National Bank's bid to buy Canadian Western signals more consolidations in banking sector
National Bank of Canada’s bid to buy Canadian Western Bank is yet another sign that Canada’s banking sector is going to further consolidate as the larger banks try to gain more control and tackle any headwinds they might face in the near term, some analysts say.
The $5-billion, all-stock deal will expand the Quebec-focused bank’s reach to Alberta and British Columbia, and comes just a few months after Royal Bank of Canada completed its acquisition of HSBC Bank Canada.
“Our view has always been that there will be consolidation in the Canadian banking space because the large banks have structural competitive advantages that the smaller banks can’t overcome,” Nigel D’Souza, a senior investment analyst at equity research firm Veritas Investment Research Corp., said.
“They own most of the market, they have extensive national branch networks, they have lower funding costs … when you put all that together, these are advantages that the other, smaller banks cannot overcome. Ultimately, those banks will have to be consolidated.”
National Bank, the sixth largest in Canada, said the deal, which will require the approval of two-thirds of Canadian Western shareholders at a special meeting in September, would increase the bank’s presence and branch network and provide it with the opportunity to grow its retail segment.
The Competition Bureau said it would review the proposed deal.
“Under the Competition Act, the bureau has a mandate to review mergers to determine whether they are likely to result in a substantial lessening or prevention of competition,” spokesperson Sarah Brown said in an email. “Should we determine that the proposed transaction is likely to harm competition, we will take appropriate action.”
She added that it is
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