National Bank's $5bn deal strengthens its presence in Alberta and BC
National Bank of Canada's recent acquisition of Canadian Western Bank is anticipated to yield substantial long-term returns, as reported by BNN Bloomberg.
Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, described National Bank as a “terrific operator” in mergers and acquisitions.
“All the acquisitions that they've made have been really homeruns... National has a terrific track record of acquisitions and Canadian Western Bank really underperformed for many years, so hopefully the tide will turn for them,” Schwartz stated in an interview with BNN Bloomberg.
The $5bn acquisition, finalized earlier this month, enhances National Bank's presence in Western Canada.
Schwartz noted that this expansion positions the bank advantageously, especially amid potential shifts toward Canadian self-sufficiency in response to external economic pressures.
“Increasing oil and gas infrastructure spending, LNG, more pipelines, adding more data centres in Alberta... what better place to be than having a bank doing cash-flow lending in Alberta and B.C.,” he commented.
While acknowledging the integration challenges in the short term, Schwartz emphasized the acquisition's long-term benefits.
“They'll (have) a tough job this year integrating that into their numbers so it's really hard to tell if National's earnings are going to grow from here because there's going to be a number of costs involved, but long term this is an excellent deal,” he said.
First quarter earnings report
Coinciding with these developments, National Bank reported a first-quarter profit of $997m, up from $922ma year earlier. Earnings per diluted share increased to $2.78 from $2.59 in the same quarter last year.
This growth was driven by strong performances in the wealth management and financial markets sectors.
Schwartz highlighted the bank's evolving focus: “National Bank is really becoming less of a bank and more of a trading and wealth management operation. (It also) had nice results from its US non-prime loan business as well being the largest growing bank in Cambodia.”
However, the bank's provisions for credit losses rose to $254m from $120m a year earlier, exceeding analyst expectations, according to Bloomberg News.
Schwartz attributed this increase to economic uncertainties, stating, “I guess the one offset of course is the rise in provisions for credit losses... the worries about tariffs and the uncertainty means that you should be prudent about provisions for credit losses for 2025 – anything can happen.”
Following the earnings release, National Bank's shares declined by more than five percent in afternoon trading on Wednesday.
This report came shortly after Bank of Nova Scotia and Bank of Montreal released their first-quarter results, with Canadian Imperial Bank of Commerce, Toronto-Dominion Bank, and Royal Bank of Canada scheduled to report on Thursday.
The acquisition of Canadian Western Bank aligns with National Bank's strategic plan to accelerate growth across all business lines in Canada, as stated in their press release.
This move is expected to increase National Bank's commercial banking portfolio by nearly 52 percent, enhancing loan and revenue diversification, according to Retail Banker International.
