National Bank of Canada is on the hunt for more acquisitions in an effort to keep growing beyond Quebec, and has shuffled its management to focus on expansion.
After buying fund manager Wellington West Holdings Inc. this year, the country’s sixth-largest bank said it has an appetite for additional deals, particularly in the Canadian wealth management business.
“We are in a position to look at other deals,” National Bank chief executive officer Louis Vachon told analysts on a conference call Thursday after the bank reported a 15-per-cent increase in third-quarter profit.
Mr. Vachon did not mention specific assets, but said the bank has the capacity to execute more deals similar to the $333-million Wellington West purchase, which saw National Bank buy the remaining 82 per cent of the company it didn’t own.
He said the integration of those assets into the National’s operations has gone smoothly and management would be ready to undertake another integration if a suitable deal came available.
In particular, National Bank executives would not comment on whether it is looking at purchasing the Canadian wealth management assets of HSBC Holdings PLC . Sources indicate the global banking giant has put those assets on the block as it looks to shed properties around the world.
National Bank is widely said to be in the running, though no suitors have been formally named. National is looking to bolster its operations in the rest of Canada, beyond its base of Quebec and the Atlantic provinces. Most of HSBC’s wealth management assets are on the West Coast.
In a shuffle designed to boost the bank’s focus on deal hunting, chief financial officer Patricia Curadeau-Grou will become executive vice-president of risk management at the end of August, and will serve as a strategic adviser to Mr. Vachon starting next summer. One of Ms. Curadeau-Grou’s main priorities will be to assess potential asset purchases.
“We’ve done some small acquisitions,” Ms. Curadeau-Grou said. “The intent here is not necessarily to be more aggressive ... it’s just to look at the avenues that are open to us and spend more time and ... drum up additional top line [growth]”
In an interview, Ms. Curadeau-Grou said acquisitions will likely be sought in personal and commercial banking and wealth management in Canada. Portfolio investments in Europe will also be considered. Ghislain Parent will serve as the bank’s new CFO.
The shifts came as National Bank reported higher third-quarter earnings, but posted lending margins and trading revenue that were weaker than analysts expected. The shares fell nearly 3 per cent on the news.
National Bank earned $312-million, or $1.84 a share in the third quarter, compared with $271-million, or $1.56 a share, during the same period last year. Revenue rose 4 per cent to $1.1-billion. Adjusted earnings, excluding one-time items, were $1.72 a share, one cent above analysts’ expectations for the quarter.
Earnings at the bank’s retail branch network rose 6 per cent to $168-million, on higher loan volumes. However, that was tempered by slimmer net interest margins, which were 2.34 per cent in the quarter, compared with 2.38 per cent in the second quarter, and 2.46 per cent during the same period last year. Net interest margins, which are the difference between what banks earn on loans and what they pay out on deposits, have been tightening across the banking sector.
The bank’s financial markets division made $101-million, an increase of 7 per cent, which was less than analysts expected compared with last year when trading revenues were particularly slow.
National Bank (NAT)
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