Under Louis Vachon's leadership, National Bank expanded and diversified but kept its stronghold in Quebec.Paul Chiasson/The Canadian Press
Louis Vachon is feeling serene as he walks away after almost 15 years as CEO of National Bank of Canada . But his tenure, framed by global crises, wasn’t always so calm.
His first 73 days on the job, in the summer of 2007, went more or less as expected. Then came the credit crunch that froze the market for asset-backed commercial paper (ABCP), which quickly became a defining moment for the Montreal-based bank. It was holding $2 billion of that paper on behalf of 250,000 retail investors, and Mr. Vachon made a swift decision to buy it back, swallowing a $575-million writedown that pushed the bank to its first quarterly loss in 15 years.
It was a serious black eye for National Bank, but helped forge Mr. Vachon’s reputation for keeping a cool head under pressure.
“I think it was quite clear I could take decisions in tough circumstances,” he said in an interview last week. “For the mid- and long term, I think that was a positive signal.”
Within months, though, the global financial system plunged into a much broader crisis, testing his mettle again. “Maybe because I started in a pretty rough period in ‘07-’08, I was never crushed by the responsibility” of running a major bank, he said.
The serenity he feels now as he steps down is not so different from the way he felt on the job. “Do I feel 100 pounds lighter? No,” he said, adding with a well-known laugh: “Because I’m not – not even five pounds lighter.”
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The bank he handed off Monday to new CEO Laurent Ferreira has been closely tied to Mr. Vachon’s image. At 59, he is retiring young by bank CEO standards, but was nonetheless seen as an elder statesman in Corporate Canada, a prominent public face who raised the profile of the country’s sixth-largest bank.
Under his leadership, National Bank expanded and diversified but kept its stronghold in Quebec, where a steady provincial economy has helped keep its financial performance buoyant. Its business lines have become more balanced, with wealth management gaining prominence and capital markets still a centrepiece of its strategy. Over 15 years, National Bank’s total shareholder return increased at a compound annual rate of 13 per cent, outpacing its Canadian peers and virtually all major global banks. But it never tried to become one of them.
Outside Quebec, the bank was careful to target sectors and locales where it could carve out a profitable niche. In retail banking, that meant expanding mostly in New Brunswick and Southern Ontario. Its commercial banking focused on areas such as real estate, health care and entertainment. And its international division consists largely of a U.S. specialty-finance subsidiary, Credigy Ltd., and its ownership of ABA Bank in Cambodia.
“What we tried to avoid has been a full-fledged frontal assault on retail banking across the country and a full-fledged frontal assault on the U.S. banking industry,” Mr. Vachon said. “I think there’s still plenty of room for us to be a superregional bank.”
He speaks with pride about the times National Bank shook off a nagging discount on the valuation of its stock to trade at or above the level of its peers. And he thinks he has left a bank that is more comfortable with change. But he is not without regrets.
The bank pursued an international strategy that included taking minority stakes in companies in regions with the potential for rapid economic growth, including West African countries such as Ivory Coast. But the plan “led to some confusion,” Mr. Vachon said. To calm investors’ concerns, he put a formal moratorium on further acquisitions abroad. “I think people felt it was a spray and pray strategy, which it wasn’t. I think there was more method to what we were trying to do. But it was not well explained.”
As smartphones changed the way people bank, National Bank was also late to bring a mobile banking app to market. “I was asleep at the switch on that one,” Mr. Vachon said. But he learned to pick his spots with investments in technology, avoiding pet projects that didn’t tie in directly to the bank’s strategy.
The bank also hit a rough patch in 2015. In a 12-month span, it took a $165-million writedown on its investment in Maple Financial Group Inc. and a $250-million provision for expected losses from the oil and gas sector, raised $300 million by issuing shares to shore up its capital and restructured to slash costs.
Mr. Vachon responded with the same approach he had used in the ABCP crisis: “If you’re in a bad spot, just admit it, deal with it.”
The bank put together a new plan in 2016, determined to do better, and since then its stock price has almost tripled from less than $37 to $102.75. “Sometimes we get into trouble, but we’re pretty damn good at getting out of trouble,” he said.
Since January, Mr. Vachon has been gradually handing over operations to Mr. Ferreira, who served as chief operating officer as an apprenticeship for the CEO job. National Bank needed a new strategic plan for 2022 to 2024, which has yet to be unveiled, and Mr. Vachon said he provided some feedback but was “not directly involved” in conversations led by Mr. Ferreira to craft it.
Mr. Vachon took more summer holidays this year, and last month he moved offices to make way for the change. He will take a few months off to decide what’s next, after taking a seat on the board of convenience store chain Couche-Tard in September. He is also a director at brewing giant Molson Coors, “really to taste new beers – that’s my main responsibility,” he said. “One that I take very seriously.”
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