Canadian Western Bank ‘watching every loan’ after energy industry defaults

Canadian Western Bank (TSE:CWB, Mkt cap 2.09B, P/E 9.97, Div/yield 0.23/3.58, EPS 2.58, Shares 81.88M) has reported a 37% decline in profit for the second quarter after struggling clients in the oil and gas industry failed to keep up their loan repayments. However, the quarterly results were better than many analysts feared.

Canadian Western Bank

Canadian Western Bank ‘watching every loan’ after energy industry defaults

Announcing its quarterly results last week, the bank blamed “the significant negative impact of persistent low oil prices on the credit performance of oil and gas production loans”.

Net income fell to C$32.2 million for the quarter ended April 30, 2016, after the bank set aside C$33 million to cover defaulted loans to oil and gas companies. Overall, its exposure to oil and gas production loans decreased C$7 million to C$327 million. That’s equivalent to 2% of its total lending, news agency Reuters reported.

Diluted earnings per common share of C$0.40 were down 38%, the bank said.

Reuters noted that Canada’s biggest banks, including Royal Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia, all announced higher losses on loans to energy companies in the second quarter after oil prices dropped to 13-year lows in February.

Commenting on the situation, Canadian Western Bank’s CEO Chris Fowler told analysts that the bank was watching every oil and gas loan closely.

“This whole industry is challenged right now,” he said. “Not every loan financially is on the watch list but we’re looking at every loan.”

The bank’s pre-tax, pre-provision earnings rose 8% to C$84.5 million thanks to 14% year-over-year loan growth and 7% higher non-interest income. This was partially offset by a 10 basis point decrease in net interest margin and 10% increase in non-interest expenses.

Edmonton based Canadian Western Bank offers a range of financial services through more than 40 branch locations in Western Canada. The bank offers Personal banking, business banking and investing services. Personal banking include the provision of bank accounts, mortgages, loans, credit cards, banking services such as online banking, mobile banking and ATM banking, creditor insurance and travel insurance. Business banking includes provision of business lending, business accounts, cash management services, credit cards and services to small businesses. Its investing services include a range of Guaranteed Investment Certificates (GICs), Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), Registered Retirement Income Fund Products (RRIFs), Registered Education Savings Plan (RESP) and mutual funds. More from Reuters »

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Canadian Western Bank posts relatively unchanged profit in Q1

Canadian Western Bank (TSE:CWB, Mkt cap 1.97B, P/E 9.14, Div/yield 0.23/3.90, EPS 2.58, Shares 80.56M) says “solid” first-quarter results have ensured it is “well positioned at the outset of an important year”.

The Edmonton-based bank showed that it could hold steady in spite of ongoing economic weakness in its home province of Alberta.

Canadian Western Bank solid results well positioned important year

Canadian Western Bank – “solid” first-quarter results have ensured it is “well positioned at the outset of an important year”

It posted shareholders’ net income from continuing operations of $52.1 million, down 1% from $52.4 million, compared to the same quarter a year earlier. Diluted earnings per common share of 65 cents and adjusted cash earnings per common share of 66 cents remained consistent from last year.

Year-over-year growth in the bank’s loan and deposit business was tempered by lower margins on interest received compared to interest paid out, $2.9 million in losses on securities from volatile financial markets and the increase in Alberta’s provincial corporate tax rate to 12% from 10%, introduced by the NDP last June.

Meanwhile, loans grew by 12% and deposits increased by 11%, it said in a press release.

Chris Fowler, CWB’s president and CEO, believes the firm’s recent acquisition of CWB Maxium Financial will soon prove fertile, noting how Maxium’s specialized financing originations will provide “attractive returns and are complementary to our existing lending verticals.”

He added: “With 80% of its business in Ontario, Maxium will accelerate expansion of CWB’s geographic footprint in Central and Eastern Canada. Both the Maxium acquisition and the upcoming launch of our new core banking system represent significant steps in the continued execution of CWB’s strategic direction.”

Fowler also confirmed that with the Canadian economy still feeling the effects of low oil prices, CWB is working “proactively with our clients, particularly in Alberta and Saskatchewan, to address related operating challenges.”

Edmonton based Canadian Western Bank offers a range of financial services through more than 40 branch locations in Western Canada. The bank offers Personal banking, business banking and investing services. Personal banking include the provision of bank accounts, mortgages, loans, credit cards, banking services such as online banking, mobile banking and ATM banking, creditor insurance and travel insurance. Business banking includes provision of business lending, business accounts, cash management services, credit cards and services to small businesses. Its investing services include a range of Guaranteed Investment Certificates (GICs), Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), Registered Retirement Income Fund Products (RRIFs), Registered Education Savings Plan (RESP) and mutual funds. More from Reuters »

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

Canadian Western Bank sets Q1 date for $120m Maxium Group acquisition

Canadian Western Bank (TSE:CWB, Mkt cap 1.85B, P/E 8.91, Div/yield 0.23/4.00, EPS 2.58, Shares 80.53M) will complete the acquisition of Maxium Financial Services Inc. and Desante Financial Services Inc., together known as the Maxium Group, during the first quarter of 2016 in a deal worth up to $120 million.

Canadian Western Bank Maxium Group acquisition

Canadian Western Bank sets Q1 date for $120m Maxium Group acquisition

Maxium Group, a privately held financing company that provides loans, equipment leases and structured financing solutions, boasts more than 35,000 clients.

It conducts most of its business in Ontario, with a portfolio including health care, golf, transportation, real estate, and general corporate financing. According to an official release in September, it has securitized lending assets totalling around $1 billion.

The purchase agreement is structured over three years, with the closing date slated for the first quarter of 2016, CWB said in a news release.

Some $30 million of the acquisition will be funded by CWB common shares, while the bank will stump up $19.5 million in cash, with contingent payments, that will total up to $70.5 million based on Maxium Group’s business performance over a 36-month period, bringing the deal up to the $120 million mark.

Chris Fowler, CWB’s president and chief executive, explained why the Edmonton-based bank identified Maxium Group with acquisition in mind.

“This acquisition brings an experienced and motivated team of employees, led by a highly respected management group with a demonstrated history of delivering consistently strong financial performance, including solid credit quality,” he said in the news release.

Meanwhile, the purchase will oil the wheels of CWB’s drive to expand its footprint in Eastern and Central Canada, Fowler added. Maxium Group already does more than 80% of its business in Ontario.

Canadian Western Bank (CWB) is a bank offering a range of financial services through more than 40 branch locations in Western Canada. The bank offers Personal banking, business banking and investing services. Personal banking include the provision of bank accounts, mortgages, loans, credit cards, banking services such as online banking, mobile banking and ATM banking, creditor insurance and travel insurance. Business banking includes provision of business lending, business accounts, cash management services, credit cards and services to small businesses. Its investing services include a range of Guaranteed Investment Certificates (GICs), Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), Registered Retirement Income Fund Products (RRIFs), Registered Education Savings Plan (RESP) and mutual funds. More from Reuters »

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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.