National Bank of Canada NA-T -5.80%decrease posted higher third-quarter profit that beat analysts’ expectations as the lender booked stronger performance across personal banking, capital markets and wealth management.
National Bank’s net income climbed 23 per cent to $1.31-billion, or $3.25 per share, in the three months that ended July 31.
Adjusted to exclude certain items, including costs related to the acquisition of Canadian Western Bank and transactions with Laurentian Bank of Canada, the bank said it earned $3.39 per share, beating the $3.21 per share analysts expected, according to data by S&P Capital IQ.
“We delivered strong earnings and revenue growth, as well as a high return on equity, continuing the momentum achieved since the beginning of the year,” National Bank chief executive officer Laurent Ferreira said in a statement.
“Despite trade and geopolitical uncertainty, Canada’s resilience and the retooling of its economy are creating opportunities for growth.
National Bank is the third major Canadian bank to report earnings for the fiscal third quarter. Bank of Montreal and Bank of Nova Scotia posted better-than-expected results on Tuesday. Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will wrap up the week with earnings releases on Thursday.
Canadian bank stocks surged this year, outperforming Canada’s stock market and U.S. lenders. Investors have been eager for third-quarter results to help determine whether bank shares’ rich valuations have peaked.
In the quarter, National Bank set aside $246-million in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated and less than the $203-million reserved in the same quarter last year.
Total revenue rose 18 per cent in the quarter to $4.05-billion while expenses increased 9 per cent to $2.09-billion, which the bank said was driven by higher variable compensation and litigation costs.
Profit from personal and commercial banking was $421-million, up 14 per cent from a year earlier, as personal lending grew 13 per cent and commercial lending rose 4 per cent.
Capital markets profit jumped 32 per cent to $442-million, driven by higher revenue across global markets and corporate and investment banking.
National Bank generates more of its profit from capital markets compared to its peers, benefitting from higher trade and deal activity. Capital markets profit jumped 32 per cent to $442-million, driven by higher revenue across global markets and corporate and investment banking.
“Overall, this was another strong quarter for [National Bank], supported by broad-based operating performance and continued strength in its market-sensitive businesses, particularly equity trading,” Raymond James analyst Stephen Boland said in a note to clients.
The lender is conducting a strategic review of its personal and commercial business, where it is underearning compared to the other big banks. Profit from personal and commercial banking was $421-million, up 14 per cent from a year earlier, as personal lending grew 13 per cent and commercial lending rose 4 per cent.
The wealth management division generated $296-million of profit, up 21 per cent on higher fee-based revenues.
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