Ongoing Growth, At A Price, From Canadian Western Bank

Edmonton’s Canadian Western Bank (OTCPK:CBWBF) (CWB.TO) continues to execute on several of its primary growth drivers, including generating attractive commercial loan growth, building the Optimum alternative mortgage business, and continuing an ongoing shift away from a heavy legacy exposure to energy and energy-reliant markets. While the bank does have a good growth outlook, some of the concerns I had about valuation and near-term headwinds have had an impact on the share price, which is down a bit (in Canadian dollars) since my last write-up late in 2017.

If Canadian Western were an American bank, I think there would be more concerns about the company’s weak core deposit situation and its high, and rising, total cost of funding. Using debt to fund loan growth is a risky strategy, but credit quality remains strong as does operating leverage. Although the level of operating risk is a concern, these shares do look more reasonably priced and should offer a lot of earnings growth in the coming years.

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Ongoing Growth, At A Price, From Canadian Western Bank