The Canadian Western Bank’s first Eastern branch in Mississauga, Ont., on Oct. 31, 2021.Christopher Katsarov/The Globe and Mail
Canadian Western Bank CWB-T says it has postponed the release of its fourth-quarter earnings owing to a recent legal claim against one of its subsidiaries that required “prudent investigation.”
CWB’s shares tumbled 5.4 per cent in Toronto on Friday after the lender abruptly delayed the earnings publication to a later date this month without explanation.
The sudden nature of the change prompted widespread speculation among investors that it was related to National Bank of Canada’s deal to acquire CWB, but the Edmonton-based lender on Saturday refuted that claim.
“We continue to expect forward progress of the transaction and expect it to close as planned and within previously announced timelines,” CWB said of National Bank’s acquisition in a press release.
The bank said a legal claim against a subsidiary, CWB Maxium Financial Ltd. (Maxium), was received late into the process of approving and disclosing its annual financial results.
The claimant is seeking $18-million in damages, as well as general and punitive damages and costs related to the provision of certain loans to corporations affiliated with the claimant, and the resolution of the loans.
The claim includes “allegations of unethical conduct by a named individual.”
CWB said that it has launched a full investigation and has thus far confirmed that the named individual is a sales agent of Maxium with no lending approval authority. The loans were approved through the lender’s credit approval process, which includes a thorough review of each loan by its risk management team, the bank said.
CWB said that it does not expect the outcome of the claim to impact its future financial results.
Montreal-based National Bank is nearing the final stages of approval to take over CWB. During a conference call Wednesday discussing fourth-quarter earnings, National Bank chief executive officer Laurent Ferreira said Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, is currently reviewing the proposal.
The final step will be for Finance Minister Chrystia Freeland to green-light the deal. Mr. Ferreira added that he expects the deal to close in early 2025.
“Our proposed acquisition of Canadian Western Bank will be a key pillar in our domestic growth in 2025 and for the years to come,” he said during the call. “We look forward to bringing together two strong teams and highly complementary platforms to accelerate our growth. The approval process is progressing well.”
In recent quarters, CWB has grappled with higher-than-expected provisions for loans that could default. In third-quarter earnings released at the end of August, the bank said that the increase in provisions was driven by two specific client accounts, and that it did not expect further issues.
In June, National Bank announced its intention to buy CWB and struck a stock-swap deal that values the Edmonton-based lender at $5-billion.
At the time, National Bank, the country’s sixth-largest lender, said its takeover expands its business by $37-billion in loans across 65,000 customers and 39 branches in Western Canada and Ontario. The deal would increase the bank’s Canadian lending portfolio outside of Quebec by 37 per cent.
National Bank did not immediately respond to requests for comment.