“Toronto-Dominion Bank and Banknorth of Maine are in advanced discussions to strike a deal worth more than $2.2bn that would mark the Canadian bank’s first foray into US branch banking,” write James Politi and Bernard Simon in today’s Finanical Times.

“Negotiations could end with an agreement in the next few days, people close to the talks said on Tuesday. A deal would involve TD Bank taking control of Banknorth through the acquisition of a roughly 50 per cent stake in the US company for a combination of cash and stock. Banknorth has a market capitalisation of $5.45bn.”

“The talks, which are at a very sensitive stage and could still fall apart, come after the Canadian bank in January broke off discussions to merge TD Waterhouse, its brokerage unit, with E*Trade of the US.”

“A combination of TD Waterhouse and E*Trade would have created the second-largest discount brokerage in North America behind Charles Schwab. But the sides could not agree on ‘governance issues’.“

“With headquarters in Portland, Maine, Banknorth has assets of about $29bn and more than 300 branches in New England states such as Vermont, Massachusetts, and New Hampshire.”

“Banks in the north-eastern US have been among the most active in the wave of consolidation that has swept across the US banking sector in the past 12 months.”

“Last year, FleetBoston agreed to be sold to Bank of America for $47bn. This year Citizens Bank, the Rhode-Island based unit of the Royal Bank of Scotland, agreed to pay $10.5bn for Charter One Financial, which is based in Ohio.”

“TD Bank already has a sizeable retail presence in the US through TD Waterhouse, which also provides banking services through Waterhouse National Bank. Regulators earlier stymied the bank’s plans to open branches in some Wal-Mart stores.”

In a joint news release, TD and Banknorth Group, confirmed that they are holding discussions with regard
to a possible transaction.

“At this point there can be no assurances that the discussions will lead to an agreement,” the banks said.