April 18, 2009

A $850 million writedown by Canada's largest bank to reflect a drop in the value of its U.S. assets is probably a one-off event rather than a sign of chronic problems in the country's much-vaunted banking system.The announcement late Thursday that Royal Bank of Canada (RY.TO) will take a goodwill charge because the value of its U.S. business has declined was mostly shrugged off by industry watchers as a prudent move that acknowledges what most observers already suspected.

While competitors Bank of Montreal (BMO.TO) and Toronto-Dominion Bank (TD.TO) also have exposure to the shattered U.S. economy through large retail banking presence there -- BMO in the Midwest, TD in the Northeast -- analysts said any writedowns will probably be smaller and not come until later in the year."There's no doubt these Canadian banks, with their U.S. operations, are exposed to a decline in the overall value of the franchise -- so from that perspective, we could see something like this out of BMO or TD," said Craig Fehr, a financial services analyst at Edwards Jones.