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Canadian Western Falls as Bank Misses Estimates: Edmonton Mover

Canadian Western Bank fell the most in three months after posting second-quarter profit that missed analysts’ estimates on higher expenses and tighter lending margins.

Canadian Western fell 3.3 percent to C$27.60 at 1:50 p.m. in Toronto, making it the worst performer today in the Standard & Poor’s/TSX Financials Index. The shares have slid 2.8 percent this year, compared with the 1.4 percent advance of the 45-company index.

Net income for the period ended April 30 climbed 8.4 percent to C$43 million ($41.9 million), or 54 cents a share, from C$39.7 million, or 52 cents, a year earlier, the Edmonton-based bank said today in a statement. Adjusted earnings, which exclude some items, were 55 cents a share, missing the 57-cent average estimate of 10 analysts surveyed by Bloomberg.

“The lower-than-expected earnings were driven by expenses and margins,” Andre-Philippe Hardy, an analyst at RBC Capital Markets, said in a note to clients.

Canadian Western, led by Chief Executive Officer Christopher Fowler, has expanded its wealth-management business to diversify beyond commercial and wholesale lending. In April, the bank agreed to buy a 55 percent stake in Calgary-based McLean & Partners Wealth Management Ltd., which oversees about C$1 billion of assets.

The lender, which operates mostly in Canada’s western provinces, has posted a profit in 100 consecutive quarters. The bank raised its quarterly dividend one cent to 18 cents a share, according to the statement.

Margins Squeezed

Net interest margin, the difference between what a bank pays for deposits and charges for loans, declined 16 basis points to 2.65 percent from a year earlier, according to the statement. A basis point is one-hundredth of a percentage point. Low interest rates and “ongoing competitive pressure” have squeezed margins, the bank said.

“This key measure will remain under pressure until we see some movement toward higher interest rates,” Fowler said in the statement.

Expenses rose 8.8 percent to C$64.8 million from a year earlier, led by an 11 percent increase in salaries and benefits, according to the statement. Revenue increased 7.1 percent to C$136 million.

(Canadian Western will host a conference call at 3 p.m. Toronto time. To listen, dial +1-647-427-7450 or +1-866-231-8191, passcode 65242639.)

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