Wednesday, March 29, 2006

National Bank & CIBC at NBF Financial Services Conference

Canadian Press, Allan Swift, 29 March 2006

The CEO of National Bank of Canada says the Montreal-based bank is not overly exposed to Canada's flagging pulp and paper industry, which is concentrated in the province of Quebec.

Real Raymond told a banking conference Wednesday that most of the debt for that industry is held by secondary markets in the United States.

"Our exposure is very much under control," Raymond told analysts after giving a speech.

In any case, Raymond said, National Bank's overall corporate loan portfolio of all industries combined has shrunk to about $2.7 billion from $6 billion to $7 billion about five years ago.

Analysts say National Bank is vulnerable by having all its branches and most of its activities within Quebec, with the province's dependence on export-related manufacturing hurt by the rising Canada dollar.

But Raymond said the province's economy has done relatively well and is more stable even than Ontario, which is overly dependent on the volatile automotive sector.

Raymond said that in any case, his Quebec-based bank now gets 65 per cent of its revenue from business not related to lending. The growth has come in the growing areas of wealth-management products like mutual funds and insurance.

With the aging Canadian population, "revenue in wealth management will continue to grow at a fast pace," Raymond said.

The CEO said the bank sees a huge opportunity in selling its products through the financial advisers of its partners, called white label products because the consumer does not know the loan or other product comes from the bank.

National Bank has access to 8,000 third-party representatives, and Raymond said only 30 per cent of them have so far sold at least one of the bank's products.

"There's a huge opportunity there, we touch maybe five or six per cent of that client base overall," he said. "There is a lot more we can do with our partnerships."

Earlier, CIBC's chief executive Gerry McCaughey said the Toronto-based bank is ahead of its target to reduce its annual non-interest expenses by $250 million by the end of this fiscal year.

While CIBC's cost cutting in the first quarter put it on the road to passing the goal, McCaughey said the target is in the context of other banks also reducing their non-interest expenses, so the target may have to be raised.

He said CIBC wants to reach the median non-interest expense ratio of the other banks, or exceed it.

The $250-million target "should get us to the median; if not, that would mean our competitors have also improved their operations," he said.