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A few years ago, Chief Darcy Bear and the Whitecap Dakota First Nation in Saskatchewan made a practical decision to cut ties with the handful of financial institutions that were backing their infrastructure loans in favour of a single player: Bank of Montreal.
It was a simple choice, Chief Bear explained during an interview in Toronto this week. Along with its domestic peers, BMO has made a concerted push into aboriginal banking. But the bank went further. While the band had in the past been forced to depend on relatively short-term debt, making it harder to make the case for bigger infrastructure projects with extended lifespans — roads, schools, bridges — BMO was offering longer, more favourable terms. The kind of 20- or 25-year deals common in off-reserve municipal projects, instead of forcing the band into five or 10-year arrangements.
“The relationship has been a good one,” said Chief Bear, smiling as he recounted the story of first meeting Stephen Fay, BMO’s head of Aboriginal Banking five years ago, after patiently waiting around until the very end of a conference in Vancouver conference to make the meeting happen.
Like any banker, Mr. Fay also seems pleased when he recounts the story of having won out over rival financial services institutions by “pushing the envelope” on infrastructure loans for aboriginal communities. But he says he’s “waiting for the other shoe” to drop in the relentless grabs for market share that are characteristic in his competitive industry.
Rivals such as Royal Bank of Canada, Toronto-Dominion Bank, and Canadian Imperial Bank of Commerce are also enthusiastically chasing the expected economic growth in Canada’s native communities — and eyeing the billions of dollars in land claim settlements coming down the pipeline that will be looking for professional management.
TD already has more than $1.5-billion in First Nations claims under administration and investment management, according to a report last year. BMO has more than $1-billion. Over the next 12 to 18 months, about half a billion dollars is expected from land claims in British Columbia, Alberta and Quebec, according to BMO. And for the banks that could mean a healthy stream of fees. The loan business is also expected to boom as new income flowing into the native communities can be used to secure more credit to fund projects and businesses.
While banks watch their traditional lending business gradually trend toward to slower growth amid signs consumers in the broader Canadian market are reining in their debt consumption, there is a growing appetite for loans in aboriginal communities like Saskatchewan’s Whitecap Dakota First Nation and the Westbank First Nation in British Columbia.
Boom times in local aboriginal economies, driven in part by recent legal decisions that have given bands more say and economic interest in resource development, are sometimes lost amid headline-grabbing events like the housing crisis and allegations of financial mismanagement a few years ago at Attawapiskat First Nation in northwestern Ontario.
For the rest of this article, click here: http://business.financialpost.com/2015/01/10/an-emerging-market-at-home-how-canadian-banks-are-making-a-big-push-into-aboriginal-banking/