Mid-size bank shares surge as National Bank announces $5bn acquisition

National Bank's deal for CWB follows RBC's acquisition of HSBC Canada, spurring more M&A activity

Mid-size bank shares surge as National Bank announces $5bn acquisition

Canadian Western Bank shares surged Wednesday as news broke that National Bank was acquiring it at a $5bn valuation.  

Shares of other mid-sized banks also gained as the acquisition trend continued, according to BNN Bloomberg

CWB shares closed 68.3 percent at $41.89 on the Toronto Stock Exchange, with National Bank valuing them at $52.24 each. This all-share deal follows RBC's $13.5bn acquisition of HSBC Canada, hinting at more consolidation in the banking industry.   

Nigel D'Souza, senior investment analyst at Veritas Investment Research Corp., noted that smaller banks struggle against larger ones' economies of scale and lower funding costs. Shares of Laurentian Bank and EQ Bank owner EQB Inc. also saw gains. 

BDO's Shilpa Mishra remarked on the unprecedented M&A activity, citing other deals like National Bank's acquisition of Silicon Valley Bank's Canadian loan portfolio and BMO's purchase of Bank of the West.  

Despite concerns about market concentration, Mishra sees the National Bank deal as beneficial, enhancing its national presence.   

National Bank's CEO Laurent Ferreira emphasized the deal's potential to create a stronger competitor. CWB will maintain its branch locations and Edmonton-based operations.   

The acquisition, expected to close by the end of 2025 pending regulatory and shareholder approval, is viewed as a strategic move in response to RBC's HSBC Canada acquisition. Jefferies analyst John Aiken believes the deal will likely be completed, despite the uncertainty surrounding approval timing.   

National Bank shares closed 5.9 percent at $108.49, but Aiken views the acquisition as positive, increasing National Bank's scale and commercial loan book. Despite CWB's share surge, its closing price remains similar to 2014 levels.