Canadian Western Bank Looking To Growth To Counteract Increasing Macro Pressures

I continue to be impressed by how Canadian Western Bank (OTCPK:CBWBF) (CWB.TO) management addresses the challenges facing this small commercially-focused bank, even if some of the challenges are self-inflicted. While I thought the shares looked more than 20% undervalued when I last wrote about the shares, I'm a little surprised that the shares have done well since then (up close to 25%) given how negative sentiment has been for much of the past year.

Macro headwinds are accelerating; NIM compression looks probable, credit losses are likely to increase, Canada's economy is slowing, and Canadian Western's deposit mix is still not ideal. That said, the company continues to deliver strong loan growth, is reaping some benefits from a renewed focus on branch-raised deposits, and stands to see a significant benefit from the adoption of the Advanced Internal Rate Based (or AIRB) capital calculation approach. At this point, I'd call Canadian Western a middling investment idea; the shares do look a little undervalued, priced for high single-digit to low double-digit returns, but a lot is riding on the bank maintaining the strong loan growth and credit quality trends that have helped boost the stock recently.

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Canadian Western Bank Looking To Growth To Counteract Increasing Macro Pressures