In an unexpected bit of news, especially after the way regulators have been behaving lately when it comes to the word “merger,” Canadian banking giant National Bank of Canada (TSE:NA) cleared a key regulatory hurdle in its planned purchase of Canadian Western Bank (TSE:CWB). With the banking deal about to go through, investors were somewhat pleased, sending shares up fractionally in Thursday morning’s trading.
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The Competition Bureau in Canada recently signed off on the acquisition, which gets the deal past an antitrust hurdle. With that in play, now, all that remains is the approval of the Minister of Finance and the Office of the Superintendent of Financial Institutions. Given that it already passed muster on one front, it is a fairly safe bet it will clear the remaining two hurdles. Though, a rejection could still take place.
The original deal was announced back in June, and called for National Bank to shell out C$5 billion, which would give it access to a new portfolio of commercial banking business. In fact, picking up Canadian Western Bank would swell National Bank’s commercial portfolio by 52%, according to a report from The Market Online.
A Boost From Moody’s
That was not the end of the good news for National Bank of Canada. Word also emerged that Moody’s Ratings was considering an upgrade for National Bank’s debt. The ratings are being placed under review for a potential upgrade thanks to its “…strong underlying profitability and balance sheet,” reported Investment Executive.
It certainly did not hurt that National Bank has the highest common equity Tier 1 capital ratio among Canadian banks. And, its exposure to “problem loans” is also among the lowest. So that combination of factors makes it a much more likely prospect to pay back any debt it takes on.
Is National Bank of Canada a Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:NA stock based on three Buys and eight Holds assigned in the past three months, as indicated by the graphic below. After a 48.17% rally in its share price over the past year, the average TSE:NA price target of C$31.08 per share implies 10.73% upside potential.
