British Columbia wanted its own bank, which now thrives
Vancouver, British Columbia — The Bank of British Columbia had an odd start. It was founded because of the suspicion many British Columbians have for the eastern financial community. To be more specific, the provincial premier, the late W. A. C. Bennett Sr., thought British Columbia should have a bank of its own, one not headquartered in Toronto or Montreal in "the east."
That bank was launched 13 years ago and today the Bank of B.C. is thriving. Profits in the first quarter were up some 200 percent from the same period in 1980.
Originally Mr. Bennett, the father of today's provincial premier, William R. Bennett, thought the province should own at least part of the new bank. But the federal government, which has the constitutional responsibility for banking in Canada, ruled that out.
So, at Mr. Bennett's initiative, a group of British Columbian's raised $12.7 million, got a charter approved by Parliament in Ottawa in 1966, and established the first branch of the Bank of British Columbia in 1968 in Vancouver. The bank was on its own, competing with other banks for the benefits of the provincial government.
Mr. Bennett did give the bank an initial assist, however, by directing some crown corporations and other agencies to place funds in the newborn institution. But that government aid was a one-time boost, insists Victor Dobb, the bank's executive vice-president.
But the misconception that the bank is controlled by or heavily influenced by the provincial government slipped away only in the last four or five years, Mr. Doob says. Since under Canadian law no single individual or group can own more than 10 percent of a commercial bank, the Bank of B.C. is not even controlled by any dominant shareholder among its 11,000 stock owners, he adds.
For many years, this new bank's deposits grew at a rate of about 35 percent a year. The bank's aim was to bring in new business as fast as possible, and it succeeded. It was helped by the rapid economic growth of western Canada in the 1970s. As many as 1,000 newcomers a week were moving into Vancouver, the province's biggest city. The population of the entire province rose from 2,060, 000 in 1969 to 2,569,900 in 1979.
Moreover, the bank was an innovator, introducing new services to the Canadian banking scene that proved popular and were subsequently copied by other banks. For instance, it copied from the Wells Fargo Bank in California an account providing a package of services for a monthly fee, rather than a per-check charge. "People were concerned about being nickeled and dimed to death," Mr. Dobb said.
He maintains also that the bank's decision to build relatively large branches , rather than more small ones, has helped. "We don't have a branch every two or three blocks," he said. "However, we do have them fairly strategically located."
Profits, unfortunately, did not keep up with deposit growth. Indeed, notes Bruce Clarke, an investment analyst with Pemberton Securities Ltd., the bank was far less profitable than its competitors in relation to either equity or deposits.
A year or so ago the bank changed its strategy, deciding to concentrate on improving profits. Several high executives, apparently in disagreement with this plan, left the bank. As a result of the change, however, profits for the bank's first fiscal quarter, ending Jan. 31, jumped to $3.19 per share, from $1. 08 per share for the comparable quarter the previous year. "It is almost like a turnaround," Mr. Clarke said.
Earnings for the Bank of B.C. are now more comparable with the average for Canadian banks. The same is true of growth. Total assets were up 17 percent last year from 1979.
"That was planned to some extent," said Mr. Dobb. "We were trying to bring earnings into a better balance."
Today the bank has some 50 branches in British Columbia and Alberta. It added two last year and expects to add three more this year. But it has no plans to branch in the east. "We will concentrate on the areas we know best and are known best," Mr. Dobb said. The bank advertises itself as "Canada's western bank," partly to avoid any stigma in Alberta from its name, chiefly to appeal to western Canadian pride. It is the only Canadian bank with its major operations exclusively in this fast-growing region.
That's one reason its stock rose in price last year from $27 to a peak of $45 . The price is not a little under that peak.
The bank still has some problems. In the view of Mr. Clarke, it has an inadequate staff training program and thus does not promote sufficiently from within. It does not yet have any automated teller machines like some of its competitors, although Mr. Dobb says this is "very much in the works." Further, its international business in only 20 percent of its total, compared with an average of 35 percent for its competitors.
Nonetheless, Mr. Clarke, estimating that the bank's earnings will rise to $7 to $9 per share this year, reckons the Bank of B.C.'s st ock is "probably the best buy" among Canadian bank stocks.