Stockchase InsightsCanadian Western BankCWB.TOHOLDSep 06, 2023

Bought into the arbitrage. Upon closing will own NA, which is a really good bet for the long term.

National Bank is buying it. Price of shares of CWB has risen because of National's performance. NA is paying more than fair value for CWB. Is confident the deal will happen.

What the caller's really asking is could this be an arbitrage opportunity to back-door his way into NA? Yes, but there's risk that the government doesn't allow the deal. Deal could fall apart. Then CWB would go back to $27. Unless you also short NA, you could really get slaughtered.

He'd never recommend a retail investor ever do anything crazy like that. If you really want to own NA, buy that stock instead.

Under regulatory scrutiny, but likelihood of transaction going through is pretty high, though of course not guaranteed. The acquisition makes a lot of sense for expanding NA's footprint. No other player likely to step in.

If you're worried, you could sell and redeploy proceeds elsewhere in the sector. Look at RY or even TD.

He's very happy to hold up. He sees 25% upside. The merger was a good thing. He expects the merger by BNS to be approved and will benefit both. The differential between the two stocks points to approval.

Don't forget it's a share swap, so shares will trade in line with NA shares. NA shares are down, because it's raising a bunch of money to pay for the acquisition. Consider yourself lucky, as you're doubling your money from yesterday. 

He'd hold on, accept the NA shares, hold onto those shares, and you'll do extremely well. 

Regional banks are having a tough time competing with well-established big banks in general due to their inferior scale and less famous brand recognition. CWB is trading at a cheap valuation of only 0.7x Price/Book, but operational efficiency is not as good as the high-quality operators in the banking industry. Return on equity was around the 10% range in the last few years, which is quite weak relative to the large banks, while net margin is also lower than large banks. CWB could be an interesting value name once in a while, but we think it makes more sense to hold high-quality, more efficient banks in the long term. CWB does have energy sector exposure, which is both good and bad depending on the cycle. But for an income stock, we prefer the safety of the larger banks. We would prefer RY or TD.
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If you're looking for a bank stock go with something bigger. If looking for more growth you should do better with some of the non-bank lenders, 

Testing breakout and trendline. Small position. Will leg in more as it proves itself.

She is underweight banks but owns several of the large ones. The smaller banks like Canadian Western carry more risk than the larger ones and face pressure from investors who can get better rates from high interest savings, money market funds, etc.

Likes this bank because it is run differently than other Canadian banks (more energy clients). Fundamentals of bank look good. Technical aspects of chart look great. Believes stock could hit $40. Will continue to hold. 

Fate of energy sector directly impacts success of company.
High exposure to energy industry through lending.
Does not own shares - too risky.
Large Canadian banks better for defensive investors.

Very cheap. Strong balance sheet, decent yield, very nice upside potential. The West is coming back thanks to oil. Banks in general have been under pressure to raise more reserves. Rising interest rates are mixed for the banks. 

It is down and bouncing around within a band range. He is not sure about the details of the company but the dividend is reasonably safe. It may be good for a long term investor but there are others which may be better quality.