Here are the top reads on deals and financial services over the past week. Have a great weekend,
The case for tax cuts: How do you lobby for a tax cut when you’re CIBC chief executive Victor Dodig, and your bank made a record $4.7-billion profit last year? Simple: You make a compelling case that Canada is losing its edge, then pitch a change to the regime that only the wonkiest of policy wonks would understand. And you never, ever, utter the words “tax cut.” Opinion (Andrew Willis, for subscribers)
The 10-year hangover: How the long shadow of the global financial crisis endures: In mid-September of 2008, as Henry Paulson stood face-to-face with one of the most dangerous financial meltdowns in history, his days were so hectic that he didn’t have time to fear he might screw it all up. But at night, the U.S. Treasury Secretary would lie awake, stare into the darkness and become overwhelmed with doubt. Story (David Parkinson and Barrie McKenna, for subscribers)
Lessons for the next financial downturn, courtesy of 2008: During the grim days of September 2008, many saw the bankruptcy of Lehman Brothers Holdings Inc. as the end of Wall Street. In the weeks after its collapse, German finance minister Peer Steinbrueck declared that the long era of U.S. economic hegemony was over. For his part, French president Nicolas Sarkozy was sure Lehman’s failure marked the end of unrestrained American-style capitalism. Story (Ian McGugan, for subscribers)
Watchdogs still don’t pay enough attention to subprime lending: A year after he was appointed Canada’s top banking watchdog, Jeremy Rudin shared his reflections on the challenges of the postcrisis era. Speaking to a Toronto business crowd back in June, 2015, Mr. Rudin said the failure of Lehman Brothers and its aftermath opened eyes around the world to lapses in banking regulation. Story (Rita Trichur, for subscribers)
Mutual funds brouhaha: Ontario’s decision to interfere in a national review of mutual fund fees has thrown the six-year study into disarray, raising questions about the prospects for change, including the elimination of early-withdrawal fees. On Thursday, the Canadian Securities Administrators, an umbrella group for all provincial securities watchdogs, proposed changes that would prohibit the fees, known as deferred sales charges (DSCs), on mutual funds. The review included public consultations and research papers, and the provincial regulators supported the recommendations. Story (Clare O’Hara and Tim Kiladze)
Ontario’s Ford government is shamefully backing the investment industry over investors: How comforting it must be for Bay Street to see government standing up for the overdog in matters related to consumer protection. Two recent developments highlight the power banks, brokers and mutual fund companies have to shape the regulations that protect consumers from financial firms. One is the surprise announcement on Thursday that the Ontario government does not agree with modest changes to mutual fund commissions that were proposed by provincial securities regulators. The other is the news that a third big bank, Bank of Nova Scotia, has decided to stop participating in the Ombudsman for Banking Services and Investments. In the federally regulated world of banking, OBSI is your independent recourse when you complain to your bank about a service or product and are told to take a hike. Opinion (Rob Carrick)
Ontario opposes proposed ban on deferred fees for funds: Ontario’s new government has come out against a proposal to ban the use of an early-withdrawal fee on mutual funds that is often hidden from consumers, a decision that drew backlash from within the industry and throws a long-standing review of fund fees into turmoil. Story (Clare O’Hara and Tim Kiladze, for subscribers)
Spin-off: AltaGas Ltd. is spinning off its Canadian regulated gas-distribution assets into a new publicly traded company to cut debt it took on in its US$4.5-billion takeover of U.S.-based WGL Holdings Inc., a deal that has weighed heavily on its stock price. Story (Jeffrey Jones, for subscribers)
Declining business investment threatens economy, C.D. Howe, Fraser Institute says: A sharp decline in business investment is a major headwind for Canada’s economy, two recent reports say, amplifying competitiveness concerns spurred by trade uncertainty and corporate tax cuts in the United States. Story (Jeff Lewis, for subscribers)
Fintech partnership: National Bank of Canada is partnering with online lender Thinking Capital to expand its small-business loans to Canadian companies. On Thursday, National Bank became the second major bank to announce a strategic partnership agreement with Montreal-based Thinking Capital, allowing the bank to now offer loans to a wider segment of small to medium-sized businesses in Canada. The partnership permits National Bank to white-label, or rebrand as its own, Thinking Capital’s proprietary fintech platform and process loans directly in-house. Story (Clare O’Hara)
Hostile takeover: Trinidad Drilling Ltd. urged investors to reject a hostile takeover bid made by rival Ensign Energy Services as it tries to drum up a richer offer in a downtrodden energy market. Calgary-based Trinidad on Thursday accused Ensign of undervaluing its prospects and taking advantage of what it called temporary weakness in its shares as it began a formal search for a white knight. Story (Jeff Lewis, for subscribers)
Ten years on, few lessons learned from the global financial crisis: It’s been a decade since the collapse of Lehman Brothers sparked the 2008-09 global financial crisis and recession. The global economy is finally performing at a robust level, with solid output and employment growth in many regions and interest rates generally on the rise toward more normal levels. The acute pain felt during the financial crisis, and the protracted period of recovery, should have encouraged policy-makers and their voters to take meaningful steps to avoid a repeat performance. But have lessons been learned? Opinion (C.D. Howe’s Glen Hodgson)
Canada must prepare for multidimensional conflict: There are hard lessons to be learned from the disproportionate Saudi response to a tweet from our Foreign Affairs Minister calling for the release of imprisoned rights activists, and an opportunity to make our country better prepared and more resilient. Opinion (National Bank CEO Louis Vachon)
Aggressive acquisition strategy hits Scotiabank’s stock price as investor skepticism mounts: After a stunning run of acquisitions, Bank of Nova Scotia is feeling the heat. Shares of Canada’s third-largest lender are suffering relative to rival Big Six banks, and the pressure is on management to prove its recent spate of deals was worth it. Story (Tim Kiladze, for subscribers)
U.S. company acquires Canadian cloud businesses: An American holding company has agreed to buy two Canadian cloud-based businesses for nearly US$200-million, with plans to combine them in a new publicly traded “digital city hall” business. Story (Josh O’Kane, for subscribers)
Alternative stock exchange IEX gets its first listing: On Wednesday, IEX announced that its platform would soon host the shares of Interactive Brokers Group Inc., an automated brokerage firm, which is set to become the only major U.S. stock listed outside of the New York Stock Exchange or Nasdaq. Story (Tim Shufelt, for subscribers)
Nine-figure valuation: A Toronto-based artificial-intelligence software startup with just 38 employees and a handful of customers has surpassed US$100-million valuation after receiving a capital injection led by Montreal financial-services giant Power Financial Corp. Story
Discount broker revamp: Toronto-Dominion Bank is partnering with a U.S. financial technology startup to revamp its online trading platform for retail investors as well as launch a robo-advisory service that will house its own proprietary exchange-traded funds. TD has signed a licensing agreement with Hydrogen Technology Corp., a New York-based fintech company, that will allow TD to use Hydrogen’s proprietary technology to enhance its current discount brokerage, TD WebBroker, for do-it-yourself investors. Story
Open banking opinion piece: The Federal budget delivered by Finance Minister Bill Morneau last February contained a commitment to examine the merits of open banking. While policy-makers are busy examining the issue, this move does not appear to have opened much of a broader public debate among the users of banking services on the benefits of open banking, or what Canadians of all walks of life want from the banking industry. A broader debate is needed. Opinion (Andrew Moor and Dan Dickinson)
CIBC to launch Canada’s first ‘women in leadership’ bond for institutional investors: Canadian Imperial Bank of Commerce is preparing to launch what it says will be the country’s first bond aimed at advancing women’s leadership, at a time when social and governance issues are top of mind for institutional investors. Story (Alexandra Posadzki, for subscribers)
TD to revamp discount brokerage firm: Toronto-Dominion Bank is partnering with a U.S. financial technology startup to revamp its online trading platform for retail investors as well as launch a robo-advisory service that will house its own proprietary exchange-traded funds. TD has signed a licensing agreement with Hydrogen Technology Corp., a New York-based fintech company, that will allow TD to use Hydrogen’s proprietary technology to enhance its current discount brokerage, TD WebBroker, for do-it-yourself investors. Story (Clare O’Hara)
CIBC CEO warns about rising global debt levels; urges Canada to attract more foreign direct investment: The chief executive officer of Canadian Imperial Bank of Commerce is sounding an alarm over falling levels of foreign investment in Canada, warning that the country needs clearer rules to shore up investor confidence. Story (James Bradshaw, for subscribers)
Financial products: Fidelity Investments Canada, one of the last major mutual fund companies yet to join the Canadian exchange-traded funds industry, is set to begin trading next week in six ETFs for income-seeking investors, offering a suite of dividend factor-based funds starting Sept. 18 on the Toronto Stock Exchange. Story (Clare O’Hara)
Globe editorial: Chartered banks should not be allowed to pick their own referees: So the news that yet another big bank is opting to break with the country’s not-for-profit national banking ombudsman is not great for consumers. Editorial
Hudson’s Bay forms joint venture with German competitor Karstadt: Hudson’s Bay Co. on Tuesday struck a deal with its main European competitor to merge their German department-store chains in a move that will generate $616-million that HBC will use to cut debt and shore up its challenged retail business. Story (Marina Strauss and Jeffrey Jones, for subscribers)
Scotiabank has dropped OBSI: As of Nov. 1, Bank of Nova Scotia will no longer resolve banking disputes with customers through the country’s non-profit banking ombudsman, making it the third major financial institution to choose a for-profit alternative. Royal Bank of Canada and Toronto-Dominion Bank opted out of the Ombudsman for Banking Services and Investments in the past decade, turning to the private, for-profit ADR Chambers Banking Ombuds Office (ADRBO) to mediate customer complaints. Story (James Bradshaw, for subscribers)
Sweetened bid: Iron Bridge Resources Inc. has agreed to a sweetened takeover bid from Velvet Energy Ltd. after more than three months of seeking a white knight in an unwelcoming energy market. Story (Jeffrey Jones, for subscribers)
Canada’s Big Six banks have an obsession with cutting costs amid record profits: The extended bull market and booming economy is the stuff investors used to dream of. But for some, it’s just not enough. Coming off a quarter in which they collectively earned an eye-watering $11.6-billion, Canada’s largest banks participated in a Bay Street conference last week where the main focus was, of all things, cost control. It has been this way for a few years now. Story (Tim Kiladze, for subscribers)
A decade on, and the banking bailouts still fuel the rise of global populism: The London alumni of Lehman Bros. are to meet for a reunion bash on Sept. 14 at a swanky club in the City, as the financial district is known, 10 years less a day after the investment bank’s spectacular collapse. Several hundred former Lehman employees are expected to attend the boozer, and it’s a safe bet they can afford the £70 ($120) ticket. Opinion (Eric Reguly, for subscribers)
Wealth management: High-net worth investors can now hold bitcoin investments in their registered accounts, including registered retirement savings plans and tax-free savings accounts. Starting this week, investment advisers are able to purchase the First Block Capital Bitcoin Trust, a fund that launched last year for accredited investors, on the NEO Connect – a trading platform developed by Aequitas Innovations Inc. and a sister platform to the NEO Exchange. Story (Clare O’Hara)
MORE DEALS AND FINANCIAL SERVICES NEWS FROM FRIDAY
Money laundering: Shares in Danske Bank fell 4 percent on Friday after the Wall Street Journal reported that U.S. law enforcement agencies are investigating the bank over allegations of money laundering through Estonia. Story
Takeover approval: Takeda Pharmaceutical Co Ltd said on Friday China approved its purchase of Shire Plc, the latest regulator to clear the US$62 billion (47 billion pounds) deal and bring the Japanese group closer to becoming a global top 10 drug maker. Story
Pipelines: Kinder Morgan Inc. has hired investment bank TD Securities to facilitate a potential sale of its Canadian business, which could fetch as much as $2.4-billion, people familiar with the situation told Reuters this week. Story
Succession: As a single mother with a British accent who loves numbers, Marianne Lake bears little resemblance to Jamie Dimon, the longtime chief executive of JPMorgan Chase & Co., known for his bravado, quips and occasional profanity-laced outbursts. Yet Lake has emerged as a front-runner to replace Dimon when he eventually retires, Reuters interviews with more than a dozen current and former executives show. Story
The Streetwise newsletter is Tuesday to Saturday. If you’re reading this on the web, or if someone forwarded this e-mail to you, you can sign up for Streetwise and all Globe newsletters on our signup page.