Canadian Western Bank Receives a Hold from Canaccord Genuity

By Carrie Williams

The Financial sector company, Canadian Western Bank (TSX: CWB), has received a rating update from a Wall Street analyst today. The company received a Hold rating from Canaccord Genuity’s analyst Scott Chan CFA, with a C$29 price target.

Chan CFA observed:

“Date and time of first dissemination: August 31, 2017, 08:33 ET Date and time of production: August 31, 2017, 08:33 ET Target Price / Valuation Methodology: Canadian Western Bank – CWB Our C$29.00 target price is based on an 11.2x P/E multiple applied to our F2018 EPS estimate of C$2.62. Risks to achieving Target Price / Valuation: Canadian Western Bank – CWB Some of the specific risk factors that could impact our target price include: Geographic. The majority of loans are situated in Western Canada, with Alberta and BC exposure at 35% each. Any deterioration in business and economic conditions could have adverse effects on loan growth and the credit quality of CWB’s loan portfolio. Competition for deposits. Home Capital events have increased the price of deposits for certain institutions. We note Canadian Western Trust’s yields were affected, but have since begun to normalize. Lower deposit growth could impact our forecast loan growth projections. Commercial businesses. Competition for small to medium size businesses is intense, and aggressive pricing by peers could further pressure margins. Loan growth. YTD, CWB’s loan growth is up 4% YoY and is relatively low compared to historical standards. With NII representing ~90% of total revenue, lower loan traction would impact our top-line estimates. Oil prices. Investor sentiment on CWB stock continues to be highly correlated to the WTI oil price. Any further declines in oil prices could lower production growth and ancillary business activity. Trading volume. CWB’s market cap of C$2B is low compared with other publicly traded banks, and as such shares trade thinly in the marketplace.”

According to TipRanks.com, CFA is a 3-star analyst with an average return of 2.8% and a 53.7% success rate. CFA covers the Financial sector, focusing on stocks such as Canadian Bank of Commerce, Goldman Sachs Group Inc, and Bank Of Nova Scotia.

Currently, the analyst consensus on Canadian Western Bank is Moderate Buy and the average price target is C$30.06, representing a 4.8% upside.

In a report issued on August 21, Scotiabank also maintained a Hold rating on the stock with a C$30 price target.

Canadian Western Bank’s market cap is currently C$2.53B and has a P/E ratio of 13.1.

Canadian Western Bank engages in the provision of business banking services for small and medium-sizes companies. The firm provides general commercial banking; equipment financing and leasing; commercial real estate financing; real estate construction financing; and energy lending.

The company’s shares closed on Wednesday at C$28.69.