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The Canadian banking industry got sideswiped by the Enron scandal in 2005 after three of the country's six-biggest banks took billions of dollars in charges for their liabilities in related lawsuits.

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Canadian Imperial Bank of Commerce took the biggest bruising over Enron Corp., the U.S. energy trader that went bankrupt in 2001 amid a massive accounting-fraud scandal.

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Settlements on two Enron-related matters were completed in August, but CIBC remains a defendant in a number of remaining actions.

"CIBC lost money because of that writeoff but it will make that money back in the next 18 months," Graham said. "If you take out CIBC's Enron hit, they actually had a pretty decent year."

Rivals Royal Bank and TD also absorbed charges related to their respective Enron-related litigation but their exposure was considered minor compared with that of CIBC.

Both are defendants in a securities class-action lawsuit in U.S. federal court. The suit, which is pending in Texas, was filed by Enron's shareholders.

For its part, Royal Bank has set aside $591 million in reserves for Enron litigation but that did not prevent its annual profit from soaring 21 per cent year-over-year to a record $3.4 billion.

That upturn also came as the Royal booked hefty one-time costs for insurance claims arising from hurricanes Katrina, Rita and Wilma during its fourth quarter.

In a further testament to its financial strength, Canada's largest bank remains bullish about fiscal 2006 and has set aggressive goals, including 20 per cent plus growth in earnings per share and a six to eight per cent spike in revenues.

TD, meanwhile, has set aside $500 million to deal with any Enron fallout. Nevertheless, with litigation still pending, some observers have said it's impossible to estimate the scandal's final toll on Canadian banks.

"You go to court in Texas and anything can happen," commented John Kinsey, a portfolio manager with Caldwell Securities.

Enron woes aside, the banks continued to churn out robust gains in 2005, largely credited to the strength of mortgage lending and wealth-management sales.

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[ 24 December 2005: Message edited by: Hephaestion ]