TRUST -- FOR A PREFERRED SHARE
Canada's trust companies have been lucky as well as clever. Their larger banking brethren have struggled with portfolios full of Latin American, energy and agricultural loans. Banking confidence has not yet recovered from the crash of Canadian Commercial bank and Northland.
Canadian regulations ensure that trusts must invest the bulk of their assets in high-quality, well-secured loans. They are out of the sovereign risk market. Their ability to make commercial loans is restricted, which makes it harder to lose money on lousy credit decisions. Part of the trust business is to provide fiduciary services and fund management. This requires little capital, and losing money (except for the client) is difficult. From this business the banks are excluded by law.
But the trusts do compete with the banks in mortgage lending, and increasingly in retail banking, including deposit accounts, personal loans, and credit cards. They are also heavily involved in profitable real estate brokerage.
Whether by luck or skill, the two giants of the industry, Royal Trustco and Canada Trustco, have performed admirably with returns on assets and equity that compare well with other financial institutions in Canada and the US.