Canadian Western Bank (CWB.TO) Buy, Sell or…

Canadian Western Bank (CWB.TO)

56.63

-0.62 (1.08%)

as of Feb 4, 2025, 9:00:00 pm Market Open.

106 watching

Unspecified

It is a smaller bank and could be a good way to play the oil and gas sector. Or you could consider the service companies. It is a decent company but there are other ways to play the financials. The larger Canadian banks in general show fairly consistent results with an 8 to 10% ROE and 2 to 5% dividend yield. His favourite bank is Royal.

BUY ON WEAKNESS

Results have lagged competitors in market. Large stock selloff has affected share price. Economic downturn is a worry as company not as large as others. If betting on ability for banks to increase margins, would be a good bet. Current yield is over 5% which is attractive. Bet would be on a soft landing of economy.

DON'T BUY

CWB vs. LB He'd buy neither right now. Financials are not necessarily what you want going into a recession. Credit losses can sting. Regional banks are not as well diversified as the bigger banks. No wealth management. CWB is more exposed to commercial and industrial loans, so losses can be greater. CWB edges out LB by a hair.

TOP PICK

It is a cheap bank in a good area of the energy business. It is less than 7 1/2 X forward looking P/E. Is trading at Book Value or even a discount. It is as cheap as it has ever been in 25 years except for the Covid low. Also has a good dividend. Regarding recession, banks usually come through recessions relatively unscathed and can be bought at good discounts. Buy 10, Hold 3, Sell 0. (Analysts’ price target is $37.12)

WEAK BUY

Tough time when oil was down. Now in great shape. Yield is 3.3%, not as high as the big banks. 9x earnings, below book value. Worth looking at. The world is looking a lot better for the banking industry. It will always trade at a lower multiple, as it's regional.

COMMENT

Working to diversify, including owning Ontario real estate. Undergoing a review to calculate capital differently which, if successful, would let them compete more aggressively on loan products. Regional banks are trades for him, in and out. Prefers this to LB.

HOLD

Fine as a holding. But the majors are cheap enough, and they'll move first. Slightly higher losses coming to CWB because of the oil patch. It's a hold. Wouldn't worry about the dividend too much, but he'd prefer one of the majors at this stage.

DON'T BUY

Focused on the western part of the country and which is still going through a difficult economic period of time. It has had a decent couple of years as credit losses have been kept to a decent low. Their traditional business of lending with a flat yield curve is very difficult. He prefers TD-T and RY-T because they are doing the best with regards to investing.

COMMENT

He sees companies with better diversification outside Canada (the big Canadian banks), though CWB is generally fine and so is its current share price.

DON'T BUY

It's correlated to Canadian oil. The next phase will be a recession, so oil prices will likely see $25 rather than $75. This means, CWB will fall too.

BUY

Got stuck at $40 and had a sell-off. $20-40 range, so there's plenty of upside here. He's worried about this sector, but CWB has already sold off, so he's not worried about it.

DON'T BUY

A good bank, but he questions if it's best in breed. Best in breed involves dominant industry position, sustainable competitive advantage, very strong management, high margins and ROC. There are better examples in the banking industry. Not very diversified geographically. Wealth management, insurance, and capital markets are voids in its portfolio.

HOLD

A mortgage- and loan-heavy bank, so it's more volatile than the big banks. But volatility is opportunity. Don't trade out of this for one to buy one of the big guys. Just stick with it.

COMMENT

Tied in with Alberta's economy, but in the past few years has surprised all--its loans losses aren't as bad as people feared. They've weathered the oil crisis very well. Prefers banks not as regional as this one. If you're positive about Alberta's outlook, then CWB is a good hold. A few new pipelines would boost sentiment.

COMMENT

National Bank or Canadian Western Bank or Laurentian? Definitely National. It's growing in asset management and spending on technology, adapting their tech to their data findings. Drawback is it's Canadian-only focus. That said, he prefers larger banks operating in U.S. like TD and Royal.

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Canadian Western Bank (CWB.TO)