Delayed financial report doesn’t derail merger plans, CEO says
CWB Financial Group has published its delayed fourth-quarter earnings, reaffirming that its plans to merge with National Bank of Canada “remains on track”. The delay followed a legal claim against a CWB subsidiary, which the company said will not impact its financial standing.
For the fiscal year ending October 31, CWB reported net income for common shareholders of $268 million, a 17% decline from the previous year. Adjusted earnings per share (EPS) dropped 16% to $3.01. Quarterly net income fell 19% year-over-year to $62 million, but rose 50% from the previous quarter, driven by reduced provisions for credit losses.
Annual pre-tax, pre-provision income grew by 8%, supported by revenue growth and careful expense management. Quarterly revenue increased by 6% compared to the same period last year, fuelled by a 5% rise in net interest income and a 13% boost in non-interest income, largely from higher wealth management fees and gains on securities. However, these gains were tempered by a 12% increase in adjusted non-interest expenses.
Provisions for credit losses on impaired loans surged to 38 basis points from eight basis points in the same quarter last year, reflecting elevated borrower defaults and declining asset values. This marks a return to historical norms after an unusually low impaired loan provision rate in 2023.
NBC acquisition progress
CWB president and CEO Chris Fowler affirmed that the bank’s merger with National Bank is "on track" for a 2025 completion.
The transaction, approved by shareholders in September and cleared by the Competition Bureau later that month, is now subject to regulatory approval from the Office of the Superintendent of Financial Institutions (OSFI) and the Minister of Finance.
“I am excited about the future for Canadian Western Bank and am confident that the combination of our two banks will create incredible value for our clients, teams, communities, and shareholders," Fowler said in the financial report.
The merger is expected to expand CWB’s offerings, enabling access to National Bank’s capital markets expertise and broader service platform. Retail, small business, and commercial clients are expected to benefit from an enhanced range of products and services.
Impact of subsidiary investigation
The release of CWB’s earnings was delayed after an $18 million legal claim was filed against its subsidiary, CWB Maxium Financial Ltd. The claim, related to loans under a court-approved receivership, includes allegations of unethical conduct and seeks general and punitive damages.
CWB conducted an internal investigation and concluded that the claim does not impact its financial statements or reveal deficiencies in internal controls.
Read more: Canadian Western Bank postpones earnings amid subsidiary investigation
“Upon receipt of this claim, we launched an in-depth investigation," the bank stated. “The evidence obtained through this investigation supports that this matter has no impact on our financial statements, and no deficiencies in internal controls over financial reporting were identified.”
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