29-05-2025
National Bank of Canada (NTIOF) Q2 2025 Earnings Call Highlights: Strong EPS Growth and ...
Earnings Per Share (EPS): $2.85, up 12% year-over-year.
Return on Equity (ROE): 15.6%.
CET1 Ratio: 13.4%.
Quarterly Dividend Increase: Raised by $0.04.
P&C Banking Net Income: $316 million, including $45 million from CWB.
Wealth Management Net Income Growth: 15% year-over-year.
Financial Markets Net Income: Over $500 million.
Credigy Net Income: $40 million.
ABA Bank Client and Deposit Growth: 33% and 21% respectively.
Revenue Growth (All-Bank): 33% year-over-year.
PTPP Growth (All-Bank): 45% year-over-year.
Expenses Increase (Excluding CWB): 12% year-over-year.
Non-Trading Net Interest Income (NII) Increase: 11% sequentially.
Total Loans: $286 billion, up 22% year-over-year.
Deposits (Excluding Wholesale Funding): $294 billion, up 23% year-over-year.
Total PCLs: $545 million or 79 basis points.
Adjusted Total PCLs: $315 million or 45 basis points.
Gross Impaired Loan Ratio: 98 basis points.
Warning! GuruFocus has detected 4 Warning Signs with NTIOF.
Release Date: May 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
National Bank of Canada (NTIOF) reported a 12% year-over-year increase in earnings per share, reaching $2.85.
The bank's return on equity was strong at 15.6%, reflecting robust financial performance.
The acquisition of CWB is progressing well, with early momentum in cost and funding synergies.
Wealth management saw a 15% increase in net income year-over-year, driven by strong organic growth.
The bank's CET1 ratio stands at a solid 13.4%, supporting business growth and allowing for a dividend increase.
Macroeconomic uncertainty, including global trade tensions and geopolitical instability, poses challenges to forecasting growth and inflation.
Operating leverage was negative in the wealth management segment due to the integration of CWB's wealth business.
The bank faces competitive pressures in deposit pricing, impacting net interest margins.
The integration of CWB is expected to temporarily slow growth in certain segments, such as commercial loans.
The bank's gross impaired loan ratio increased, driven by the CWB transaction, indicating potential credit quality concerns.
Q: Why didn't National Bank of Canada update its earnings guidance despite strong Q2 results? A: Marie Gingras, CFO, explained that while they are confident in delivering mid-single-digit EPS growth for fiscal 2025, they see potential upside depending on market conditions. The strong first half provides a solid foundation, but they face a tough comparison in Q3. The successful integration of CWB is expected to create growth opportunities across Canada.
Q: Can you provide more details on the AIRB transition and its impact on risk-weighted assets? A: Marie Gingras noted that while a small portfolio was migrated this quarter, the majority of the benefits from the AIRB transition are expected in 2026. A full capital plan update will be provided later in the year, likely in Q4.
Q: Why isn't National Bank of Canada considering share buybacks given its strong CET1 ratio? A: Laurent Ferreira, CEO, stated that the focus is on organic growth and integrating CWB. The bank is cautious due to market uncertainty and plans to provide a capital plan update in Q4, which will include discussions on buybacks.
Q: What needs to happen for revenue synergies from the CWB acquisition to materialize? A: Michael Denham, EVP, explained that revenue synergies will begin once client migrations to National Bank's systems are complete. This will allow CWB clients to access the full range of National Bank products and services, with migrations starting in the summer.
Q: How did National Bank of Canada achieve such strong trading results in Q2? A: Etienne Dubuc, EVP, Financial Markets, attributed the success to an ideal trading environment with short volatility events, strong client activity, and robust issuance. The bank's defensive positioning and advanced trading technology allowed it to capitalize on market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
