CWB Financial Group (TSX: CWB) (CWB) announced financial performance for the three and nine months ended July 31, 2024, with quarterly common shareholders’ net income of $41 million, diluted earnings per common share (EPS) of $0.43, and adjusted EPS(1) of $0.60.
“Our teams delivered strong pre-tax, pre-provision income(1) this quarter through targeted loan growth and an optimized funding mix that drove a significant improvement in net interest margin(1),” said Chris Fowler, President and CEO.
“Our third quarter performance was negatively impacted by a significant increase in the provision for credit losses on impaired loans(1). The increase primarily related to two loans where borrower-specific circumstances resulted in unusually large provisions for these specific exposures. We anticipate credit losses will trend back towards our normal historical range next quarter.”
“We expect continued profitable growth within our disciplined and secured lending model, and we are well positioned to deliver a significant improvement in financial performance in the fourth quarter.”
Quarterly common shareholders’ net income and diluted EPS both declined 50% from the prior year, as a 5% increase in revenue, driven by a twelve basis point increase in net interest margin, was more than offset by a 43 basis point increase in the total provision for credit losses and costs incurred that were directly associated with the potential National Bank of Canada transaction. The increase in our current quarter provision for credit losses was primarily driven by a 47 basis point increase in our provision for credit losses on impaired loans. Pre-tax, pre-provision income was up 4% compared to the prior year, while adjusted EPS declined 32%.
On a sequential basis, quarterly common shareholders’ net income declined 46% and adjusted EPS declined 26%. Pre-tax, pre-provision income increased 5% and reflected a nine basis point increase in net interest margin. On a year-to-date basis we drove 11% growth in pre-tax, pre-provision income and delivered positive operating leverage(1) of 3.9%.
Our Board of Directors declared a cash dividend of $0.35 per common share, up two cents, or 6% from the dividend declared last year and consistent with last quarter.
National Bank of Canada (NBC) Transaction
On June 11, 2024, we announced that we entered into a definitive agreement where NBC proposed to acquire all of the issued and outstanding common shares of CWB through a share exchange. As part of the transaction, CWB Shareholders will be entitled to receive 0.450 of a NBC common share for each CWB common share held as of the date of closing.
This transaction will bring together two complementary Canadian banks with growing businesses, enabling the united bank to enhance services to its customers by offering a comprehensive product and service platform at national scale, with a regionally focused service model. CWB’s current retail customers will benefit from a larger product offering and digital platform, our small business clients will be able to utilize NBC’s cash and risk management solutions, and our commercial clients will benefit from access to NBC’s leading capital markets franchise.
The transaction is subject to approval by CWB shareholders and receipt of required regulatory approvals as conditions to close the transaction, which is expected to occur in 2025. We expect that there will be a period of preparation for the transition period following closing to effectively integrate our operations into NBC. We remain committed to meeting our clients’ banking needs during this time.
We have incurred and expect to continue to incur costs directly associated with this potential transaction. These costs are not indicative of our underlying operating performance and therefore are excluded in the calculation of our non-GAAP measures. Refer to definitions and details provided on pages 4 and 5 of the news release.
Read the news release in full.
Read the shareholders report.
(1) Adjusted EPS, pre-tax, pre-provision income, net interest margin, the provision for credit losses on total loans as a percentage of average loans and operating leverage are non-GAAP measures. Refer to definitions and detail provided on pages 4 and 5 of the news release.
FOR FURTHER INFORMATION CONTACT:
Chris Williams
AVP, Investor Relations
CWB Financial Group
Phone: 780-508-8229
Email: [email protected]