National Bank of Canada NA-T +3.45%increase reported second-quarter profit that beat analysts’ estimates on a boost from capital markets even as the lender ramps up provisions for bad loans.
National’s net income decreased by 1 per cent to $896-million, or $2.17 per share, in the three months that ended April 30.
Adjusted to exclude certain items, including acquisition and integration costs related to the acquisition of Canadian Western Bank, the bank said it earned $2.85 per share. That edged out the $2.40 per share analysts expected, according to S&P Capital IQ.
“In the context of continued geopolitical and geoeconomic uncertainty, our strong capital position allows us to support business growth,” National chief executive officer Laurent Ferreira said in a statement.
The bank raised its quarterly dividend by 4 cents to $1.18 per share.
National is the fourth major Canadian bank to report earnings for the fiscal second quarter. Bank of Montreal also released results Wednesday, posting profit that beat expectations.
Over the past week, Toronto-Dominion Bank posted results that beat analyst estimates and Bank of Nova Scotia missed expectations. Royal Bank of Canada and Canadian Imperial Bank of Commerce release results on Thursday.
Analysts expected Canada’s banks to continue grappling with higher loan loss reserves as U.S. President Donald Trump’s trade war threatens a deeper economic downturn.
In the quarter, National set aside $545-million in provisions for credit losses – the funds banks reserve to cover loans that may default. That was higher than analysts anticipated, and included $315-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses.
In the same quarter last year, National reserved $138-million in provisions.
In the beginning of the quarter, National closed its takeover of Edmonton-based CWB, significantly expanding its footprint in Alberta and British Columbia. National is currently integrating Canada’s ninth-largest lender — a process that is driving up costs.
Total revenue rose 33 per cent in the quarter to $3.65-billion while expenses jumped 32 per cent to $1.94-billion.
Profit from Canadian personal and commercial banking was $132-million, down 58 per cent from a year earlier, driven by higher expenses due to the CWB takeover and a jump in provisions.
The wealth management division generated $232-million of profit, up 13 per cent, driven by higher fee-based revenues, net interest income and revenue from CWB.
Capital markets profit jumped 56 per cent to $501-million on a jump in trading revenue.
Leave a Reply
You must be logged in to post a comment.