National Bank profits rise, ups dividend, boosted by stable home market

TORONTO — Quebec-focused National Bank of Canada bucked the general trend of downward profits among banks this quarter as it benefited from higher stability in its home market.

The Montreal-based bank on Wednesday reported a second-quarter profit of $906 million, up from $832 million a year earlier, while raising its quarterly dividend by four cents to $1.10 per share.

The increased payment to shareholders came as National Bank says its profit amounted to $2.54 per diluted share for the quarter ended April 30, up from $2.34 per diluted share in the same quarter last year. Adjusted profits were reported as the same.

The bank is the only one of the four that have reported so far to show a rise in both adjusted and unadjusted profits, as banks set aside more money for potentially bad loans and loan growth slows.

Scotiabank reported profits were down in both categories, while TD's unadjusted profits were down and BMO's adjusted profits dropped.

National Bank has not been immune from credit trends that have pressured other bank earnings, reporting $138 million in provisions for credit loss, up from $85 million last year, but that was largely in line with analyst expectation.

Chief executive Laurent Ferreira credited the performance of the bank to its disciplined execution of strategy and diversified earnings power, but National Bank has also benefited from a concentration in its home market, where it generates a little over half of its revenue.

The bank noted that both in credit cards and variable rate mortgages, its clients outside of Quebec have seen the relative largest increases in delinquencies, along with clients who are non-homeowners and those with insured mortgages.

Uninsured variable rate mortgage delinquencies in the Quebec region still remain below pre-pandemic levels, said chief risk officer William Bonnell.

He said the performance can be explained by Quebec households being more resilient, with more dual-income families and the economy more diversified, but especially because of lower house prices.

"The lower house price has a real impact on the size of the payment shock," said Bonnell.

"So the same interest rate change just doesn't hit the household budget as much, and is more easily offset by wage growth and other aspects."

The average house price in Quebec stood at $516,020 in April compared with $716,044 nationally, according to the Canadian Real Estate Association. Neighbouring Ontario was at $900,161 for the month.

The provincial boost to its credit performance, along with a surprise upside in capital markets, helped National Bank beat analyst expectations of a profit of $2.45 per share, according to LSEG Data & Analytics.

Revenue totalled $2.75 billion, up from $2.45 billion a year earlier, while the bank's provision for credit losses amounted to $138 million, up from $85 million in the same quarter last year.

National Bank said its personal and commercial business earned $311 million in its latest quarter, down from $320 million in the same quarter last year as it faced higher provisions for credit losses.

The bank's wealth management operations earned $205 million, up from $178 million in the second quarter of 2023, while its financial markets business earned $322 million in the quarter, up from $268 million a year earlier.

National Bank's U.S. specialty finance and international business earned $163 million in its latest quarter, up from $128 million in the same quarter last year.

The bank's "other" segment reported a loss of $95 million in its latest quarter compared with a loss of $62 million a year ago.

This report by The Canadian Press was first published May 29, 2024.

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Ian Bickis, The Canadian Press