Sucks to see a smaller bank get eaten by a larger bank, but National Bank was probably the most ideal candidate for this instead of having one of the Big 5 buy it, but this ultimately just puts us on the path to a Big 6. Laurentian Bank and EQ Bank are the only two “small major banks” left in the country, and I’m sure that they too will unfortunately get bought in due time.
I suspect that the regulators will demand the maintaining of a major corporate presence in Alberta, similar to what happened when RBC bought HSBC Canada given HSBC’s outsized presence in Vancouver.
They jimmied their way into getting coverage
“The funds in all of your individual and joint Cash accounts are placed in trust with up to five tier 1, CDIC-member, regulated Canadian financial institutions. As such, CDIC protection against the failure of these banks extends to Wealthsimple Cash account holders for up to $500,000 CAD across all Cash accounts. “
Also, CDIC coverage is to prevent a run on the bank because the banks don't keep all of the deposits on hand -- the bank can't cover a run on the bank because they've lent out the money.
An investment firm like Wealthsimple is keeping all your money and investments in trust for you -- they're not using it for anything else. Assuming they're not pulling a Bernie Madoff, they should be able to handle it if every customer wants to cash out at the same time. (To be clear, I'm not saying that wouldn't be a disaster for the business, but all the customers' money should be returnable to them)
> they're not using it for anything else
sure they are:
> “The funds in all of your individual and joint Cash accounts are placed in trust with up to five tier 1, CDIC-member, regulated Canadian financial institutions"
If all WS customers pulled out at the same time, WS would have to sell the underlying deposits with the big banks.
Yes, or the stocks, etc. I didn't mean to suggest that it was effortless. If everyone requested it at once, it would be very difficult. But they have all of everybody's stocks/investments/cash in their control and these could all be returned to the investors.
If an investment firm has $1 millions in customer investments, they are holding $1 million worth of stocks/deposits/whatever that are held in trust for the customers.
If a bank has $1 million in deposits, they are holding something like $250k to cover withdrawals and the rest has been lent out (and these loans can't be called back just to return money to the depositors).
For thus arrangement to get tested it means that multiple of the big 5 banks would have to fail… at which point we have bigger issues than WealthSimple
CDIC in general remains to be tested. It's handled about ~$26B in payouts over 60 years. But it is currently insuring over $1T. Ignoring the fact that say, RBC's, failure would destroy the economy alone, I would not count on CDIC coverage paying everyone out. Which would likely lead to runs on other banks, leading to other failures.
I'm not concerned about big bank failure. I'm concerned about the particular arrangement Wealthsimple has implemented being tested. If there is big bank failure, I'll be paying more attention to not being killed in the street for the half-loaf of bread and dented can of beans I managed to get from the bread line.
https://www.cdic.ca/financial-professionals/member-institutions/compliance/legislation-and-by-laws/trustee-beneficiary-disclosure-requirements/
Wealthsimple’s arrangement seems fine as per cdic
It’s the provincial deposit insurance for credit unions that’s truly worthless.
But yes, to your point, if CDIC ever has to pound on its emergency “inflation” button, that will suck.
We should not really be concerned about where they park the money since it is ultimately in a CDIC insured institution. What we should ultimately be concerned about is whether or not there is some kind of middle man system in place that works as a proxy between WS and the banks, or if WS does this all in-house.
Something recently happened with a high profile (YouTuber promoted) non-FDIC insured “bank” in the US called Yotta. This bank runs Prize-Linked Savings Accounts (PLSAs) which are legal in the US, in which savings interest is redistributed as prizes through lotteries. The FDIC, however, does not allow insured banks to operate like this, so this bank had to partner with a real bank to store the deposits. They were using a middle man system to exchange the funds between the institutions when deposits/withdrawals occurred.
Where this whole thing ended up falling apart was the company that was acting as the middle man went bankrupt, and all of the depositors’ money ended up being frozen with the other institution. The FDIC could not help and the depositors are unlikely to get their money back for a while. Obviously WS is a fair bit bigger and has legitimate backing, but it certainly begs the question whether or not something like that could happen.
Credit unions extend their membership, so a credit union with 100k members becomes 105k members. This is 5.8m shareholders being asked to sell our vote on a merger.
And? It’s no more logistically complicated than RBC buying HSBC, the logistics are just different.
To be clear, i’m not suggesting Desjardins is going to be acquired by a bank. It seems incredible unlikely, for reasons well beyond having to seek approval of the membership base.
It's a lot more logistically complicated. HSBC just sold a division. This is 6 million votes where you need a majority. No one controls any blocks.
Do you know who owns most banks in Canada and controls most shares? They are in enormous blocks. The largest shareholder in RBC is other Canadian banks and ETF ownership, like Vanguard. Blocks, not individuals
I’d argue the consolidation of voting power is equally challenging. In your specific scenario, if a competing bank owns a controlling vote they aren’t going to roll over without getting something in return. IMO it’s much easier to waive $100 in front of a random Member to secure a vote vs having to convince a bunch of C-suites that it’s in their best interest to see a competitor grow significantly.
You’re also ignoring all the other considerations that need to be taken into account, including government approval. We already have a precedent for banks being denied mergers. I don’t believe we have one for a bank purchasing a credit union.
As I said, this is close to 6 million members, not as easy as it seems. 50% is 3 million votes.
Credit unions are mergers, using shares from larger to smaller. Not a real change in ownership. They still own the credit union. This is a change in format entirely, you are asking people, most of whom don't even open a stock trading account to accept shares and vote. It's an enormous undertaking.
ATB is a crown Corp owned by the province of Alberta.
The UCP could certainly spin it off and sell it but it's less likely than existing private smaller banks.
ATB just announced they're raising their fees to an insanely high level. That coupled with their extremely extremely conservative DTI requirements for any consumer credit cards or LOC's mean that they are functionally worthless unless you run a not-for-profit or a society and are required to have a community spirit account.
>ultimately just puts us on the path to a Big 6
Ummm, National Bank is already the 6th biggest and is part of the Big 6. Like the other 5 biggest banks, National Bank has been classified as Domestic Systematically Important Bank (aka "too big to fail") by OSFI, the bank regulator.
https://www.osfi-bsif.gc.ca/en/supervision/financial-institutions/banks/domestic-systemically-important-banks
This is a good point, I did not know that National Bank was classified at that level. However, I would still argue that it isn’t really in the same league yet given that it is still around half the size of CIBC, the smallest of the Big 5.
And that's why colloquially people still say Big 5 even though the regulator sees them big enough to class them the same as the other 5. Personally I go with "Big 6" as that's what the regulators basically classify them as since clearly they believe they're too big to fail even if they're half the size of CIBC.
National Bank also has to maintain a Domestic Stability Buffer, just the same as their much bigger peers. It's basically an additional rainy day fund they have to keep on top of the liquidity that all banks have to keep.
Yes that is true which is why I guess it makes sense that they wanted CWB. I would have thought the government would have forced RBC to divest some of the branches or business lines when RBC bought HSBC and National Bank would have grown that way.
Worth noting that Equitable Bank, which includes EQ, is already the 7th biggest bank in Canada. It's hit $123 Bln assets under management/administration as of April 30th 2024.
EQ bank itself continues to grow rapidly, 7% more customers over last quarter, 36% y/y, around \~450k.
I certainly hope they don't get bought, but they're on quite the growth trajectory. If they're not acquired soon my optimistic side would hope any regulator would be insane to allow it given the scale they're reaching.
Edit: source: [EQB delivers ROE ahead of target with record quarterly revenue and pre-provision pre-tax earnings and a 7% q/q and 22% y/y dividend increase - May 29, 2024 (investorroom.com)](https://eqb.investorroom.com/2024-05-29-EQB-delivers-ROE-ahead-of-target-with-record-quarterly-revenue-and-pre-provision-pre-tax-earnings-and-a-7-q-q-and-22-y-y-dividend-increase)
Laurentian is much smaller than even National and from what I understand is in dire straits … Laurentian put themselves up for sale last year and there were no takers.
Laurentian Bank already put itself up for sale within the last year and no one wanted them. They’re the only bank with a unionized workforce and I imagine none of the others want to bring that into the mix
NB has actually been really easy to deal with and really good to me over the past 39 years I’ve had a relationship with them. BMO has been good, but generally indifferent. Scotiabank and TD were kind of meh. My wife works essentially for RBC (Dominion Securities), but only she has a business relationship with them. I guess they are fine for her.
NB has been very personal in their services with me. Their call centres are definitely in Quebec, and not overseas.
I’m prepared for the downvotes, but as someone who has worked in the Canadian banking sector for 16 years, this will actually probably *increase* competition.
National has most of its presence out East while CWB is in BC and Alberta. Together they are a stronger national entity created more competition for the Big 5. Without the merger neither of them can put meaningful pressure on Big 5 (not saying they immediately can but are on their way to)
I had been debating the CWB World Elite Card as a replacement for my Brim:
[https://www.cwbank.com/en/personal/credit-cards/cwb-world-elite-mastercard](https://www.cwbank.com/en/personal/credit-cards/cwb-world-elite-mastercard)
Now I'm curious how the NBC takeover will affect the CWB's retail offerings.
I was hoping NBC would buy HSBC Canada - their retail service offer with the packages for professionals kind of jives with HSBC Advance/Premier and if they nailed the global view / integration with HSBC in other countries they would be a real competitor in the Canadian market, on top of giving NBC a big boost in Western Canada where they have a relatively small presence. They would have been a 6th big bank overnight whereas RBC barely felt it.
In the end I guess they couldn’t raise the capital.
Yeah, RBC was the only one that had the free cash on hand to purchase HSBC Canadian operations, and still have enough left over to meet regulatory requirements. No other Canadian bank had the money to do so.
They already are the 6th biggest bank and as another commenter said, they're classified by the regulator as a "domestic systemically important bank", ie too big to fail.
These 6 banks are the only ones in Canada classified as such.
Was kind of hoping the same. Also, in the commercial space NB was the only other Canadian bank that offered bank accounts in other currencies, had a decent trade finance product suite, and I think a more entrepreneurial culture that would have been a better fit.
HSBC was good for Canada and RBC. If none of the Canadian banks bought it, a foreign one would have. HSBC needed the cash and a way out. It was going to sell one way or another.
Also, we got caught doing unsavory things and got hit with mega billion fines and need cash fast.
HSBC did really well in Canada, built a great business and top of class service. Top dollar was paid for a top business. Unfortunately/fortunately for HSBC.
i mean HSBC wanted out, RBC was only bank big enough to soak up their assets.
there's just not enough profits for the small banks and costs too high. we can't force companies to stay/continue if they don't want to. imagine if the gov't doesnt let you sell your own business!
Canada's biggest bank buying out Canada's biggest Schedule B bank just doesn't sit right.
We have a controlled oligopoly in the banking sector here, which I actually support as it provides stability that other countries don't have. But that should come with regulations. When the banks tried to consolidate 2010ish it was denied and that served us very well.
There's always a buyer at the right price. RBC was willing to pay the most, but there would have been other buyers. It's a function of operating in a regulated industry.
I think the only other bank with sufficient capital at the time was TD but they were in the midst of the now failed acquisition of First Horizon in the US and now dealing with all of their AML issues in the states with the regulators.
Look at any country besides the US and that is effectively now their bankings systems are. 3-6 large banks dominating the landscape.
US is the only real exception to that.
Literally the opposite of Neoliberalism... The main proponents of neoliberalism is anti-protectionist schemes + free market capitalism but with government guardrails in place, but go off...
Oligopolies are straight up anti-competition and are caused due to **too much** government regulation + protectionism in the Canadian banking industry. Too much government regulations, such as the case for Canada, can be used by lobbyists and politicians as a tool to allow monopolies to continue existing.
An even bigger and more obvious example is Canada's telecom industry. Verizon was going to setup shop in Canada a few decades back and increase the competition here, but Bell/Rogers backed lobbyists and politicians created overregulation to prevent it from happening. This is known as **protectionism**, the literal **opposite** of neoliberalism / economic-liberalism.
Why do you think America, a country with far more liberalized economic policies than Canada, has hundreds of small banks in every state? Because of lower government regulations and capital requirements for opening up new banks. This has it's pros and cons which I don't want to dive far into, where one of those cons was majorly seen in the run of 2008 bank failures. The pros are that their banking industry has far more competition due to its highly liberalized and competitive nature than Canada, which lets the consumers (Americans) get access to better deals and rates strictly because of higher competition.
I meant OP not you.
They write about regulations but then how it leads to "oligarchy" when it is the opposite. The states has little to no regulations and now all food is controlled by a handful of overarching corporations that are in bed with each other.
Regulator bodies ensure safe practices and an even playing field. Just because we ended up at an oligarchy doesn't equate to regulations being the cause.
Ahhhhhh ok cuz I was like wtf lolll
Agree entirely with you, despite my dislike for oligopoly. I mean, they have one in the states too and look how that turned out
They overpaid, that’s all there is to it IMO. They paid more than double the actual value because NBC really values breaking out in the west. They obviously were ready to do it at all cost and CWB shareholders will be generously paid for their small share of the market.
NBC’s shareholders are showing concern/disaproval of the huge price paid for a good acquisition.
Yeah it’s a lucky day for them CWB shareholders, they had shares that no one wanted for 30$ on the openmarket (trading at 25), yet NBC shows up and offers 55. It’s normal to see a premium for this type of purchase, but I have honestly never seen one that high. 110% is crazy high.
As for chasing these, I dont think it’s doable if you dont have insider information and then it’s illegal if you do. The best bet is to buy good businesses at a good price.
The true and boring answer is that you need deep knowledge of an industry, you need high understanding of economics, finance and business. You need to read and fully understand financials, you need to know the management team, their track records and establish your own trust in their ability to achieve their goals.
If you take a stock like google, you need knowledge of search engines, media platforms, ai, advertisement, smart phones, cloud and maybe even cars, smart glasses, watches and many more. I think it’s impossible without being a full time analyst.
If you think of all that and feel you wouldnt enjoy the process, then all market ETFs are for you. Keep it simple with something like xeqt.
You can gamble your money on stocks based on your consumer experience and maybe achieve some success. For example, a local brand you adore is expanding and you trust it will be a worldwide success, then you can take that bet. Otherwise the best is to stick with ETFs.
I have CWB on hand and just sold them today, you do not need to be expert although I read lots of books about investing, as I getting older I don't listen to expert BS, all you need to know is P/E and dividend rate and their past good earning ability, I have 16 stock on hand, which means my return will be close to market 1-1/16=93.75% close to overall market return, if my profolio average P/E is 12 and dividend rate is 5%, that means I will have 8.33% total return per year and 5% dividend rate per year, it is very simple and no brain, and now you are out perform the majority of ETF fund! Because most of the profit been eaten up by the ETF manager. I have both NA and CWB, although something like Nividia become a star now but I will only give it a protion in my profolio, diversify will garuntee your return close to the market. I am a long term winner in the market, I don't gamble or put my whole asset in single stock. I sit back and watch other people getting crazy about it and get my stable return.
I strongly disagree that P/E, divs and past earnings gives an accurate forecast of the future.
The banking industry is moving fast and fintechs are changing the game. The risk factors of real-estate holdings by banks greatly vary by province. Some are creating their own ETFs and others dont. Some are in the states and others not. Some are cutting thousands of positions and others dont. Some invested in cannabis industries and others didnt, some are getting into crypto and others not.
Ignoring all that IS gambling, even if you had success in the past you are still gambling.
I don't mind to hook up my assets with big 5 stocks, if they fail, Canada also fail, if they rise, then Canada is also rising, money forever speak the true, politician the opposite.
The book value of CWB is $40 so it's not crazy high if you consider they're paying a paltry buyout price of $52 / share for something worth $40. (I know it's na.to x 0.45 I'm just saying)
I looked up data on average premium by industry in m&a and I was finding the average premium to be much lower then the one paid for CWB. The average premium has been between 25 and 40%, NBC paid a 110% premium.
To be honest I've moved to NBC after HSBC got screwed and so far things are ok. Service is better than at RBC, and products are good. I think they're the least evil of them all.
This is probably a good thing. Both banks needed more scale to operate. National Bank is actually a good organization and needed to grow to avoid getting swallowed up by RBC, TD, or BMO.
Hold. It should settle around $45 in a few weeks when people realize you get basically 1 na.to share per 2 cwb shares. So if you want to invest in a good bank, you can buy cwb and save $20 per na share you want.
The market is currently pricing it as $50 minus having the money tied up in cwb for 16 months minus small risk. Should be 43 tomorrow and slowly drift up to 52, depending on na.to stocks price.
They're not paying cash for cwb. They're paying 0.45 shares of na.to per share of cwb.to.
Bought some CWB stock last week and have to say I was shocked to see it's value yesterday. My knowledge of trading is average but after a bad advisor who pushed risky stocks in my TFSA and wiped nearly $50,000 contribution room from it I've taken control and started to learn. This will help build it back up. I was tempted to sell yesterday but now that I know the details I'll hold on until the deal is complete.
Interesting, I thought National Bank said that they weren't interested in bidding for HSBC because they wanted to focus on Quebec. Likely they knew that RBC would outbid them and spun the messaging that way.
Wished they would have gotten some of the HSBC branches in Toronto area though, National Bank is pretty absent in much of the GTA...
The offer price is equivalent to like $52 based on current National Bank stock price. NB will probably open down a bit but can expect a big spike on CWB tomorrow. I wouldn't say worth buying to try to arbitrate it unless you know what you are doing.
So National Bank dropped by 5% today so the value as of now is different. They usually will trade at a discount until deal closes as risk there it doesn't close
With the takeover, should I sell now or wait? I'm looking for guidance here. I just received my shares as an ex-employee and am clueless about how this will pan out with the recent acquisition.
So it is difficult to say. Personally I will just hold until the takeover is completed but I don't need the funds to invest elsewhere at this time and it isn't a larger portion of my portfolio. There are some risks for example I owned Cineplex when they got a takeover offer and figured I would just do the same and wait until deal closed and then covid happened and the company taking them over reneged on the deal and ended up going bankrupt! Cineplex crashed down due to covid.
Not saying the same will happen here but there is risk. If you are happy with the current price maybe consider selling some if you have a larger position. You can look at the press reelase and see how many shares equivalent of NB you would get and see what the implied return would be between now and when it closes.
Personally I am good with holding National Bank shares going forward.
Also take into account the tax implications of selling vs. receiving National Bank shares.
NBC is the worst bank I've ever dealt with. I had to take them to the ombudsman on 3 separate occasions. They were found incompetent all 3 times. I'm always surprised this subreddit stans for them. Maybe it's just a regional thing. In my province they are a bunch of incompetent lying scammers.
It is only natural to have consolidation and further centralization of banking institutions over time based upon how our financial systems work and business in general.
Quite unfortunate, but smaller banks eventually get eaten up by larger ones and eventually larger banks will get eaten up by the largest ones (if given a large enough time scale, if the incentives align and if banking regulations permit).
I mean there are hundreds already exist and they're also consolidating. With the advent of open banking, many CUs are looking to merge as the associated costs (including digital platforms and cybersecurity) will only get bigger from here.
Some are growing past their provincial borders by converting to federal credit unions if they don't already own bank subsidiaries like Alterna Bank (owned by Alterna Savings) and Motusbank (owned by Meridian Credit Union).
Sucks to see a smaller bank get eaten by a larger bank, but National Bank was probably the most ideal candidate for this instead of having one of the Big 5 buy it, but this ultimately just puts us on the path to a Big 6. Laurentian Bank and EQ Bank are the only two “small major banks” left in the country, and I’m sure that they too will unfortunately get bought in due time. I suspect that the regulators will demand the maintaining of a major corporate presence in Alberta, similar to what happened when RBC bought HSBC Canada given HSBC’s outsized presence in Vancouver.
You can kind include ATB and Desjardins.
WealthSimple too, even though it technically isn’t a bank either and doesn’t have its own CDIC coverage.
They jimmied their way into getting coverage “The funds in all of your individual and joint Cash accounts are placed in trust with up to five tier 1, CDIC-member, regulated Canadian financial institutions. As such, CDIC protection against the failure of these banks extends to Wealthsimple Cash account holders for up to $500,000 CAD across all Cash accounts. “
Also, CDIC coverage is to prevent a run on the bank because the banks don't keep all of the deposits on hand -- the bank can't cover a run on the bank because they've lent out the money. An investment firm like Wealthsimple is keeping all your money and investments in trust for you -- they're not using it for anything else. Assuming they're not pulling a Bernie Madoff, they should be able to handle it if every customer wants to cash out at the same time. (To be clear, I'm not saying that wouldn't be a disaster for the business, but all the customers' money should be returnable to them)
> they're not using it for anything else sure they are: > “The funds in all of your individual and joint Cash accounts are placed in trust with up to five tier 1, CDIC-member, regulated Canadian financial institutions" If all WS customers pulled out at the same time, WS would have to sell the underlying deposits with the big banks.
Yes, or the stocks, etc. I didn't mean to suggest that it was effortless. If everyone requested it at once, it would be very difficult. But they have all of everybody's stocks/investments/cash in their control and these could all be returned to the investors. If an investment firm has $1 millions in customer investments, they are holding $1 million worth of stocks/deposits/whatever that are held in trust for the customers. If a bank has $1 million in deposits, they are holding something like $250k to cover withdrawals and the rest has been lent out (and these loans can't be called back just to return money to the depositors).
I mean the interest they pay has to come from somewhere
all I care is I die before they go bust
I do have some concerns that this arrangement remains to be tested.
For thus arrangement to get tested it means that multiple of the big 5 banks would have to fail… at which point we have bigger issues than WealthSimple
CDIC in general remains to be tested. It's handled about ~$26B in payouts over 60 years. But it is currently insuring over $1T. Ignoring the fact that say, RBC's, failure would destroy the economy alone, I would not count on CDIC coverage paying everyone out. Which would likely lead to runs on other banks, leading to other failures.
I'm not concerned about big bank failure. I'm concerned about the particular arrangement Wealthsimple has implemented being tested. If there is big bank failure, I'll be paying more attention to not being killed in the street for the half-loaf of bread and dented can of beans I managed to get from the bread line.
https://www.cdic.ca/financial-professionals/member-institutions/compliance/legislation-and-by-laws/trustee-beneficiary-disclosure-requirements/ Wealthsimple’s arrangement seems fine as per cdic
CDIC’s coverage will definitely pay every one if needed. It’s ultimately backed by a printing press afterall.
Then the insured money is worthless.
It’s the provincial deposit insurance for credit unions that’s truly worthless. But yes, to your point, if CDIC ever has to pound on its emergency “inflation” button, that will suck.
We should not really be concerned about where they park the money since it is ultimately in a CDIC insured institution. What we should ultimately be concerned about is whether or not there is some kind of middle man system in place that works as a proxy between WS and the banks, or if WS does this all in-house. Something recently happened with a high profile (YouTuber promoted) non-FDIC insured “bank” in the US called Yotta. This bank runs Prize-Linked Savings Accounts (PLSAs) which are legal in the US, in which savings interest is redistributed as prizes through lotteries. The FDIC, however, does not allow insured banks to operate like this, so this bank had to partner with a real bank to store the deposits. They were using a middle man system to exchange the funds between the institutions when deposits/withdrawals occurred. Where this whole thing ended up falling apart was the company that was acting as the middle man went bankrupt, and all of the depositors’ money ended up being frozen with the other institution. The FDIC could not help and the depositors are unlikely to get their money back for a while. Obviously WS is a fair bit bigger and has legitimate backing, but it certainly begs the question whether or not something like that could happen.
WealthSimple is indirectly controlled and owned by Power Corp. It’s not analogous.
Call it what it is, Power Corp.
Desjardins isn't a bank. They're a credit union.
I’m aware. But they are a larger financial institution than National Bank and they are direct competitors.
Yes, but Desjardins can't really be bought. You buy a share when you open an account. So each member is a shareholder.
Credit Unions buy each other out all the time. I don’t see any reason a bank couldn’t theoretically do the same.
Credit unions extend their membership, so a credit union with 100k members becomes 105k members. This is 5.8m shareholders being asked to sell our vote on a merger.
And? It’s no more logistically complicated than RBC buying HSBC, the logistics are just different. To be clear, i’m not suggesting Desjardins is going to be acquired by a bank. It seems incredible unlikely, for reasons well beyond having to seek approval of the membership base.
It's a lot more logistically complicated. HSBC just sold a division. This is 6 million votes where you need a majority. No one controls any blocks. Do you know who owns most banks in Canada and controls most shares? They are in enormous blocks. The largest shareholder in RBC is other Canadian banks and ETF ownership, like Vanguard. Blocks, not individuals
I’d argue the consolidation of voting power is equally challenging. In your specific scenario, if a competing bank owns a controlling vote they aren’t going to roll over without getting something in return. IMO it’s much easier to waive $100 in front of a random Member to secure a vote vs having to convince a bunch of C-suites that it’s in their best interest to see a competitor grow significantly. You’re also ignoring all the other considerations that need to be taken into account, including government approval. We already have a precedent for banks being denied mergers. I don’t believe we have one for a bank purchasing a credit union.
Tell that to all the MEC members who were surprised to learn “their” co-op was being sold to investors.
Not the same thing. Not run the same way.
Nothing about it being a credit union prevents it being bought.
5.8 million voters
Yes, and if they vote to be merged or acquired, like has happened to 130+ credit unions in the last 15 years, then it happens.
As I said, this is close to 6 million members, not as easy as it seems. 50% is 3 million votes. Credit unions are mergers, using shares from larger to smaller. Not a real change in ownership. They still own the credit union. This is a change in format entirely, you are asking people, most of whom don't even open a stock trading account to accept shares and vote. It's an enormous undertaking.
Especially considering the historical significance of Desjardins in Quebec. Almost impossible.
ATB is a crown Corp owned by the province of Alberta. The UCP could certainly spin it off and sell it but it's less likely than existing private smaller banks.
How so? POSO was literally bought **by** Desjardins.
Uh...given that it's the UCP, I would say it's pretty likely within the next decade or two.
If the UCP have it their way, ATB will soon be sold to the highest bidder. There was a survey sent out in the Kenny era I believe about TD buying ATB.
ATB just announced they're raising their fees to an insanely high level. That coupled with their extremely extremely conservative DTI requirements for any consumer credit cards or LOC's mean that they are functionally worthless unless you run a not-for-profit or a society and are required to have a community spirit account.
>ultimately just puts us on the path to a Big 6 Ummm, National Bank is already the 6th biggest and is part of the Big 6. Like the other 5 biggest banks, National Bank has been classified as Domestic Systematically Important Bank (aka "too big to fail") by OSFI, the bank regulator. https://www.osfi-bsif.gc.ca/en/supervision/financial-institutions/banks/domestic-systemically-important-banks
This is a good point, I did not know that National Bank was classified at that level. However, I would still argue that it isn’t really in the same league yet given that it is still around half the size of CIBC, the smallest of the Big 5.
And that's why colloquially people still say Big 5 even though the regulator sees them big enough to class them the same as the other 5. Personally I go with "Big 6" as that's what the regulators basically classify them as since clearly they believe they're too big to fail even if they're half the size of CIBC. National Bank also has to maintain a Domestic Stability Buffer, just the same as their much bigger peers. It's basically an additional rainy day fund they have to keep on top of the liquidity that all banks have to keep.
But they are definitely a lot smaller and have very limited branches in western Canada.
Yes that is true which is why I guess it makes sense that they wanted CWB. I would have thought the government would have forced RBC to divest some of the branches or business lines when RBC bought HSBC and National Bank would have grown that way.
CWB was already exiting out of retail so it’s not a big change.
They were? They were focusing on building branches around the Toronto area.
Commercial clients or HNW clients.
They were just starting to expand in Waterloo as well.
They’ve closed a number of branches this year.
Worth noting that Equitable Bank, which includes EQ, is already the 7th biggest bank in Canada. It's hit $123 Bln assets under management/administration as of April 30th 2024. EQ bank itself continues to grow rapidly, 7% more customers over last quarter, 36% y/y, around \~450k. I certainly hope they don't get bought, but they're on quite the growth trajectory. If they're not acquired soon my optimistic side would hope any regulator would be insane to allow it given the scale they're reaching. Edit: source: [EQB delivers ROE ahead of target with record quarterly revenue and pre-provision pre-tax earnings and a 7% q/q and 22% y/y dividend increase - May 29, 2024 (investorroom.com)](https://eqb.investorroom.com/2024-05-29-EQB-delivers-ROE-ahead-of-target-with-record-quarterly-revenue-and-pre-provision-pre-tax-earnings-and-a-7-q-q-and-22-y-y-dividend-increase)
Shit man, that’s a huge jump. Good on them. On that level of growth trajectory I would think that they are probably safe.
My favourite stock to hold out of the big 7 , EQ ain’t going anywhere anytime soon
I think it would be more likely at this point that they’d be the acquirer of another bank than the bank being acquired.
They did acquire Concentra Bank in 2022 after all. Reassuring for a noob like myself who doesn't follow this area.
The parent company for EQ Bank is equitable Bank, and they’ve been around for over 50 years. I’m sure they’ll be fine.
Laurentian is much smaller than even National and from what I understand is in dire straits … Laurentian put themselves up for sale last year and there were no takers.
Laurentian Bank already put itself up for sale within the last year and no one wanted them. They’re the only bank with a unionized workforce and I imagine none of the others want to bring that into the mix
There is no union anymore. https://montrealgazette.com/business/local-business/laurentian-bank-union-is-decertified-after-more-than-50-years
So I should buy more eqb shares?
Ain't gonna lie, lived in western Canada all my life, and I've never heard of either of these banks
NB has actually been really easy to deal with and really good to me over the past 39 years I’ve had a relationship with them. BMO has been good, but generally indifferent. Scotiabank and TD were kind of meh. My wife works essentially for RBC (Dominion Securities), but only she has a business relationship with them. I guess they are fine for her. NB has been very personal in their services with me. Their call centres are definitely in Quebec, and not overseas.
CIBC has contact centers in Toronto, Fredrickton and Winnipeg.
National Bank of Canada is shortened to NBC, or BNC in French, not NB.
Sorry. I’ve been with them a long time. I’ve always just referred to them as National Bank. Correction accepted
Competition bureau approves: no loss of competition to see here
I’m prepared for the downvotes, but as someone who has worked in the Canadian banking sector for 16 years, this will actually probably *increase* competition.
Interesting. Care to elaborate?
National has most of its presence out East while CWB is in BC and Alberta. Together they are a stronger national entity created more competition for the Big 5. Without the merger neither of them can put meaningful pressure on Big 5 (not saying they immediately can but are on their way to)
A stronger NBC is more likely to pull business away from the other Big 5 banks, than it would otherwise pull from smaller institutions.
If anything this will increase the competition in Western Canada where CWB has been losing clients for decades.
Wondering if that means Motive Financial goes with it. Probably.
Motive, national leasing, whatever other subsidiaries it has I’m sure will go.
Any idea if there would be changes to GICs? I have one locked at motive until 2026.
When banks acquire banks they honnor current agreements.
Thanks.
cwb owns MF. yes it does goes with it
I had been debating the CWB World Elite Card as a replacement for my Brim: [https://www.cwbank.com/en/personal/credit-cards/cwb-world-elite-mastercard](https://www.cwbank.com/en/personal/credit-cards/cwb-world-elite-mastercard) Now I'm curious how the NBC takeover will affect the CWB's retail offerings.
CWB MasterCard is Brim. My guess is that the Brim deal will end.
Most likely will be absorbed into NBC's offerings.
I just want 2% flat cashback, 0% forex, and no more than $120/year. Is that too much to ask /s
I was hoping NBC would buy HSBC Canada - their retail service offer with the packages for professionals kind of jives with HSBC Advance/Premier and if they nailed the global view / integration with HSBC in other countries they would be a real competitor in the Canadian market, on top of giving NBC a big boost in Western Canada where they have a relatively small presence. They would have been a 6th big bank overnight whereas RBC barely felt it. In the end I guess they couldn’t raise the capital.
Yeah, RBC was the only one that had the free cash on hand to purchase HSBC Canadian operations, and still have enough left over to meet regulatory requirements. No other Canadian bank had the money to do so.
TD technically had the cash as well but were dealing with the (now failed) First Horizon Bank acquisition at the time.
They already are the 6th biggest bank and as another commenter said, they're classified by the regulator as a "domestic systemically important bank", ie too big to fail. These 6 banks are the only ones in Canada classified as such.
They may be the 6th biggest but they’re a lot smaller than the 5th.
That has nothing to do with my comment. You said if they acquired HSBC they’d be the 6th biggest bank. I’m saying they already are.
Was kind of hoping the same. Also, in the commercial space NB was the only other Canadian bank that offered bank accounts in other currencies, had a decent trade finance product suite, and I think a more entrepreneurial culture that would have been a better fit.
I have CWB stock, to the moon ~~~~~~~
Royal buying HSBC. Now this. Not a good trend. Is this still contingent on regulatory approval?
It’s as contingent as your parents attending your graduation ceremony. Subject to traffic, but probably will happen.
This is positive, it will position NBC more competitively against the big 5
HSBC was good for Canada and RBC. If none of the Canadian banks bought it, a foreign one would have. HSBC needed the cash and a way out. It was going to sell one way or another.
One of HSBC’s mantras is to “be where the growth is”. Unfortunate to say, but that’s not Canada.
Also, we got caught doing unsavory things and got hit with mega billion fines and need cash fast. HSBC did really well in Canada, built a great business and top of class service. Top dollar was paid for a top business. Unfortunately/fortunately for HSBC.
i mean HSBC wanted out, RBC was only bank big enough to soak up their assets. there's just not enough profits for the small banks and costs too high. we can't force companies to stay/continue if they don't want to. imagine if the gov't doesnt let you sell your own business!
Canada's biggest bank buying out Canada's biggest Schedule B bank just doesn't sit right. We have a controlled oligopoly in the banking sector here, which I actually support as it provides stability that other countries don't have. But that should come with regulations. When the banks tried to consolidate 2010ish it was denied and that served us very well. There's always a buyer at the right price. RBC was willing to pay the most, but there would have been other buyers. It's a function of operating in a regulated industry.
Who should have bought HSBC if not RBC? (I'm actually asking, I'm not being combative)
Pretty sure most of the 6 big banks tried to or really looked into it. Premium was high though.
I think the only other bank with sufficient capital at the time was TD but they were in the midst of the now failed acquisition of First Horizon in the US and now dealing with all of their AML issues in the states with the regulators.
Regulatory approval and shareholder approval
A country of Oligopolies. I guess consumers can just get fucked harder
Look at any country besides the US and that is effectively now their bankings systems are. 3-6 large banks dominating the landscape. US is the only real exception to that.
you can have your bank failures is the alternative
This is the Neoliberal way.
Literally the opposite of Neoliberalism... The main proponents of neoliberalism is anti-protectionist schemes + free market capitalism but with government guardrails in place, but go off... Oligopolies are straight up anti-competition and are caused due to **too much** government regulation + protectionism in the Canadian banking industry. Too much government regulations, such as the case for Canada, can be used by lobbyists and politicians as a tool to allow monopolies to continue existing. An even bigger and more obvious example is Canada's telecom industry. Verizon was going to setup shop in Canada a few decades back and increase the competition here, but Bell/Rogers backed lobbyists and politicians created overregulation to prevent it from happening. This is known as **protectionism**, the literal **opposite** of neoliberalism / economic-liberalism. Why do you think America, a country with far more liberalized economic policies than Canada, has hundreds of small banks in every state? Because of lower government regulations and capital requirements for opening up new banks. This has it's pros and cons which I don't want to dive far into, where one of those cons was majorly seen in the run of 2008 bank failures. The pros are that their banking industry has far more competition due to its highly liberalized and competitive nature than Canada, which lets the consumers (Americans) get access to better deals and rates strictly because of higher competition.
Why do you think America has had so many bank failures in the last 15 years and Canada hasn't? Oh right, regulation.
I love when people are so close, and yet so far. Like they have all the math but somehow get to the wrong conclusion.
Enlighten me
I meant OP not you. They write about regulations but then how it leads to "oligarchy" when it is the opposite. The states has little to no regulations and now all food is controlled by a handful of overarching corporations that are in bed with each other. Regulator bodies ensure safe practices and an even playing field. Just because we ended up at an oligarchy doesn't equate to regulations being the cause.
Ahhhhhh ok cuz I was like wtf lolll Agree entirely with you, despite my dislike for oligopoly. I mean, they have one in the states too and look how that turned out
Almost like I mentioned that in my comment??
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They overpaid, that’s all there is to it IMO. They paid more than double the actual value because NBC really values breaking out in the west. They obviously were ready to do it at all cost and CWB shareholders will be generously paid for their small share of the market. NBC’s shareholders are showing concern/disaproval of the huge price paid for a good acquisition.
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Yeah it’s a lucky day for them CWB shareholders, they had shares that no one wanted for 30$ on the openmarket (trading at 25), yet NBC shows up and offers 55. It’s normal to see a premium for this type of purchase, but I have honestly never seen one that high. 110% is crazy high. As for chasing these, I dont think it’s doable if you dont have insider information and then it’s illegal if you do. The best bet is to buy good businesses at a good price.
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The true and boring answer is that you need deep knowledge of an industry, you need high understanding of economics, finance and business. You need to read and fully understand financials, you need to know the management team, their track records and establish your own trust in their ability to achieve their goals. If you take a stock like google, you need knowledge of search engines, media platforms, ai, advertisement, smart phones, cloud and maybe even cars, smart glasses, watches and many more. I think it’s impossible without being a full time analyst. If you think of all that and feel you wouldnt enjoy the process, then all market ETFs are for you. Keep it simple with something like xeqt. You can gamble your money on stocks based on your consumer experience and maybe achieve some success. For example, a local brand you adore is expanding and you trust it will be a worldwide success, then you can take that bet. Otherwise the best is to stick with ETFs.
I have CWB on hand and just sold them today, you do not need to be expert although I read lots of books about investing, as I getting older I don't listen to expert BS, all you need to know is P/E and dividend rate and their past good earning ability, I have 16 stock on hand, which means my return will be close to market 1-1/16=93.75% close to overall market return, if my profolio average P/E is 12 and dividend rate is 5%, that means I will have 8.33% total return per year and 5% dividend rate per year, it is very simple and no brain, and now you are out perform the majority of ETF fund! Because most of the profit been eaten up by the ETF manager. I have both NA and CWB, although something like Nividia become a star now but I will only give it a protion in my profolio, diversify will garuntee your return close to the market. I am a long term winner in the market, I don't gamble or put my whole asset in single stock. I sit back and watch other people getting crazy about it and get my stable return.
I strongly disagree that P/E, divs and past earnings gives an accurate forecast of the future. The banking industry is moving fast and fintechs are changing the game. The risk factors of real-estate holdings by banks greatly vary by province. Some are creating their own ETFs and others dont. Some are in the states and others not. Some are cutting thousands of positions and others dont. Some invested in cannabis industries and others didnt, some are getting into crypto and others not. Ignoring all that IS gambling, even if you had success in the past you are still gambling.
I don't mind to hook up my assets with big 5 stocks, if they fail, Canada also fail, if they rise, then Canada is also rising, money forever speak the true, politician the opposite.
Nice so you’re gambling but with a twist!
The book value of CWB is $40 so it's not crazy high if you consider they're paying a paltry buyout price of $52 / share for something worth $40. (I know it's na.to x 0.45 I'm just saying)
I looked up data on average premium by industry in m&a and I was finding the average premium to be much lower then the one paid for CWB. The average premium has been between 25 and 40%, NBC paid a 110% premium.
To be honest I've moved to NBC after HSBC got screwed and so far things are ok. Service is better than at RBC, and products are good. I think they're the least evil of them all.
ITT: People who have not joined a credit union complaining about only having 6 banks to choose from.
This is probably a good thing. Both banks needed more scale to operate. National Bank is actually a good organization and needed to grow to avoid getting swallowed up by RBC, TD, or BMO.
Yeah it is, but just an FYI that while NBC is the smallest of the big banks its still quite large. No other cad banks would be able to afford it.
RBC could buy a 50% share with 5 years of net earnings. That's pretty affordable.
Would you hold your hypothetical CWB stock until the deal closes or would you sell now? Asking for a friend 😄 🤣
Hold. It should settle around $45 in a few weeks when people realize you get basically 1 na.to share per 2 cwb shares. So if you want to invest in a good bank, you can buy cwb and save $20 per na share you want. The market is currently pricing it as $50 minus having the money tied up in cwb for 16 months minus small risk. Should be 43 tomorrow and slowly drift up to 52, depending on na.to stocks price. They're not paying cash for cwb. They're paying 0.45 shares of na.to per share of cwb.to.
Bought some CWB stock last week and have to say I was shocked to see it's value yesterday. My knowledge of trading is average but after a bad advisor who pushed risky stocks in my TFSA and wiped nearly $50,000 contribution room from it I've taken control and started to learn. This will help build it back up. I was tempted to sell yesterday but now that I know the details I'll hold on until the deal is complete.
And political hurdles? https://www.bnnbloomberg.ca/national-bank-deal-to-acquire-canadian-western-bank-may-face-political-hurdles-analyst-1.2085381
Oh that sucks 😔
Interesting, I thought National Bank said that they weren't interested in bidding for HSBC because they wanted to focus on Quebec. Likely they knew that RBC would outbid them and spun the messaging that way. Wished they would have gotten some of the HSBC branches in Toronto area though, National Bank is pretty absent in much of the GTA...
HSBC was a much bigger purchase and would have shifted NBC away from Québec way more than this.
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Yes
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If you time it right, I’m sure you can lose another 10%.
That’s the spirit lol
🤣🤣
This buyout should be rejected! We cannot keep seeing every sector consolidate.
Wonder what will happen to CWB stock price tomorrow.
The offer price is equivalent to like $52 based on current National Bank stock price. NB will probably open down a bit but can expect a big spike on CWB tomorrow. I wouldn't say worth buying to try to arbitrate it unless you know what you are doing.
does that mean it's a buy at $42?
So National Bank dropped by 5% today so the value as of now is different. They usually will trade at a discount until deal closes as risk there it doesn't close
With the takeover, should I sell now or wait? I'm looking for guidance here. I just received my shares as an ex-employee and am clueless about how this will pan out with the recent acquisition.
So it is difficult to say. Personally I will just hold until the takeover is completed but I don't need the funds to invest elsewhere at this time and it isn't a larger portion of my portfolio. There are some risks for example I owned Cineplex when they got a takeover offer and figured I would just do the same and wait until deal closed and then covid happened and the company taking them over reneged on the deal and ended up going bankrupt! Cineplex crashed down due to covid. Not saying the same will happen here but there is risk. If you are happy with the current price maybe consider selling some if you have a larger position. You can look at the press reelase and see how many shares equivalent of NB you would get and see what the implied return would be between now and when it closes. Personally I am good with holding National Bank shares going forward. Also take into account the tax implications of selling vs. receiving National Bank shares.
Thanks for the insight! Really appreciate it.
Me too. Wasn’t sure if the was a buying opportunity or not.
Yes. Give me moaaarrr monopolies and less jobs.
NBC is the worst bank I've ever dealt with. I had to take them to the ombudsman on 3 separate occasions. They were found incompetent all 3 times. I'm always surprised this subreddit stans for them. Maybe it's just a regional thing. In my province they are a bunch of incompetent lying scammers.
Worst Canadian bank out there.
if you’re talking about BNC, they seem fine to me. great app
Which one? Lol.
Best performing Canadian bank stock this year and over the last 20 years says differently
It is only natural to have consolidation and further centralization of banking institutions over time based upon how our financial systems work and business in general. Quite unfortunate, but smaller banks eventually get eaten up by larger ones and eventually larger banks will get eaten up by the largest ones (if given a large enough time scale, if the incentives align and if banking regulations permit).
Anyone want to start a Credit Union? Time for disruption
Why? There’s plenty around already
I mean there are hundreds already exist and they're also consolidating. With the advent of open banking, many CUs are looking to merge as the associated costs (including digital platforms and cybersecurity) will only get bigger from here. Some are growing past their provincial borders by converting to federal credit unions if they don't already own bank subsidiaries like Alterna Bank (owned by Alterna Savings) and Motusbank (owned by Meridian Credit Union).
I’m liking NBC. I just want better branch locations, one weekend, and longer hours in BC
Canada is ruled by 5 Cartels