank of Montreal 11th, Bank of Nova Scotia 14th, and Royal Bank of Canada 17th.
That's five out of the top 20 players. In terms of money lent, the five banks' market share is even more staggering. Of $80.8 billion in syndicated loans to the sector, Canadian banks provided $45.6 billion, or more than 56%.
Canadian banks hold an almost equally strong position in highly profitable leveraged lending to media and telecom industries, accounting for four of the top 20 institutions and $12 billion in loans, or more than 51%.
"Canadian banks' decision to focus on the media and telecom sectors goes back to the 1980s," said Roy Palmer, a banking analyst for TD Securities Inc., the Toronto-based securities unit of Toronto Dominion. "They've built up considerable strength."
Analysts noted that one reason for Canadian banks' strong position in media and telecom is that they have not only sought to build market share but have also been careful to keep profits high.
"They have considerable experience and expertise in the area, but achieving good returns depends on being nimble," said Michael Goldberg, a bank analyst at HSBC James Capel Canada in Toronto. "When profitability rises, they increase their position, and when profitability declines, they'll shrink it."
Canadian bankers stress that getting the best return for their money is a little more complicated than that.
CIBC, for example, goes after promising but lesser known companies that offer higher yields and face thinner competition.
"We focus on small and mid-cap companies, and one of our strengths is that we can also pump in equity," said Reid Murray, media entertainment managing director and group at CIBC Oppenheimer, the New York based securities unit of CIBC.
"It's a competitive necessity for us to focus on a new or underserved sector."
Bankers predict that given the explosive growth in the media and telecom industries over the last few years and the constant arrival of new technology, there's plenty of room for growth.
"This is a highly dynamic sector," Mr. Reid said. "There are businesses around today that didn't even exist up until a few years ago." u