Regulatory challenges also foreseen in major banking deal
An analyst has described National Bank of Canada’s agreement to acquire Canadian Western Bank (CWB) for approximately $5 billion in an all-stock deal as a big win for the company.
Nigel D’Souza, a senior investment analyst at Veritas, said in an interview with BNN Bloomberg that the acquisition would enable National Bank to broaden and diversify its personal and commercial banking operations across Canada.
The initial offer for CWB was $52.24 per share, which represented a 110% premium over its pre-deal share value. This valuation has since decreased following a dip in National Bank’s stock price.
D’Souza said further consolidation is to be anticipated in the Canadian banking sector, particularly after RBC's acquisition of HSBC Canada. He also suggested that smaller regional banks might struggle to compete against the structural advantages that larger banks have.
“Over the long term, there will be more consolidation in the space for any bank that competes with the big six banks, because you simply can’t beat them competitively,” he said.
The deal is expected to finalize by the end of 2025, with Stephen Boland from Raymond James suggesting that regulatory and ministerial approvals could be the main hurdles.
Potential political hurdles for National Bank acquisition
In a recent analyst note, Boland said that the acquisition seems logical given each bank’s limited presence outside their home provinces. He also expressed confidence that competition concerns would be minimal, given that the country’s major banks are already well represented in Western Canada and Quebec.
However, Boland cautioned that there might be opposition from institutions or politicians in Western Canada due to concerns about a local bank being acquired by a Quebec-based institution.
D’Souza echoed this sentiment during his interview with BNN Bloomberg, suggesting that National Bank might need to provide assurances to mitigate concerns about potential job losses.
"Since it’s a Quebec-based institution taking over, I can imagine that the provincial politicians are going to want some political insurance from National, that the job losses are not going to be material,” he said.
