Thursday, September 27, 2007

Big 5 Not Increasing Presence in Quebec: National Bank

Canadian Press, 27 September 2007

Canada's five largest banks have failed to dramatically increase their physical presence in Quebec or provide a consistent approach in the province, says the head of the National Bank of Canada.

“To have an impact on a mature market like Quebec, you need a consistent approach to that market and I think for our competitors, their approach has been anything but consistent regarding Quebec,” CEO Louis Vachon told analysts Thursday at a CIBC investors conference in Mont-Tremblant.

Mr. Vachon heads Canada's sixth-largest bank. His comments were directed at Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, and TD Canada Trust.

Mr. Vachon said the impact of the leading banks over the last 18 to 24 months has primarily been to tighten spreads in mortgages and some commercial banking — essentially using competitive pricing to attract customers.

Louis Vachon maintains that the Big Five banks have an inconsistent approach to the Quebec financial services market.

He noted the National Bank has not been as disciplined as it should have been in some of its pricing.

Meanwhile, Mr. Vachon said National Bank will continue to focus part of its growth strategy on expanding its presence outside Quebec, which accounts for 65 to 70 per cent of its business.

Early next year, it plans to disclose its expansion plans. But Mr. Vachon said the bank has preferred to focus on areas where it already has a presence in francophone areas of New Brunswick and Ontario, particularly in the Toronto area and Windsor, Ont.

It is also working on replicating its success in servicing the agricultural community of Quebec by expanding in Western Canada. It has offices in Calgary and Lethbridge.

Mr. Vachon said it has expanded its market share over the past five years in the oil and gas sector based in Calgary, where it has been active for nearly a quarter century.

He said the current crisis in credit markets may also pave the way for it to make acquisitions in the brokerage and wealth management businesses.

On the dividend front, Mr. Vachon said the bank is guided by caution and seeks only to increase the return to shareholders when it “is sustainable in any circumstances.”

As for the future, Mr. Vachon had this warning to those who question the future of the country's sixth-largest bank.

“Do not underestimate the strength of the franchise and the capacity of the franchise to generate earnings growth.”