National Bank Sees 10% of Profit From Global Business by 2020

  • Bank to seek controlling stakes for Africa, Asia investments
  • CEO Vachon sets 5-year timeframe for decision on bank stakes

National Bank of Canada seeks to generate at least 10 percent of profit from its international business by 2020, while looking to expand its stakes in Africa and Asia lenders into controlling positions, Chief Executive Officer Louis Vachon said.

“We are looking to complement our Canadian growth -- not substitute, but complement our Canadian growth -- with a disciplined international strategy that delivers higher returns," Vachon, 54, said Friday at the bank’s international development investor day in Toronto. “We want to make it relatively small, but with high impact."

National Bank acquired a controlling stake in Cambodia’s Advanced Bank of Asia Ltd. in May, building on its initial 10 percent investment in 2014. In the past two years, the lender also bought minority stakes in AfrAsia Bank Ltd. of Mauritius, Cote d’Ivoire financial group NSIA Participations and the holding company that controls XAC Bank LLC in Mongolia.

The international strategy, outlined by Vachon for the first time in detail Friday, will focus on diversification and long-term control of its investments within five years. The Montreal-based lender will report international operations -- including its debt-buying business Credigy -- separately starting in the first quarter of 2017, he said. The 10 percent profit goal is based on net income before taxes.

Controlling Stake

“It’s long-term control or exit," Vachon said. “Either you have to acquire majority control or a large minority position” or sell.

National Bank expects ABA Bank to have a compound annual growth rate of 26 percent for total assets, 23 percent for deposits and 31 percent for loans, according to a presentation. Net income is forecast to rise to $72 million by 2020 from $16 million in 2015.

Despite the international push, National Bank has no ambition to become a global bank, Vachon said.

“We feel the global banking model is under siege right now, so we have no interest in moving in that direction," he said.

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