Government approval for National Bank of Canada’s (NA.TO) acquisition of Canadian Western Bank (CWB.TO) could be delayed if the upheaval within the Liberal Party results in an early election, analysts at Jefferies Financial Group say.
Chrystia Freeland’s abrupt resignation as finance minister on Monday, hours before the government’s fiscal update, shocked Canada’s political and business communities. The developments “may have added some uncertainty to the approval timelines of the NA-CWB deal,” Jefferies analyst John Aiken wrote in a Tuesday note to investors.
Jefferies still believes the $5 billion deal should go through in the first half of 2025, Aiken writes, but the investment bank is considering a second scenario in which early elections disrupt the process.
National Bank announced the acquisition on June 11 this year, with the Competition Bureau giving the green light to the deal in September. At the time of the initial announcement, Scotia Capital analyst Meny Grauman expressed “a very positive view” of the deal in an investor note. “We tend to view in-market transactions as relatively low-risk for large Canadian banks.”
The acquisition is still under review by the Office of the Superintendent of Financial Institutions and requires ultimate approval by the federal finance minister. The exact timing of that process was not certain, but in a note following National Bank’s fourth-quarter earnings announcement on Dec. 4, RBC analyst Darko Mihelic wrote that he expected approval by May 1, 2025, “two quarters before we originally assumed (and it could be a quarter earlier than that…)”
The timeline is now less clear following the dramatic events in Ottawa on Monday. The economic statement was delivered and a new finance minister, Dominic LeBlanc, was sworn in, but calls for Prime Minister Justin Trudeau’s resignation have grown louder — as has speculation about the future of his minority government.
The developments have not impressed some in Canada’s business community. “Turmoil is always terrible news,” John Love, founder and executive chair of KingSett Capital, a private equity real estate investment firm, told the Financial Post.
Benjamin Bergen, president of the Council of Canadian Innovators, in a written statement, says Freeland’s resignation “exposes deeper cracks in the government’s ability to provide the stable, consistent leadership that businesses need. Canadian innovators cannot scale globally on shaky ground – we need strong leadership, not uncertainty, at this critical moment.”
The scenario Jefferies considers more likely is one in which the Liberals hold on to power in the short term, taking advantage of the holiday break to “regroup and strategize.” Aiken writes that the NDP and Bloc Québécois would probably prefer to “seek the time to build voter support and improve their polling, rather than vote non-confidence and call an early election.” Trudeau could also prorogue Parliament and step aside to allow a new leader to be selected, with an election still happening in the fall of 2025, Aiken says.
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In the “more or less … status quo” scenario, the CWB deal would likely still be approved in the first half of 2025, he adds.
The second scenario sees a non-confidence vote “in late February/early March, when the Liberal government tables its spring budget.” If that vote succeeded, the CWB deal approval could be pushed into the second half of the year, “as the focus of ‘government business’ takes a back seat to the election,” Aiken writes.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf. Download the Yahoo Finance app, available for Apple and Android.
Liberal tumult could see delay to National Bank’s deal for Canadian Western: Jefferies Canadian News Today.
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