National Bank of Canada’s Vancouver office.National Bank of Canada
National Bank of Canada is pushing further into the western provinces with a new private banking office in Vancouver to serve wealthy clients on the West Coast as it tries to build the country's biggest book of business with the well-heeled.
Executives with National, the smallest of the Big Six banks, said the lender's private banking business has amassed assets under management of $17-billion since it launched in 2009, almost entirely in Quebec. The new office opening Wednesday on Vancouver's Alberni Street next to a De Beers diamond jeweller is part of an aggressive effort to replicate that growth in western cities and claim top spot in private banking, whose largest player, Bank of Montreal, currently manages an estimated $24-billion. National opened a separate office for its 1859 Private Banking unit in Calgary this past January.
"Our strategy is just to grow faster than all the others" in targeted markets west of Winnipeg, Luc Paiement, co-chief executive of National Bank Financial and the head of wealth management, said. "We're seeing lots of good potential clients and it's just a matter of time."
Under chief executive Louis Vachon, National has boosted its wealth management business through acquisitions such as Winnipeg's Wellington West Holdings and shored up investment banking in Calgary's oil patch – forging ahead with the Montreal-based lender's long-held ambition to diversify outside its home market. In 2014, the bank held its annual shareholders meeting in Calgary, the first time the gathering had been held in an English-speaking province.
But the bank is nursing a few bruises it picked up along the expansion trail, including a decision to write off its investment in Maple Financial Group this year. And some wonder whether this is the right time to be beefing up in a part of the world that has been hammered by falling commodity prices.
"In an environment where growth is scarce and loan losses are rising, certainly keeping their overhead low and cutting expenses is crucial," Kash Pashootan, a portfolio manager with Raymond James Ltd.'s First Avenue Advisory in Ottawa, said. "The fact that they're expanding in this environment is contradictory to that, but it's a risk that they're willing to take. The bet that they're making is that things are going to turn around."
Mr. Paiement insists this is exactly the right time.
"We're going to be there in Calgary for probably the next 200 years," he said. "We're not playing the cycles here. [It's about] relationships. Through good times and bad times, you need to be there with your clients."
Mr. Pashootan notes that National is marching against the tide in terms of how banks have typically built out their wealth management and banking businesses for high-worth individuals, especially in Calgary. He says where rivals have traditionally used their retail banking presence to refer clients to their wealth management and investment banking services, National is using its investment banking clients as feeders for its wealth management and banking business.
Mr. Paiement says it's about keeping the business of the entrepreneurs whose prosperity the bank has helped create.
"I don't like to put it this way necessarily, but it's payback time," he said this week at National Bank's Montreal headquarters. "We've been on only one side of the client's balance sheet over the years. And now we're offering the other side."
National is swimming against the current in other ways as well. It is opening street-level offices to serve its wealthy customers, a curiosity in a country where money is more typically hidden than flaunted. The bank will move from a current temporary location in Calgary to Stephen Avenue downtown in the fall, where it will become the main tenant of the current ATB building. In Vancouver, its new digs are located in an area known for its luxury outlets.
"The models in private banking strategy typically in Canada are to house the private bank on a secret floor within their own [bank] towers," Meghan Meger, who heads National's private banking effort in western Canada, said. "What we're doing is going to be front and centre, so that we can build brand awareness and to attract clients."
National poached Ms. Meger from BMO, where she led the lender's private banking business as the national director for ultra-high net worth strategy. She's assembled a team drawn from rival banks, including Royal Bank and Scotia. "This is a relationship business," she said. "The people that we've hired in the market have a significant reach."
The number of people considered significantly wealthy is on the rise in Canada. A 2014 report by Wealth-X and UBS AG found that the number of ultra-rich people in the country, defined as those with at least $30-million (U.S.) in assets, topped 5,300 with their wealth worth a combined $635-billion. That was up from 4,980 people and $595-billion the year before.
Nearly three in four of those wealthy Canadians are self-made with only 13 per cent inheriting their fortunes.
Nicolas Van Praet