Canadian Western Bank (CWB) Q3 2024 earnings summary

Executive summary

• Pre-tax, pre-provision income grew 4% year-over-year in Q3, driven by targeted loan growth and improved net interest margin, despite a significant increase in provision for credit losses mainly from two large impaired loans.

• Q3 2024 net income declined 50% year-over-year, with adjusted EPS down sharply due to higher credit loss provisions and NBC transaction costs.

• Announced a definitive agreement to be acquired by National Bank of Canada, with closing expected in 2025 pending shareholder and regulatory approval.

• The bank remains confident in its secured lending model and expects credit losses to return to historical ranges in Q4.

• NBC transaction costs totaled about $20 million in Q3, excluded from adjusted metrics.

Financial highlights

• Pre-tax, pre-provision income rose 4% year-over-year to $143 million in Q3 2024.

• Adjusted diluted EPS was $0.43 in Q3 2024, down from $0.86 in Q3 2023; net income dropped 50% year-over-year.

• Net interest margin increased 12 bps year-over-year and 9 bps sequentially to 2.49% in Q3 2024.

• Total revenue for Q3 was $298 million, up 5% year-over-year, but down from $298 million in Q2 2024.

• Non-interest expenses rose 20% year-over-year, including $20 million in NBC transaction costs.

Outlook and guidance

• Q4 2024 loan growth expected at approximately 1%, franchise deposit growth flat, operating leverage neutral, and adjusted EPS guidance of $0.86–$0.91.

• Full-year 2024 guidance: loan growth ~2%, franchise deposit growth ~1%, positive operating leverage, adjusted EPS $3.20–$3.25.

• Net interest margin anticipated to continue expanding in Q4; credit losses expected to return to historical range.

• Economic growth in Canada expected to improve through 2025, with inflation gradually declining and further rate cuts anticipated.