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Dominion Bank May Purchase Chrysler Financial

Dominion Bank is the second-largest bank in Canada and at the moment is considering purchasing Chrysler Financial Corporation – the auto-loan firm that is owned by Cerberus Capital Management LP.  Dominion Bank will most likely pay between $6-7 billion for Chrysler Financial, which is in fact the book value of the company, or assets minus the liabilities. There are some people saying that the deal will not take place and other potential buyers are considering acquiring Chrysler Financial. Cerberus will recoup the entire investment in Chrysler Financial and return a good amount of money to the investors.

Based in suburban Detroit, the Chrysler Financial firm is about the truck and old car loans that are still being paid off by the customers, plus a technology and platform that a customer could use to start his own auto-lending business. According to Wall Street Journal, ING Groep NV is also among the potential buyers that are having discussions with Cerberus.

In the last six years, the Dominion Bank spent a significant amount of money expanding in the United States, about $19.9 billion according to various reports. Some of their most important acquisitions are Cherry Hill, a New Jersey-based Commerce Bancorp and Banknorth Group of Portland, Maine. At the moment, it has more than 1,300 branches in the United States, from Florida to Maine, which is more than it has in its native country Canada.

Edmund Clark is the CEO of Dominion Bank and he recently affirmed that the bank is primarily thinking of purchasing Federal Deposit Insurance Corporation along with other “small” purchases plus assisted transactions, which he defined back in February as being less than $10 billion in value. Besides its powerful retail network, the Dominion Bank is the biggest investor in TD Ameritrade Holding Corporation, owning 46% of the brokerage company located in Nebraska.

Due to the underwriting fees and a decrease in trading, the Dominion Bank posted last week a fourth-quarter profit that dropped by 1.6%. Although the profit of the bank from the investment made in TD Securities dropped by 74%, the money earned in the United States rose by 100%.

Stephen Feinberg is the leader of Cerberus, and the company wagered on the United States automotive industry with takeovers of GM’s auto lender four years ago, later on followed by the Chrysler car manufacturer and lender one year later. These deals preceded a significant decline in the auto sales made in the United States, a decline that meant bankruptcy for both manufacturers. Feinberg lost the control of both Chrysler and GMAC and held on to the Chrysler Financial. Last year, the lender repaid its one and a half billion in the United States Treasury Department bailout and this July sough to return to the world of lending money on a very large scale.

The current Chrysler automaker is fully controlled at the moment by Fiat SpA.

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