CWB Financial Group is a diversified financial services organization. CWB is a leading regional bank in Canada providing specialized financial services in business and personal banking, and wealth management services to small and medium-sized companies. CWB also offers equipment financing and trust services across Canada.
CWB operates through an extensive network of branches focusing on banking, lending, wealth, and trust services. It has a huge presence in western parts of Canada with a strong focus on general commercial, equipment financing, and construction and real estate project financing.
CWB provides a full suite of financial solutions and personal services to the targeted segments within Canada’s commercial banking industry. Interest income accounts for the major portion of CWB’s revenue (91%), followed by non-interest income including wealth management, credit-related fees, retail and trust services fees, and gains on securities.
- Opportunity Score: 60
- Ticker: TSE:CWB
- Sector: Financial Services
- Industry: Banks - Regional
- Market Cap: 2.69B
- P/E: 10.82
- Dividend Yield: 3.75%
- Payout Ratio (Earnings): 40.56%
- Canadian Dividend Aristocrat: YES
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 6/10
- Dividend Income Fit: 7/10
Revenue Growth & Market Exposure
Canadian Western Bank has a customer-oriented approach and focuses on meeting the financial needs of business owners. It has a large footprint extending from coast to coast throughout Canada.
Its loan portfolio comprises general commercial loans (32%), personal loans and mortgages (20%), equipment financing and leasing (17%), commercial mortgages (19%), and real estate project loans (11%).
CWB’s exposure to oil and gas production and service businesses each represent 1% of total loans. A diversified platform provides significant growth opportunities and increased resilience to regional fluctuations.
It has a long established history of more than 45 years in equipment leasing and is an industry leader in small and mid-sized equipment leasing. The Group also provides specialized financing solutions in health care, hospitality, transportation, real estate, etc.
CWB’s exposure within these industries is well-diversified and supported by high-quality and resilient borrowers. Canadian Western Bank continues to execute its balanced growth strategy diversified by geographies, industries as well as funding sources.
It is undertaking various transformational initiatives to enhance business infrastructure. CWB is focusing on increasing its non-interest income by growing its banking and leasing fee income, wealth management, and trust services.
CWB’s overall FY 2020 revenue growth was negatively impacted by an increase in the performing loan provision for credit losses and higher non-interest expenses. It also achieved branch-raised deposit growth of 20% and loan growth of 12% annually in Ontario.
The bank is growing its market share in Ontario. CWB has a reputation as a secured lender and disciplined underwriter with a proven history of low write-offs through economic cycles. CWB launched a digital banking platform for small and mid-sized business clients. Its continuous efforts on digital client experience should also support future growth.
CWB completed the acquisition of T.E. Wealth and Leon Frazer that positions it to become a leader in the Canadian private wealth industry. The bank expects to deliver mid-single-digit growth of net interest income in FY2021.
Canadian Western Bank is a dividend aristocrat, with 28 straight years of dividend increases. It has compounded its dividend growth by over 9% per annum over the last decade.
The bank has a very reasonable payout ratio of 40% and an average annual yield of ~4%. It last raised its dividend by 7.4% on an annual basis.
Canadian Western Bank has a strong balance sheet and a sound track record of dividend growth and consistent profitability. Its EPS has grown by 7% in the last decade. CWB is well-positioned to drive value creation for its shareholders through varied capital deployment options in line with its balanced growth strategy.
The bank has also consolidated its equipment financing and leasing businesses under common leadership. CWB’s overall credit quality remains strong with very low write-offs due to a secured lending portfolio, disciplined underwriting practices, and effective loan management. It continues to benefit from a diversified funding mix and consistent growth in branch-raised deposits.
The bank has strong capital levels and an expected upside with a successful AIRB transition. The AIRB approval is also expected to improve capital ratios. Its strong capital ratios supported its investment in wealth business acquisition which is expected to support adjusted EPS modestly at first and more aggressively beginning FY2022.
The acquisition will also increase non-interest income contribution to total revenue at ~12% in FY2021. CWB will focus on increasing its market share within targeted industries across its growing geographic footprint.
The financial services marketplace faces intense competition and Canadian Western Bank’s performance is affected by the level of competition in all different market segments.
Laurentian Bank, National Bank, and VersaBank are Canadian Western Banks’ top competitors. National Bank is the leading bank based out of Quebec and ranks amongst Canada’s six largest commercial banks.
VersaBank is a leading chartered bank in Canada, while Laurentian Bank is a leading Canadian bank, providing a broad range of advice-based solutions and services to its clients. In addition, Canadian Western Bank also suffers from competition from non-financial institutions offering banking products and services through electronic and internet-based financial solutions.
CWB has an impeccable reputation for providing proactive and personalized services. The group is expecting to drive strong growth over the medium term through investments in digital capabilities, product offerings, and continued business efficiency initiatives. It continues to focus on new opportunities to drive broad-based growth as the economy recovers.
The wealth acquisition further paves the way for CWB to become a leader in the Canadian private wealth industry. CWB’s differentiated market focus positions it well to drive the growth of full-service relationships with business owners across Canada.