Monday, April 03, 2006

Canadian Western Bank's secret of success

EXCLUSIVE-Canadian Western Bank rides oil boom to profit boom By Cameron French
Long merely a blip on Canada's financial services scene, Canadian Western Bank is bearing the fruit of close ties to the Alberta oil boom, and showing the Toronto-based big boys how to leverage low-risk growth from a strong economy.

Based in Edmonton, Alberta, CWB was once a stock market laggard. But it now commands a far better valuation than Canada's most profitable lenders, and plans to use its newfound wealth to add to its small but lucrative insurance business.

The bank, Canada's eighth-largest, makes its home far from the traditional banking centers of Toronto and Montreal. But its location has been crucial to success and has brought a lucrative franchise providing commercial loans to small-to-mid sized companies in Alberta, the new sweet spot of Canada's economy. "We serve the construction industry, the forestry industry, oil and gas, transportation, all those sorts of things that most of the other banks really ignore," Chief Executive Larry Pollock, said in a recent interview.

The bank's growth has prompted some analysts to reconsider the stock. "I've been wrong on the story now for quite a long time, and it was because when you take a look at Canadian Western Bank as a bank, its valuation does not make any sense whatsoever," said National Bank Financial analyst John Aiken, who rates the bank sector perform with a target of C$43 a share. "The problem is that we as Canadian investors are not used to seeing a bank growing at the same rate that CWB has been growing at on an extended period of time."

No comments: