National Bank Takes $119 Million Writedown on Maple Bank

  • Montreal-based lender says Tier 1 ratio pared 13 basis points
  • Maple Bank GmbH being investigated by German regulators

National Bank of Canada said it will write off the full C$165 million ($119 million) carrying value of its stake in Maple Financial Group Inc. after that company’s operations in Germany were limited by regulators amid a tax probe.

The writedown will be included in fiscal first-quarter results reported on Feb. 23, cutting National Bank’s common equity Tier 1 ratio by about 13 basis points, the Montreal-based lender said Sunday in a statement. National Bank, which signaled in October that such a reduction was possible, owns 24.9 percent of Maple Financial, parent of Maple Bank GmbH.

“Beyond the charge this quarter, the earnings impact should be immaterial as Maple Financial was contributing less than 1 percent to the bank’s earnings," Robert Sedran, an analyst with CIBC World Markets, said in a note to clients. “With no lasting earnings impact, there should be no lasting valuation impact either."

Shares of National Bank fell 2.5 percent to C$38.83 at 9:54 a.m. in Toronto, the worst performance in the eight-company Standard & Poor’s/TSX Banks Index. The shares have slid 3.7 percent this year.

Tax Probe

Germany’s BaFin financial-services regulator said earlier Sunday that it’s limiting Maple Bank GmbH’s activities on concern the business faces over-indebtedness in the midst of the tax probe. Barbara Fuchs, a spokeswoman for Maple Bank in Frankfurt, said the company can’t comment on investigations.

“These events result from ongoing investigations launched by German authorities in September 2015 focusing on selected trading activities by Maple Bank, and certain of its current and former employees,” National Bank said Sunday. “None of National Bank of Canada and its employees were involved in these trading activities, nor to our knowledge is National Bank of Canada or any of our employees the subject of these investigations.”

Maple Financial is a closely held company based in Canada, whose shareholders
also include Ontario Teachers’ Pension Plan, with a 28 percent stake, according to its website. The firm, which was formed in 1986, has more than 260 employees in Toronto, Frankfurt, London and Jersey City, New Jersey, among other locations. Its units include a German bank with branches in Canada and the Netherlands, and broker-dealers in Canada, the U.S. and U.K.

Deborah Allan, a spokeswoman for Toronto-based Ontario Teachers’, said the pension fund has discussed the allegations against Maple Financial with officials, and is “continuing to assess the current situation.”

Maple Bank GmbH has been in business since 1994 and deals in equity and fixed-income trading, repos and securities lending, as well as structured products and institutional sales, according to its website.

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