CWB says merger with National Bank remains unaffected
Canadian Western Bank (CWB) has delayed its fiscal fourth-quarter earnings release due to a legal claim against its subsidiary, CWB Maxium Financial Ltd.
The bank disclosed that the legal claim received “very late in the process” alleged unethical conduct by a Maxium sales agent and sought $18 million in damages related to loans granted to affiliated companies. The agent in question, according to CWB, has no lending approval authority.
CWB said its internal processes ensured that all loans in question underwent thorough reviews by its independent credit risk management team.
“Our investigation also supports that the loans in question were appropriately authorized within our credit approval process, including a thorough review and approval of each loan by our credit risk management team, which is a centralized control function independent of our business lines,” the bank said in a statement.
The bank assured stakeholders that the claim would not disrupt its pending $5 billion acquisition by National Bank of Canada.
“The decision to reschedule is unrelated to CWB’s potential acquisition by National Bank of Canada,” CWB clarified. “We continue to expect forward progress of the transaction and expect it to close as planned and within previously announced timelines.”
Announced in June, the deal has already secured government approval but awaits final government clearance.
The bank also said that the case has no significant impact on its earnings report.
"Based on current knowledge, we do not expect the outcome of this claim to have a material effect on the consolidated financial statements," CWB stated.
Despite these reassurances, the news led to a sharp drop in CWB’s stock, which fell more than 5% on Friday, erasing over $300 million in market value. The bank has cancelled a previously scheduled conference call and pledged to release its earnings by mid-December.
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Analysts had expected adjusted earnings of approximately $85 million for the quarter ended October 31. As of the third quarter, CWB CWB’s loan portfolio totalled $37.4 billion, including $6.7 billion in commercial loans and $7 billion in personal loans and mortgages.
Based in Edmonton, CWB offers personal and commercial banking services with a strong presence in Western Canada and Ontario.
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