Worries about Canadian lenders' ties to the struggling energy sector are on the rise again, despite a rebound in the price of crude oil over the past three months.
Canadian Western Bank on Tuesday said that it had quadrupled the amount of money it has set aside for bad loans to oil and gas companies, renewing concerns about banks' exposure to the sector just three weeks before the biggest lenders start to report their second-quarter results.
CWB's move shocked analysts, hammered the bank's share price and dragged down other bank stocks – mainly National Bank of Canada and Bank of Nova Scotia.
"Oil prices are up, but good times are still not here again for either the oil patch or anyone whose fortunes are tied up in the oil-producing regions of the country," Meny Grauman, an analyst at Cormark Securities, said in a note.
Edmonton-based CWB is not a big bank. But the surprising spike in loan provisions suggests that larger and more diversified banks will have to contend with another quarter of uncertainty over their lending to cash-strapped energy companies, especially after HSBC Bank Canada reported on Tuesday a fivefold increase in loan losses in its fiscal first quarter. Story
VC financings on pace for massive year
It wasn't long ago that the big knock against the Canadian venture scene was a lack of later-stage funding for surging tech companies. New data suggest capital-raising beyond the seed stage is less of an issue for Canadian startups than it once was, despite a recent softness in the market for tech initial public offerings.
According to Thomson Reuters, Canadian companies raised $869-million in venture capital (VC) in the first quarter of 2016, up 61 per cent year over year, making it "the best quarter for Canadian capital" since the third quarter of 2001, the firm said. Canadian companies raised $2.7-billion in venture capital last year, according to Thomson Reuters, the best showing in years.
More significantly, the growth was driven by large-capitalization VC deals, as 10 companies each raised $20-million or more, Thomson Reuters said. To put that in perspective, that's twice the level as the same period a year ago and puts Canada on track to have one of the biggest years for big VC financings on record.
The peak year for $20-million-plus financings (not adjusted for inflation) was 2000, the peak year of the Internet bubble, when there were 60 such deals, followed by 2001, when there were 32. Story
The potential BCE-MTS stumbling block
BCE Inc.'s purchase of Manitoba Telecom Services Inc. is expected to face a lengthy review process that will test the federal government's four-player policy on the wireless sector, raising the question of what BCE could give up to get the deal approved.
The companies announced the $3.1-billion transaction Monday, saying it took about two weeks to negotiate but admitting that the process of winning regulatory approval will drag out for the rest of the year and possibly into next. "We expect the transaction to take a fairly long time," said Glen LeBlanc, chief financial officer of BCE.
He noted that the company reached a separate deal to divest one-third of MTS's contract wireless subscribers and dealer locations to Telus Corp., in part to help "enhance wireless competition to the benefit of all Manitobans." Story
ON THE MOVE
Sid Malkani, director of equity sales for the past four years with Barclays, has taken a position with Merrill Lynch, according to a source familiar with the hiring. Story
DAILY DEALS
Contract medical research provider Transnational Holdings Inc. will merge with health care information company IMS Health Holdings Inc. in a deal worth about $9-billion. Story
Pfizer Inc. has approached U.S. cancer drug maker Medivation Inc. to express interest in an acquisition, raising the possibility of a bid rivaling a $9.3-billion offer by Sanofi SA, Reuters reported. Story
Brazil's state-run oil firm Petroleo Brasileiro SA said on Tuesday it concluded the sale of a 67.2-per-cent stake in Petrobras Argentina SA to Argentina's Pampa Energia for $892-million, according to a securities filing. Story
Hellman & Friedman LLC is close to a $7.5-billion deal for MultiPlan Inc., the Wall Street Journal reported. Story
Investors Bancorp Inc. will acquire Bank of Princeton in a $154-million deal. Story
IN CASE YOU MISSED IT
The secret behind BCE CEO George Cope's deal-making success. Story
Who's the likeliest buyer of Richardson GMP? Story
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