CWB Financial Group (CWB) has announced its financial performance for the third quarter ended July 31, 2024, highlighting a strong performance despite an increase in credit losses. The company reported quarterly common shareholders’ net income of $41 million, diluted earnings per common share (EPS) of $0.43, and adjusted EPS of $0.60.
Chris Fowler, President and CEO, highlighted the success of CWB’s teams in delivering robust pre-tax, pre-provision income through strategic loan growth and a refined funding mix, leading to a significant improvement in net interest margin. However, the third quarter performance was negatively impacted by a considerable increase in the provision for credit losses on impaired loans, primarily due to two specific loan exposures with unusual provision requirements.
Despite this, CWB remains confident about its future performance, anticipating credit losses to return to their typical historical range in the next quarter. Fowler also emphasized CWB’s commitment to continued profitable growth within their disciplined and secured lending model, positioning them for a significant financial improvement in the fourth quarter.
The company’s quarterly common shareholders’ net income and diluted EPS experienced a 50% decline compared to the previous year, attributed to a 5% increase in revenue, driven by a 12 basis point increase in net interest margin, being more than offset by a 43 basis point increase in the total provision for credit losses and costs associated with the potential National Bank of Canada (NBC) transaction. The provision for credit losses on impaired loans saw a 47 basis point increase, contributing significantly to this rise. Despite the impact of credit losses, pre-tax, pre-provision income grew by 4% year-over-year, while adjusted EPS saw a 32% decline.
On a sequential basis, quarterly common shareholders’ net income decreased by 46%, and adjusted EPS by 26%. Pre-tax, pre-provision income saw a 5% increase, reflecting a 9 basis point improvement in net interest margin. Year-to-date, CWB achieved 11% growth in pre-tax, pre-provision income and a positive operating leverage of 3.9%.
CWB’s Board of Directors declared a cash dividend of $0.35 per common share, representing a 6% increase from the previous year and consistent with the previous quarter.
National Bank of Canada (NBC) Transaction
CWB announced on June 11, 2024, that they had entered into a definitive agreement with NBC for the acquisition of all outstanding CWB common shares through a share exchange. This transaction aims to combine two complementary Canadian banks with growing businesses, providing a comprehensive product and service platform on a national scale with a regionally focused service model. CWB’s current retail customers will benefit from an expanded product offering and digital platform, small business clients will gain access to NBC’s cash and risk management solutions, and commercial clients will have access to NBC’s leading capital markets franchise.
The transaction requires approval from CWB shareholders and regulatory authorities, with closing anticipated in 2025. Following closing, CWB expects a period of preparation for the transition period to effectively integrate their operations into NBC. CWB remains dedicated to meeting their clients’ banking needs during this transition.
The company has incurred and anticipates further costs related to this potential transaction. These costs are excluded from the calculation of non-GAAP measures, as they are not representative of the company’s underlying operating performance.
CWB’s third quarter results conference call is scheduled for Friday, August 30, 2024, at 10:30 a.m. ET (8:30 a.m. MT). The call can be accessed by dialing (416) 764-8688 (Toronto) or 1 (888) 390-0546 (toll-free) and entering passcode: 64895054. It will also be webcast live on CWB’s website: www.cwb.com/investor-relations/quarterly-reports.
