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Economy bites into Canadian Western Bank results

Second-quarter profit fell 15 per cent at Canadian Western Bank as shrinking margins and the fallout of a stumbling economy weighed on earnings.

The bank said Thursday its earnings for the period ended April 30 were $21.6-million or 30 cents per share, reduced from a year-earlier 25,302 or 39 cents per share. The results included $1.7-million (three cents per share) in non-cash, stock-based compensation expenses.

"Our second-quarter results were as expected given the significant negative earnings impact from ongoing margin compression but also as expected, there is some light on the horizon," president and CEO Larry Pollock said in a statement.

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"Interest rates have bottomed, market spreads appear to be normalizing and deposit costs are trending downwards. These factors, combined with our ongoing success in repricing new and renewal loan accounts to reflect current market conditions are very positive indicators as we move forward."

Total revenues increased two per cent to $75.4-million.

Canadian Western's Tier 1 capital ratio was 11 per cent, well above the regulatory minimum of seven per cent and the roughly 10 per cent favoured by stability-wary investors.

"We are now reasonably confident that we are through the worst as it relates to margin compression, though it will likely take considerable time before we see a return to historic norms," Mr. Pollock said.

"Margin improvement was evident in the latter part of the second quarter and we expect this trend will continue for the remainder of the year."

Shares in the bank were up 17 cents at $14.71 in morning trading at the Toronto Stock Exchange.

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