National Bank of Canada’s deal for Silicon Valley Bank’s Canadian commercial loan portfolio will give it more exposure to higher growth industries and still leave the Montreal-based lender with enough capital to take a run at Laurentian Bank, according to analysts.
(Bloomberg) — National Bank of Canada’s deal for Silicon Valley Bank’s Canadian commercial loan portfolio will give it more exposure to higher growth industries and still leave the Montreal-based lender with enough capital to take a run at Laurentian Bank, according to analysts.
Canada’s sixth-largest lender agreed to buy the SVB Canadian commercial loan portfolio from First Citizens Bank on Tuesday. The loan book is comprised of approximately C$1 billion ($752 million) in loan commitments of which around C$325 million are outstanding and are in the technology, life science and global fund banking sectors, according to a statement.
“Everything is teed up such that this was a great transaction for both parties,” Industrial Alliance portfolio manager Daneshvar Rohinton said by phone, adding that the deal allows National “to step up its growth in the tech, media, telecom, and generally the younger companies, relative to their historical footprint in Quebec.”
He called the portfolio “a nice add on,” that delivers National Bank’s loan growth target for the third quarter but, given its relatively small size, won’t affect full-year results.
The deal was “likely an opportunistic purchase,” Bloomberg Intelligence analyst Paul Gulberg said in a Tuesday note, adding that National has “ample capital for the loans,” with equity ratios well above regulatory minimums.
Even after the transaction, National is still viewed as “the best fit among the Big Six banks” to acquire Laurentian Bank, according to Veritas Investment Research analyst Nigel D’Souza, responding by email.
The acquisition will be folded into National Bank’s Technology and Innovation Banking Group, under the leadership of Tuyen Vo, who has led the group since 2019.
“With this acquisition and following years of high growth by the Technology and Innovation Banking Group, the bank strengthens its presence in the tech industry across Canada,” said Michael Denham, Executive Vice-President of commercial and private banking at National Bank.
The deal is expected to close in coming weeks, subject to approval. The transaction is not expected to have a material impact on the bank’s results.
(Adds investor, analyst commentary throughout)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.