Here are the top reads on deals and financial services over the last 24 hours,
Who’s cashing in on the Raptors: However the series shakes out after that exhilarating first win, and even if Toronto is once again served a nosh of humble pie, this represents a new apex for basketball in Canada – and for the Raptors brand. Among the team’s sponsors, advertisers, the broadcasters that air the games and others – it has tipped off a mad scramble to make the most of the celebrations and capitalize on the Raptors’ success. Story (Susan Krashinsky Robertson, James Bradshaw and Andrew Willis, for subscribers)
Big banks’ support for oil producers will be unable to withstand investors’ push for a greener future: Look deeper, and it becomes clear the bankers’ support for energy companies in general and the oil sands in particular is becoming more qualified. There are clear trends in finance circles that will make it far more difficult for energy companies to raise capital, such as institutional investors’ widening embrace of environmental, social and governance (ESG) criteria in managing portfolios. Opinion (Andrew Willis, for subscribers)
Is it time to worry about bank stocks? It’s becoming clear why Canadian bank stocks are trading at low valuations: With the fiscal second-quarter earnings season nearly over, investors have seen uneven profit growth and rising loan losses. Are bank stocks going nowhere this year? Story (David Berman, for subscribers)
National Bank hikes dividend as profit climbs 2 per cent: National Bank of Canada reported a 2-per-cent rise in second-quarter profit and raised its dividend Thursday, as strong growth in its domestic retail banking business offset weak results from financial markets. For the three months ended April 30, National Bank reported profit of $558-million, or $1.51 per share, compared with $547-million, or $1.44 per share, a year ago. Story (James Bradshaw, for subscribers)
Fiera Capital says it’s safe from takeover: Canada’s third-largest independent asset manager says suitors have the company in their sights, but that buying Fiera is complicated by several things including its relationship with two Quebec-based financial institutions and the risk of a blowback by those institutions to the prospect of an out-of-province buyer. Story (Nicolas Van Praet, for subscribers)
Financial regulator fines BMO $200,000 for HELOC disclosure issues: The Financial Consumer Agency of Canada (FCAC), which regulates financial institutions, said the bank failed to disclose certain information that was required to be disclosed under the cost of borrowing regulations. The bank also failed to meet requirements about the format in which the information was to be disclosed, such as the font style and size. Story (Alexandra Posadzki, for subscribers)
BMO shuffles executive ranks in U.S. division: Erminia Johannson, who has worked at the bank since 2012, was appointed group head of North American personal banking and U.S. business banking, a new role that gives her a cross-border focus. Story (Stefanie Marotta, for subscribers)
Don’t sell to Air Canada, says Transat’s biggest shareholder: Transat A.T. Inc.’s largest shareholder says Air Canada’s takeover offer of $13 a share is not enough for the Montreal-based airline and travel company and that it should not consider any offer until it restores its profitability by raising air travel and vacation prices. “We don’t think this is an opportune time to be selling the company,” said Peter Letko of Montreal-based investment manager Letko Brosseau & Associates Inc. The investment company owns about 20 per cent of Transat. Story (Eric Atkins, for subscribers)
Former Wattpad executive Eva Lau announces first venture fund: One of Toronto’s most prominent angel investors, former Wattpad Corp. executive Eva Lau, has launched her first venture fund, becoming one of the few women in Canada to lead an early-stage investment firm. Ms. Lau is announcing Thursday her Two Small Fish Ventures has raised $9-million of her $15-million goal for her first seed-stage fund. Story (Sean Silcoff, for subscribers)
Paving the path forward for Canadian open banking: The concept of open banking is rapidly gaining traction around the world and is poised to reshape the financial landscape in Canada. Open banking refers to the use of application programming interfaces (APIs), which are available from a bank for third-party software providers to securely access features and data from that particular bank on behalf of their joint customer with the customer’s consent. Opinion (Will Buckley)
While it targets Alberta’s oil industry, HSBC gets back in business with Saudi Arabia: Walk down just about any runway ramp to your airplane at Calgary International Airport and HSBC advertisements are plastered everywhere. In some tunnels to the tarmac, posters that trumpet the Hongkong and Shanghai Banking Corp.’s worldwide reach are the only ads on display. Opinion (Mark Milke)
BMO boosts its dividend as profit bumps higher, but still falls short of estimates: Bank of Montreal reported a 5-per-cent bump in profit and raised its quarterly dividend thanks to strong U.S. growth and muted loan losses, but the results still fell shy of analysts’ forecasts due partly to severance costs. Canada’s fourth-largest bank by assets faced high expectations in the second quarter after posting impressive results in the first quarter of its fiscal year, despite a backdrop of slowing economic growth in Canada. Story (James Bradshaw, for subscribers)
Canadian Natural buys assets for $3.8-billion as Devon Energy exits Canada’s oil patch: Canadian Natural Resources Ltd. said Wednesday it is purchasing the Alberta assets of U.S.-based Devon Energy Corp. for $3.8-billion as another foreign company exits Western Canada’s oil fields. Devon Canada has capacity to produce 128,000 barrels per day – including 108,000 in the oil sands and 20,000 b/d of conventional heavy oil – though that has been shaved to 122,800 b/d because of the current production-curtailment order by the Alberta government. Story (Shawn McCarthy, for subscribers)
DBRS sold to Morningstar to create global reach: The U.S. company has signed a deal to buy the Canadian debt-rating agency for US$669-million. For Morningstar, the deal signals an attempt to diversify away from its traditional focus on equity funds. The deal is expected to close in the third quarter this year. Story (Tim Kiladze, for subscribers)
New home construction could take $8-billion stress-test hit, mortgage experts warn: Canada’s mortgage stress test is taking a toll on new house construction, with building activity expected to drop by as much as $8-billion this year alone, a new report estimates. Story (Janet McFarland, for subscribers)
Scotiabank results hurt by jump in expected loan losses: Bank of Nova Scotia reported a sharp increase in expected loan losses, driven in part by a cloudier economic outlook in Canada and Mexico, leaving investors waiting for signs of a turnaround in the second half of 2019. Story (James Bradshaw, for subscribers)
CPPIB conducts human-rights checks on Chinese investments amid use of surveillance equipment on Uyghurs: Canada’s largest public pension manager has begun a new scrutiny of its investments, including its ownership stake in Chinese companies, as human-rights groups and U.S. lawmakers point to the role of China’s surveillance-equipment makers in enabling the monitoring and control of the country’s religious minorities. The Canada Pension Plan Investment Board says it is conducting new checks across its vast portfolio to identify companies with troubling practices – even as it continues to pursue a strategy of diversification with investments in China. Story (Nathan Vanderklippe and David Green, for subscribers)
Facing debt woes, TC Energy sells pipeline stake to raise $1.15-billion: TC Energy Corp., formerly known as TransCanada Corp., is selling an 85-per-cent stake in its Northern Courier pipeline to a Canadian pension fund, after two credit-rating agencies downgraded the company’s debt and one flagged slow progress on asset sales. Story (Tim Kiladze, for subscribers)
U.S. private equity giant buys Cority Software Inc.: Thoma Bravo LLC has bought majority control of one of Toronto’s oldest and steadiest enterprise software providers. Terms were not disclosed, but industry sources believe the deal values the 350-person company at between $500-million and $750-million. Story (Sean Silcoff, for subscribers)
Caisse terminates four executives at real estate unit after misconduct investigation: Canadian pension fund manager Caisse de dépôt et placement du Québec has dismissed the head of its commercial real estate financing subsidiary and three other executives following a sweeping probe into alleged employee misconduct that included conflicts of interest and, in one case, links to organized crime. Story (Nicolas Van Praet)
Why Air Canada’s takeover of Air Transat could wreck your next European vacation: The days of snagging a cheap(er) flight to Spain or Mexico could be numbered. If Air Canada strikes a final deal to buy Transat, and subsequently wins the approval of competition authorities and the federal government, it will dominate the market for transatlantic and Caribbean flights, with more than 60 per cent of the capacity currently available on such routes. Story (Konrad Yakabuski, for subscribers)
Proposed Fiat Chrysler merger with Renault would not affect Ontario factory jobs, Unifor head assures: Jerry Dias, national president of Unifor, said he was told by an executive with the company that the merger plan unveiled on Monday was about offsetting costs by sharing vehicle platforms and systems while offering complementary lineups. Fiat Chrysler (FCA) said on Monday its offer to merge with the French manufacturer would form the third-largest car maker globally with 8.7 million yearly vehicle sales and a strong presence in most large markets. Story (Eric Atkins, for subscribers)
ApplyBoard continues 'unbelievably phenomenal’ growth by raising $55-million: After starting new lives at the University of Waterloo earlier this decade, three brothers from Iran set out in 2015 to help others do the same. Today, they’ve helped more than 45,000 international students apply for schools worldwide – and just raised $55-million to bring that number even higher. ApplyBoard Inc. is one of the fastest-growing young scale-ups in Canada. Story (Josh’OKane, for subscribers)
IIROC permanently bans former CFO of now-defunct Octagon Capital: The former chief financial officer of the now-defunct investment firm Octagon Capital Corp. has been permanently banned by the Investment Industry Regulatory Organization of Canada. The settlement agreement between Christopher Everest and IIROC, which has been approved by a hearing panel, will also see Mr. Everest pay a $10,000 fine. Story (Alex Posadzki, for subscribers)
CMHC targets banks for 'cavalier’ approach to mortgage lending: Evan Siddall, the guy who backstops $448-billion in mortgages for Canadian homeowners, is calling out the big banks for what he calls irresponsible behaviour that’s fuelling a highly leveraged residential real estate market. Mr. Siddall is chief executive of the Canada Mortgage and Housing Corp. He’s important. He runs a Crown corporation that helped 123,000 people purchase homes last year by stepping up with mortgage insurance. But Mr. Siddall is still a civil servant. And government officials don’t typically tear a strip off executives at the country’s biggest banks. The CMHC boss must have missed that memo. Opinion (Andrew Willis, for subscribers)
Growing number of lawyers opt out of Big Law game, choosing to start boutique firms: Five years ago, after spending over a decade at Osler, Hoskin & Harcourt LLP, Neil Paris decided to branch out on his own. There was a bottleneck of young lawyers angling for partner status at the time, leaving his own prospects of attaining the coveted title uncertain, and he knew that a number of his clients were interested in hiring “lawyers with Bay Street experience who don’t bill out at Bay Street rates,” Mr. Paris said. Story (Alexandra Posadzki, for subscribers)
Ottawa needs the right competition framework to keep airfares fair: These changes significantly increase the risk that airline consumers will lose, especially budget-conscious customers. That is because fares are likely to rise more than they should as a result of increased industry concentration and greater focus on airline profitability. Opinion (David Tyerman)
Onex is making more headway with WestJet purchase than its bid for Air Canada 20 years ago: History does seem to rhyme from time to time. So far, Onex Corp. has made more headway in 2019 in its pursuit of a major airline purchase, with its takeover offer to buy WestJet Airlines Ltd., than it did 20 years ago, when its bid for Canadian Airlines and Air Canada was declared illegal by a court. Opinion (Douglas Reid)
Canada’s skies need more airlines and more competition, not less: The Canadian airline industry is suddenly in upheaval, thanks to two major deals. The one getting the most attention is the biggest: private-equity player Onex’s $3.5-billion purchase of WestJet, the country’s second-largest carrier. But it’s the smaller transaction – Air Canada’s proposed $520-million takeover of Transat – that could have a bigger impact. Editorial
MORE FINANCIAL SERVICES AND DEALS NEWS FROM FRIDAY
Goldman Sachs building digital wealth management tool to attract more Main Street clients: Goldman Sachs Group Inc. chief operating officer John Waldron said on Friday that the bank is building a digital wealth management tool to try to gain more Main Street clients. Story (Reuters, for subscribers)
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