Pacific & Western Bank bucks earnings trend, reports ‘very successful year’

Financial Post
Barry Critchley
Dec 4, 2014


Amid all the bad news reported by the big banks this week – bad news that may continue Friday when Scotiabank and National Bank are due to report – at least one schedule 1 bank delivered some good news.

On Thursday, London Ont.-based Pacific & Western Bank of Canada announced its results for the recently completed fiscal year. And on all measures, the bank – which has been public for one year – reported results that should please its owners. Certainly the management is pleased describing the results as demonstrating a “very successful year.”

For instance:

  • Net income for the year was up more than three fold to $5.7 million
  • Net interest margin for the year rose by 12 per cent to 1.96 per cent from 1.75 per cent in the same period in fiscal 2012/2013.
  • Total revenue for the year jumped by about 10 per cent to $30.5 million
  • Credit quality remains strong: at year there were no gross impaired loans
  • The bank’s capital ratios are also strong: it’s so-called Common Equity Tier 1 was 11.25 per cent (down a tad from the 11.29 per cent of 2012/13) while its total capital ratio ended the year at 13.69 per cent (up slightly from 12.99 per cent last year).

The bank is a little unusual in the way that it gathers deposits and in the types of business that it pursues.

On the deposit side, it has gathered more than $125 million in deposits from trustees in bankruptcy through a custom banking solution it developed for the sector. “This new channel of deposits is not only diversifying the banks deposit base, but is also lowering its cost of funds,” said David Taylor, the bank’s chief executive. One year earlier deposits from this source stood at $35.4 million.

On the asset side, the bank has developed a product that allows it to buy loans and leases from financiers across a variety of industries. At year-end it had acquired $395 million of such assets. One year earlier the outstandings stood at $187.8 million.

“We have developed state of the art systems to allow us to process large numbers of these small ticket assets and expect this business will become a major portion of the Bank’s total assets and revenue stream,” said Taylor.

And more innovations are in the pipeline: the bank offers a white label credit card for Home Hardware and “is close to initiating a point of sale financing pilot that we hope will lead to a significant source of consumer loans in underserved niche markets across Canada.”

The bank is not actively traded: for the day the shares lost $0.08 to close at $5.82. For the year the shares have traded in the range $5.31-$7.14.