The National Bank’s major acquisition project in Western Canada continues to give rise to caution as evidenced by the decline in the stock which has reached around 10% since its announcement a week ago.

National Bank shares fell again during the first trading session of the week. Shares of Quebec’s largest bank ended in negative territory for the fourth consecutive session since management revealed an agreement to buy Canadian Western Bank.

The slide continued on Monday despite the National Bank receiving new support at the start of the day. Analyst Nigel Dsouza, from the Veritas firm, told his clients this morning that he now recommends the purchase of National Bank shares, describing the acquisition project as a “strategic victory”, because it allows to diversify and extend the franchise of banking services to individuals and businesses outside Quebec.

His colleague Meny Grauman, from Scotia, for his part considers the reaction of investors too severe.

This expert says he has a “very positive” view of the proposed transaction and considers it “low risk”. It’s a winning strategic operation,” he underlines in a note sent to his clients on Monday.

“As with all transactions, execution will be key,” he says.

This transaction, valued at five billion dollars, to be carried out by exchange of shares, is certainly a high price in the eyes of portfolio manager Alain Chung, of the Claret firm.

“The quality of loans at Canadian Western Bank is not as good as the average quality of loans at large banks,” adds Alain Chung. “It’s not for nothing that Western Bank stock was trading at a price lower than its book value. The market is not stupid after all. »

The 110% premium offered by the National Bank has not finished fueling discussions. If the premium paid is so high, it is in particular to prevent any competing offer, affirms Meny Grauman.

In this regard, only CIBC is able to challenge National Bank, according to TD analyst Mario Mendoca, because the other banks are either managing transactions on their own or processing transactions. other questions that would make it difficult to submit an offer.

Meny Grauman also notes that the transaction contributes to further diluting the National Bank’s exposure to Cambodia. This situation reinforces his opinion that the National Bank may decide to sell the banking institution it owns in Southeast Asia and which he values ​​at more than $2.7 billion. “The gain realized could certainly be used to offset a significant portion of the dilution resulting from the purchase of Canadian Western Bank. »

He notes that the addition of Canadian Western Bank will increase National Bank’s Canadian loan portfolio outside Quebec by 37% and its domestic business banking portfolio by 52%.

“The transaction will also diversify National Bank’s revenue stream and provide significant growth opportunities in the financial markets and wealth management segments. »

There are now five out of 12 analysts suggesting the purchase of National Bank shares, according to information collected by the financial data firm Refinitiv.