(Reuters) - Canadian Western Bank (CWB.TO) 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.
While Canada’s larger banks focus their lending businesses on residential mortgages, Edmonton, Alberta-based Canadian Western has carved out a niche in business lending to companies active in the Alberta oil sands.
Pollock, who announced his departure last August, will officially step down at the company’s annual general meeting later on Thursday.
Under his guidance, Canadian Western has grown from a six-branch operation to Canada’s seventh-biggest bank by market capitalization and has been profitable during every quarter of his stewardship.
He will be replaced by Chris Fowler, who has been at the bank for 21 years himself, and served most recently as chief operating officer.
Khan said he’s not worried about the impact of the handover, noting Fowler’s long track record working with Pollock and the fact that Pollock will remain with the bank as an advisor.
“I don’t think it changes anything,” he said.
Reporting By Cameron French; Editing by Peter Galloway