While last year's bank merger mania has died north of the border, two of Canada's big banks are planning a dash to the altar with the nation's largest trust company.

Canada Trust, the country's seventh-largest financial institution after the Big Six banks, with C$46 billion ($32 billion) in assets, opened its dance card after owner Imasco Ltd. decided to put all its non-tobacco related operations on the block following a planned buyout by British American Tobacco PLC of the 58% of Imasco the embattled tobacco firm doesn't already own.

BAT has said it has no interest in Montreal-based Imasco's financial services, real estate or consumer retail arms.

The trust company made its name in Canada as an innovative mortgage lender, with a C$16 billion ($11 billion) portfolio. It also has consumer lending and credit card assets, as well as a relatively tiny C$1.2 billion ($900 million) commercial mortgage portfolio. The company is a Canadian retail landmark, with 429 branches across the country and 12,000 employees.

No stranger to the asset-backed market, the trust company's last deal in May was a C$250 million ($180 million) five-year mortgage-backed deal, agented by CIBC World Markets.

So far, two strapping suitors have shown interest in buying CT Financial Services, Canada Trust's parent, with the merger becoming a topic of discussion at last week's asset-backed conference in Whistler.

Rumors first had the country's second largest bank, CIBC, buying the trust company, followed by talk of number-five player Toronto Dominion wanting to cut in.

It's been a bizarre love triangle for all three institutions involved, with TD once rumored to be interested in CT in 1996, followed by a pitch by CIBC for the trust company in 1997, a move that was shot down by federal regulators. The two banks then turned to each other for comfort, planning to merge themselves in 1998. But federal finance minister Paul Martin put the kibosh on that deal.

Ratings on the merged entity would likely stay the same, said Richard Hildebrand, analyst with Dominion Bond Rating Service. "If [the merger] is one of two rumored, they are all rated the same so the rating would carry over," he said. - TC

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