Canadian Western Bank
TSX : CWB

Canadian Western Bank

February 10, 2015 19:00 ET

CWB Announces Strategic Transaction to Refine Its Growth Strategy

EDMONTON, ALBERTA--(Marketwired - Feb. 10, 2015) - Canadian Western Bank Group (TSX:CWB) today announced a refinement to its long-term growth strategy with a definitive agreement to sell its property and casualty insurance subsidiary, Canadian Direct Insurance (CDI), to Intact Financial Corporation (Intact) for $197 million in cash. The purchase price is approximately 2.5 times the net book value of CDI as at October 31, 2014. The transaction is subject to customary closing conditions, including regulatory approvals. The closing date is expected in mid-2015.

"This transaction is the result of a purposeful strategic assessment that we started over a year ago," said Chris Fowler, CWB's president and chief executive officer. "Our strategic direction is to increase the depth and breadth of client relationships through a focus on our core business banking platform with complementary financial services in personal banking, equipment finance and leasing, alternative mortgages, wealth management and trust services. These core areas provide the best opportunities to drive meaningful future growth and build long-term value for CWB shareholders, while the insurance business is much less strategically aligned. We believe this opportunity to monetize and redeploy the significant value created by CDI into our identified core areas will generate superior returns for CWB shareholders moving forward.

"Upon closing, we estimate the capital generated from the expected gain on sale from this transaction will increase CWB's common equity Tier 1 ratio by approximately 60 basis points. The gain will also drive considerable outperformance relative to our published 2015 key profitability targets and growth in earnings per common share. However, the resulting elevated capital level is expected to constrain our 2015 return on common shareholders' equity from continuing operations. As stated, it is our intention to redeploy this capital in due course for strategic and accretive opportunities that are consistent with our risk appetite. This capital level will position us to move quickly on investment opportunities as they materialize. Our primary areas of interest for potential strategic acquisitions are centred on opportunities in equipment finance and leasing, and wealth management.

"Executing our long-term strategic plan includes capitalizing on the growth potential in CWB's business banking speciality and other niche areas that we are currently supporting with large investments in our core technology systems. We remain optimistic about our pipeline of high quality growth opportunities that will continue to be supported by our disciplined underwriting and proven loan management capabilities, as well as our low balance sheet leverage and strong capital position as measured under the Standardized approach for calculating risk-weighted assets. We look forward to providing additional performance details with our scheduled first quarter results news release on March 5th. At that time, we will also update the expected impact of this transaction on our fiscal 2015 performance target ranges.

"CDI's strong market position attracted significant interest from a broad list of potential buyers. While Intact was ultimately the successful bidder, their demonstrated focus on customer service and commitment to employees were additional factors we considered in selecting them as our preferred partner for this transaction. The employees of CDI have made tremendous contributions to the CWB Group over the past 10-plus years, and we appreciate all they have done to responsively serve clients and contribute to the success of CWB Group. While the strategic and business rationale for this sale is clearly very positive for CWB Group, we are always sensitive to any decisions that directly impact employees," concluded Mr. Fowler.

Deloitte Corporate Finance Inc. is acting as exclusive financial advisor to CWB.

Analysts' Conference Call

CWB's executives will comment on the strategic rationale of this transaction, and respond to related questions posed by analysts and institutional investors during a conference call and webcast scheduled for tomorrow Wednesday, February 11, 2015, at 8:00 am ET (6:00 am MT).

The conference call may be accessed on a listen-only basis by dialing (647) 788-4922 or toll-free (877) 223-4471. The webcast may be accessed live from the Investor Relations section of the Bank's website, www.cwb.com/investor-relations. The webcast will be archived on the Bank's website for 60 days.

A replay of the conference call will be available until February 25, 2015, by dialing (416) 621-4642 (Toronto) or (800) 585-8367 (toll-free) and entering passcode 83275352.

About CWB Group

Canadian Western Bank offers a full range of business and personal banking services across the four western provinces and is the largest publicly traded Canadian bank headquartered in Western Canada. The Bank, along with its operating affiliates, National Leasing Group, Canadian Western Trust, Valiant Trust, Canadian Direct Insurance, Canadian Western Financial, Adroit Investment Management, and McLean & Partners Wealth Management, collectively offer a diversified range of financial services across Canada and are together known as the CWB Group. The common shares of Canadian Western Bank are listed on the Toronto Stock Exchange under the trading symbol "CWB". CWB's Series 5 Preferred Shares trade on the Toronto Stock Exchange under the trading symbol "CWB.PR.B". Refer to www.cwb.com for additional information.

Forward-looking Statements

From time to time, CWB makes written and verbal forward-looking statements. Statements of this type are included in the Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as press releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about CWB's objectives and strategies, targeted and expected financial results and the outlook for CWB's businesses or for the Canadian or U.S. economy. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may impact" and other similar expressions, or future or conditional verbs such as "will", "should", "would" and "could."

By their very nature, forward-looking statements involve numerous assumptions. A variety of factors, many of which are beyond CWB's control, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and economic conditions in Canada including the volatility and lack of liquidity in financial markets, fluctuations in interest rates and currency values, changes in monetary policy, changes in economic and political conditions, regulatory and legal developments, the level of competition in CWB's markets, the occurrence of weather-related and other natural catastrophes, changes in accounting standards and policies, the accuracy of and completeness of information CWB receives about customers and counterparties, the ability to attract and retain key personnel, the ability to complete and integrate acquisitions, reliance on third parties to provide components of CWB's business infrastructure, changes in tax laws, technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction of new products, and management's ability to anticipate and manage the risks associated with these factors. It is important to note that the preceding list is not exhaustive of possible factors.

These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause CWB's actual results to differ materially from the expectations expressed in such forward looking statements. Unless required by securities law, CWB does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by it or on its behalf.

Assumptions about the performance of the Canadian economy in 2015 and how it will affect CWB's businesses are material factors considered when setting organizational objectives and targets. Performance target ranges for fiscal 2015 consider the following management assumptions:

  • Moderate economic growth in Canada and relatively stronger performance in the four western provinces;
  • A relatively stable net interest margin (teb) compared to the level achieved in the fourth quarter of 2014, primarily attributed to treasury management strategies and shifts in asset mix that help to offset impacts from the very low interest rate environment, a flat interest rate curve and competitive factors;
  • Sound credit quality with actual losses remaining within CWB's historical range of acceptable levels.

Potential risks that may have a material adverse impact on current economic expectations and forecasts include a sustained period of materially lower energy and other commodity prices compared to average levels observed in fiscal 2014, a slowing rate of economic growth in the U.S., a significant and sustained deterioration in Canadian residential real estate prices, or a significant disruption in major global economies. Greater than expected pricing competition and/or disruptions in domestic or global financial markets that meaningfully impact loan yields and/or funding costs may also contribute to adverse financial results compared to expectations.

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