iStock/Lisa Marie

National Bank of Canada is purchasing Canadian Western Bank in a share exchange that values the Edmonton-based lender at approximately $5 billion.

“This transaction is about growth and brings together two great banks with a complementary footprint in personal and commercial banking, and supports our objectives in Western Canada and across the country,” said Laurent Ferreira, president and CEO of National Bank, in a statement.

“CWB has developed an attractive banking franchise with a reputation for exceptional service with deep customer relationships across a number of priority industries and service lines.”

In a statement, Chris Fowler, CEO of CWB, praised National Bank’s scale, complementary market expertise and technological capabilities.

“National Bank can increase its banking and wealth management activities, and offer more competitive products and services to provide customers with more options and better value,” the bank said in a release.

In 2022, CWB Financial Group combined its five legacy private wealth firms under the new brand platform of CWB Wealth. These firms were T.E. Wealth, Doherty & Bryant Financial Strategists, Leon Frazer & Associates, CWB Wealth Management (originally founded as Adroit Investment Management) and CWB McLean & Partners.

CWB Wealth focuses on serving the wealth management needs of high-net-worth business owners.

As of Oct. 31, 2023, CWB had $7.9 billion in assets under management and administration on its CWB Wealth platform, and $2.1 billion in assets under advisory in its T.E. Wealth Indigenous Services business, for a total of $10 billion in assets under supervision. That compared to $9.6 billion in assets under supervision on Oct. 31, 2022.

CWB has 39 branches in Western Canada and Ontario, and in January it opened a branch in Toronto. The new regional wealth hub and banking centre was meant to help CWB target business-owner clients as an alternative to the Big Six banks.

Alberta and British Columbia represent approximately 24% of National Bank’s assets under administration.

The release stated that executives and leaders will continue to be based out of Edmonton.

The move continues consolidation in the Canadian banking industry.

For example, in November 2022, HSBC Group agreed to sell its banking operations in Canada to Royal Bank of Canada. The transaction closed in March 2024.

In July 2023, Laurentian Bank launched a strategic review to “maximize shareholder and stakeholder value” that could have led to a sale. However, no buyer emerged.

The trend has raised some concerns about increased market concentration, but Shilpa Mishra, managing director in BDO’s Capital Advisory Services practice, said she doesn’t see National Bank deal as a problem.

“It’s definitely a good thing,” she said. “It’s really about growing National Bank’s already growing portfolio and it doesn’t take anything away from the market. It gives National a broader depth of services.”

The deal doesn’t raise the same concerns that RBC’s acquisition of HSBC Canada did, said Keldon Bester, executive director of the Canadian Anti-Monopoly Project.

“This isn’t the largest financial institution purchasing a really differentiate competitor where there are overlaps.”

But CWB had been working to expand eastward and the loss of a growing player could be an issue if other banks also seek acquisitions, he said.

“The continuing trend is worrisome … this is one less door that folks are able to knock on for things like small business financing.”

While there aren’t many small to mid-sized banks that could be targets, there is the potential to take over some of the credit unions that have a significant share of some markets, he said.

“The real test will be if the other five [big banks] start thinking that it’s open season.”

The National Bank purchase will be subject to approval of two-thirds of the votes cast by CWB shareholders at a special meeting expected to be held in September. It will also be subject to other customary approvals.

With files from Rudy Mezzetta