• Earnings Per Share (EPS): $2.93 for Q1 2025, up 13% year over year.
• Return on Equity (ROE): 17.6% for Q1 2025.
• CET1 Ratio: 13.6% at the end of Q1 2025.
• Dividend Payout Ratio: 40.6% in Q1 2025.
• P&C Banking Net Income: $290 million in Q1 2025.
• Personal Mortgages Growth: 3% year over year.
• Commercial Loans Growth: 13% year over year.
• Wealth Management Net Earnings Growth: 23% year over year in Q1 2025.
• Financial Markets Net Income Growth: 35% year over year in Q1 2025.
• Credigy Net Income Growth: 8% year over year.
• ABA Bank Loan Book Growth: 9% year over year in Q1 2025.
• ABA Bank Client Base Growth: 31% year over year in Q1 2025.
• ABA Bank Deposit Growth: 19% year over year in Q1 2025.
• Revenue Growth: 19% year over year in Q1 2025.
• Pre-Tax Pre-Provision (PTPP) Growth: 28% year over year.
• Efficiency Ratio: 50% in Q1 2025.
• Expenses Growth: 12% year over year.
• Effective Tax Rate: 22.6% in Q1 2025.
• Non-Trading Net Interest Income (NII) Growth: 3% sequentially.
• Loans Growth: 7% year over year, 1% quarter over quarter.
• Deposits Growth (excluding wholesale funding): 12% year over year, 4% quarter over quarter.
• Total Provisions for Credit Losses (PCLs): $254 million, 41 basis points.
• Gross Impaired Loan Ratio: 79 basis points, up 11 basis points sequentially.

• Warning! GuruFocus has detected 4 Warning Signs with NTIOF.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• National Bank of Canada (NTIOF) reported a strong earnings per share of $2.93 for Q1 2025, marking a 13% increase year-over-year.
• The bank achieved a return on equity of 17.6%, reflecting strong execution across business segments.
• The acquisition of Canadian Western Bank (CWB) is expected to enhance National Bank's domestic growth and expand its banking capabilities.
• Wealth Management segment saw a 23% increase in net earnings year-over-year, driven by market appreciation and strong net entries.
• Financial Markets exceeded expectations with a 35% year-over-year net income growth, benefiting from strong issuance volumes and securities finance opportunities.

Negative Points

• Canada's economic performance is lagging behind the US and other G7 nations, with declining productivity and GDP per capita.
• The threat of US tariffs creates increased uncertainty, potentially impacting economic growth and prolonging the credit cycle.
• Total provisions for credit losses (PCLs) increased to $254 million, reflecting heightened uncertainty and potential tariff impacts.
• The bank's effective tax rate increased due to the application of Pillar 2 rules, impacting financial results.
• ABA Bank continues to face challenges with lower tourism spend impacting customer activity, despite a 9% loan book growth year-over-year.

Q & A Highlights

Q: What assumptions are included in the updated guidance for 2025, particularly regarding tariffs and their impact on impaired PCL and EPS? A: Jean-Sebastien Gris, Chief Risk Officer, explained that the PCL guidance includes the acquisition of CWB and reflects increased uncertainty due to potential tariffs. The top two files accounted for 10 basis points of impaired loan losses, indicating lumpiness. Marie Gingras, CFO, added that the EPS outlook, excluding the amortization of the fair value mark, still expects mid-single-digit growth, with no material impact from tariffs factored in yet.

Q: When will National Bank of Canada provide guidance on revenue synergies related to the CWB acquisition? A: Marie Gingras, CFO, stated that they plan to provide guidance on revenue synergies later in the year as the integration progresses. Michael Denham, EVP of Commercial and Private Banking, added that some revenue synergies, like using their balance sheet to support CWB clients, are already underway.

Q: How does National Bank of Canada view the potential impact of tariffs on commercial credit and PCLs? A: Jean-Sebastien Gris, Chief Risk Officer, noted that while there is uncertainty around tariffs, the commercial credit portfolio remains resilient. The watchlist levels are stable, and the lumpiness observed in Q1 was due to a few specific files. The bank continues to monitor the situation closely.

Q: What is the outlook for National Bank of Canada's capital management and share buybacks post-CWB acquisition? A: Marie Gingras, CFO, mentioned that the bank is comfortable with its capital levels post-acquisition, with a CET1 ratio of 13.6%. Share buybacks are planned for 2026, and a detailed capital deployment strategy will be shared in Q4. Laurent Ferreira, CEO, emphasized the importance of maintaining optionality given the current economic environment.

Q: How does National Bank of Canada expect the P&C margin to evolve with the addition of CWB and the impact of the fair value mark amortization? A: Lucie Blanchet, EVP of Personal Banking and Client Experience, explained that asset spreads are expected to remain healthy, but deposit spreads are under pressure. Marie Gingras, CFO, noted that the fair value mark amortization will impact NII and NIM, and more guidance will be provided in the next quarter.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.