Morningstar DBRS Comments on CWB Disclosure of a Legal Claim Against Its Subsidiary

On December 7, 2024, Canadian Western Bank (CWB or the Bank; rated at A (low), Under Review with Positive Implications by Morningstar DBRS) provided an update concerning the announcement that the release of its fourth quarter and fiscal 2024 financial results have been rescheduled to mid-December 2024 from December 6, 2024. The delay of the earnings release was associated with the receipt of a legal claim against CWB Maxium Financial Ltd. (Maxium), a wholly owned subsidiary of CWB, which occurred late in the process of approving and disclosing the annual financial results. The claim contains several allegations, including allegations of unethical conduct by a Maxium sales agent. The claimant is seeking $18 million in damages, as well as additional general and punitive damages and costs, associated with the provision of certain loans to corporations affiliated with the claimant and the resolution of these loans.

The legal claim raises some credit concerns, and Morningstar DBRS will be closely monitoring the ongoing investigation and the final outcome, including the magnitude of the total costs/damages as well as potential nonfinancial risks to which the Bank may be exposed. Any negative developments as a result of potential risk-management control deficiencies, corporate governance failures and/or culture/conduct issues could have negative credit ratings implications.

In our baseline scenario, however, Morningstar DBRS expects that the outcome of this claim will not have a material financial impact on the Bank. Further, Morningstar DBRS expects CWB's potential acquisition by National Bank of Canada (rated at AA with a Stable trend by Morningstar DBRS) to continue moving forward and close as planned by the end of 2025. These expectations underpin CWB's credit ratings and the Under Review with Positive Implications status. This baseline scenario is subject to change depending on developments associated with the aforementioned legal claim.

Notes:
All figures are in Canadian dollars unless otherwise noted.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577