National Bank Gains as Foreign Lenders Retreat, CEO Says
“We’ve benefited from the pullout of the foreign banks,” Vachon said today in Toronto during an investor presentation on investment banking. Canadian companies and governments looking to arrange deals are deciding that the Montreal-based lender is an alternative to the Toronto banks as foreign firms show an “off-and-on commitment” to Canada, he said.
UBS AG (UBSN), Switzerland’s largest bank, has trimmed staff in Canada amid plans announced last year to eliminate 10,000 jobs worldwide and dismantle parts of the investment bank to increase profitability. St. Louis-based Stifel Financial Corp. said in August it was closing operations in Toronto and Calgary, while Macquarie Group Ltd., Australia’s largest investment bank, is exiting its real estate and leveraged-finance business in Canada, a person with direct knowledge of the decision said last month.
The lender’s National Bank Financial unit is the top arranger of debt sales for Canadian governments this year, as it was in 2012 and 2011, according to data compiled by Bloomberg. The firm ranks sixth for corporate bond sales in 2013.
National Bank won’t make significant changes to its business mix, Vachon said. About 26 percent of the firm’s activities are in financial markets, compared with 52 percent for personal and commercial banking and 20 percent from wealth management, Vachon, 51, said. Financial markets will drop to about 23 percent by 2017, he said.
“What will continue to happen, though, in terms of our geographical footprint is a slow, steady pan-Canadian expansion,” Vachon said. “It’s slow and steady because we still see a lot of opportunities in Quebec.”
The bank will consider “mid-size acquisitions” that won’t dilute shares, with a focus on purchases outside Quebec, Vachon said. Financial markets revenue from outside the province should account for 43 percent of the unit’s total by 2017, up from 36 percent last year, Vachon said.
Investors have criticized National Bank for being too focused on Quebec and too reliant on wholesale banking, which led to expectations of slower growth than its Canadian peers, Vachon said.
“Expectations are still pretty low, at least that’s what the market is telling us,” Vachon said. “National Bank may not be the highest nominal growth story, but I think we still have the best risk-adjusted growth story.”
National Bank climbed 0.2 percent to C$84.83 at 4 p.m. in Toronto. The shares gained 9.8 percent this year, compared with the 7.9 percent advance of the eight-company Standard & Poor’s/TSX Commercial Banks Index.
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