National Bank of Canada’s recent acquisition of Canadian Western Bank is likely to lead to high returns in the long-run, as the lender has a history of successful mergers and acquisitions (M&A) and is growing fast across multiple divisions, says one expert.
In an interview with BNN Bloomberg on Wednesday, Barry Schwartz, a chief investment officer and portfolio manager at Baskin Wealth Management, called National Bank a “terrific operator” in the M&A space.
“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,” he said.
National’s $5-billion acquisition of Edmonton-based Canadian Western officially closed earlier this month. The deal expands Montreal-based National’s presence in Western Canada, which is primed for further economic growth in the coming years, Schwartz argued.
He said that with recent threats from U.S. President Donald Trump both to Canada’s sovereignty and to some of its most important exports including oil and gas, there may be a “change of tone” brewing in Canada to focus more on self sufficiency.
“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 said.
“So, Canadian Western Bank was a great acquisition. 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.”
Q1 earnings
Schwartz’s comments came the same day National Bank reported first quarter earnings, which showed the bank earned $997 million in quarterly profit, up from $922 million a year earlier.
That amounted to $2.78 per diluted share, compared to $2.59 per diluted share in the same quarter a year ago. The bank saw strong results from its wealth management and financial markets units, which Schwartz said are becoming an increasingly important part of the overall business.
“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 U.S. non-prime loan business as well being the largest growing bank in Cambodia,” he said.
“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.”
The bank set aside $254 million for potentially bad loans in the quarter, up from $120 million a year earlier, and well ahead of analyst estimates, according to Bloomberg News. National Bank shares were down more than five per cent in afternoon trading Wednesday.
National’s quarterly earnings report came a day after Bank of Nova Scotia and Bank of Montreal released their Q1 results, while Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and Royal Bank of Canada will all report on Thursday.
With files from The Canadian Press and Bloomberg News
