Canadian Western Bank shares drop on results

Thu Mar 7, 2013 12:32pm EST
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(Reuters) - Canadian Western Bank (CWB.TO: Quote) shares fell to a 2013 low on Thursday after the regional lender reported quarterly results that just missed estimates due to narrower interest spreads on loans.

The result, which caps a quarter in which Canada's six top banks all beat market expectations, comes as the company's chief executive, Larry Pollock, steps down after 23 years in the job.

Canadian Western, the country's No. 7 bank by market capitalization, earned C$45.5 million ($44.17 million), or 57 Canadian cents a share, in its first quarter, ended Jan 31. That compared with a year-before profit of C$41.5 million, or 54 Canadian cents a share.

Cash earnings, which exclude certain adjustments, were 58 Canadian cents a share, falling just short of analysts' estimates of a profit of 59 Canadian cents a share, according to Thomson Reuters I/B/E/S.

National Bank Financial analyst Shubha Khan said the shortfall was due to narrower-than-expected interest spreads on the bank's loans, and attributed Thursday's drop in the stock to that.

"I think people may have been spooked by the margin compression this quarter, and I suspect the market is reading too much into it," he said in an interview.

Loan margins at Canada's banks have been under scrutiny over the past year as the current low rate environment reduces profits on new loans as well as profits on older loans that were issued at higher rates and are now being renewed at current levels.

Margins were 2.66 percent during the quarter, down from 2.77 percent year earlier.

The bank's shares were down 3.1 percent at C$29.43 on the Toronto Stock Exchange at midday on Thursday after touching C$28.84, their lowest level since December.   Continued...

A Canadian Western Bank branch is seen in Calgary, Alberta June 9, 2009. REUTERS/Todd Korol