Ottawa mulls emerging risks to financial institutions
New catastrophic risks that threaten Canadian financial institutions are getting more attention from the federal government.
As natural disasters become increasingly frequent and severe in Canada, the country's banks, insurers and other financial firms face an "increased potential for losses," according to a new consultation paper from the Department of Finance.
The document, released on Friday, invites a review of how stable, efficient and useful to customers the financial sector is, while it also highlights several of the government's growing concerns about factors that could stand in the way of the industry's resiliency.
"Financial institutions are facing an array of new and emerging risks, including catastrophic risks, that have a low probability of occurring and yet could result in high potential losses," the consultation paper notes. "Factors such as increased urbanization, terrorism, and climate and environmental change have increased the potential for losses from catastrophic events."
Property and casualty insurers are already feeling the pain. Canada has recently experienced the most costly and damaging flooding and wildfire in the country's history, resulting in hits to profitability. Story
Twin Butte Energy takeover in jeopardy as debt holders balk at deal
A takeover proposal to rescue debt-hobbled Twin Butte Energy Ltd. is in jeopardy as debt holders angry over the prospect of a major markdown in the value of their securities vow to reject the deal.
Holders of Twin Butte's convertible debentures have appealed to other investors, arguing that the proposed buyout by Hong Kong-based Reignwood Resources Pte. Ltd. will result in them getting shortchanged. The debt holders, led by Bockhold Investment Management Group, say they should be afforded more money as a senior security class and that shareholders should get nothing.
Twin Butte says the arrangement is fair to all stakeholders, and that rejection stands to push the struggling company into receivership, as it has no other deals waiting in the wings following an extensive search for buyers during the worst of the industry downturn. Story
Bank-owned dealers gain from 'Goldilocks' volatility
It's been a robust earnings season so far for Canada's bank-owned dealers.
"All the banks have been beating our expectations on capital markets," Peter Routledge, an analyst with National Bank Financial, said in an interview.
The trading arms of all of the bank-owned dealers have been benefiting from what he terms as "Goldilocks" volatility: an environment of heightened volatility that's hot enough to prompt people to trade, but not so cold as to scare them off entirely.
"There's been a healthy amount of fear and greed," Mr. Routledge said. Story
Private equity investors to offload natural-gas-focused holdings
Private equity players face uncertain prospects as they seek to offload holdings in natural-gas-focused drillers rocked by two years of weak prices.
Several producers backed by private equity investors have hung "For sale" signs on their operations in recent months as the downturn in energy prices intensified.
Chinook Energy Inc. this month hired investment bank Peters & Co. Ltd. to explore options, including a potential sale. Its shareholders include Calgary-based ARC Financial Corp. and Alberta Investment Management Co., which manages the province's pension funds.
It joined sales processes launched earlier this year by Endurance Energy Ltd., backed by Warburg Pincus LLC, and Mosaic Energy Ltd., which is partly owned by Texas-based NGP Energy Capital Management LLC. Mosaic is being sold through a receivership that began in April, while Endurance entered restructuring in May.
Closely held NEP Canada ULC, backed by Houston-based Kayne Anderson Capital Advisors LP, is also on the block.
The moves are a reversal from what had been an expanding role for private equity in the oil patch. The planned exits also highlight souring prospects for Canadian gas producers, which have suffered as Alberta prices languish at multiyear lows. Story
BMO's plump capital levels spur deal chatter
Apart from wowing observers with a better-than-expected profit and lower-than-expected expenses in its fiscal third-quarter results, Bank of Montreal also delivered a surprising jump in its capital levels – raising the question of what the lender intends to do with its extra savings. Is another deal in the works?
BMO's common equity tier 1 capital ratio (CET1), a measure of financial health watched closely by regulators, rose to 10.5 per cent – up half a percentage point (or 50 basis points) since the end of the second quarter and well ahead of the 10-per-cent figure that Canada's big banks generally aim for.
The gain follows BMO's acquisition of General Electric Capital Corp.'s transportation finance unit in December. While the price of that acquisition wasn't disclosed, BMO said the deal would shave about 70 basis points from its CET1 ratio. Clearly, the Canadian lender's capital levels have rebounded surprisingly fast since then, due in part to strong earnings.
On a conference call with analysts on Tuesday, Tom Flynn, BMO's chief financial officer, shot down the suggestion that the bank's beefed-up capital levels put it in a position to restart a share buyback program, but he didn't rule out the possibility that BMO would deploy capital in some fashion. Story
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