Canada's National Bank to buy Canadian Western Bank for $3.6 billion

A Canadian Western Bank branch is seen in Calgary, Alberta

By Nivedita Balu and Manya Saini

TORONTO (Reuters) -National Bank of Canada said on Tuesday it would buy Alberta-based rival Canadian Western Bank in a C$5 billion ($3.63 billion) deal combining the country's sixth- and eighth-largest lenders respectively and giving the Quebec-based bank coast-to-coast exposure.

The deal is the latest in Canada's highly regulated and saturated banking space that is dominated by the big six lenders. Earlier this year, the nation's biggest lender, Royal Bank of Canada, acquired HSBC's Canadian business.

CWB, founded in 1984, focuses on commercial banking that specializes in equipment financing, trust services and wealth management, with 39 branches and 65,000 clients in Canada, concentrated in Alberta and British Columbia. Its C$37-billion loan book increases National Bank's lending portfolio outside of Quebec by 37%, the banks said.

"This transaction is about growth... and supports our objectives in Western Canada and across the country," National Bank's CEO Laurent Ferreira said.

Many Canadian banks have sought growth outside the country, typically through acquisition of regional banks south of the border. Montreal-based National Bank has focused on opportunities at home, earning about a third of its income from capital markets.

The pricetag of C$52.24 per share represents a 110% premium to CWB's Tuesday close. The banks said each CWB share will be exchanged for 0.450 of a common share of National Bank.

The deal is expected to close by the end of 2025 upon approval by CWB shareholders and regulators.

Canada's second-largest pension fund, Caisse de depot et placement du Québec, said it would invest C$500 million to complete the acquisition, which would make it the second-largest shareholder of National Bank.

($1 = 1.3756 Canadian dollars)

(Reporting by Manya Saini in Bengaluru and Nivedita Balu in Toronto; Editing by Vijay Kishore and Rod Nickel)