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National Bank of Canada (NTIOF) Q2 Earnings Decline Y/Y

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·4 min read
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National Bank of Canada’s NTIOF second-quarter fiscal 2020 (ended Apr 30, 2020) adjusted earnings per share were C$1.01, down 33% from the year-ago reported figure, thanks to a substantial rise in provisions, owing to the coronavirus outbreak-related concerns.

Elevated compensation along with occupancy and technology costs acted as headwinds. However, increases in non-interest income and net interest income were positive factors. Also, rise in loans and deposits, and strong capital position were tailwinds.

The company reported net income of C$379 million ($275.6 million), reflecting a fall of 32% year over year.

Furthermore, on a year-over-year basis, all segments witnessed improvement in net income. Wealth Management, Financial Markets, and US Specialty Finance & International reported rise of 21%, 1% and 3%, respectively, in quarterly net income. However, Personal & Commercial Banking unit witnessed a significant decline in net income.

Revenues Increase, Expenses & Provisions Surge

Adjusted total revenues were up 14% year over year to C$2.11 billion ($1.53 billion). On a reported basis, total revenues were C$2.04 billion ($1.48 billion), reflecting an increase of 15% year over year.

Net interest income was C$1.16 billion ($0.84 billion), up 17.6% from the year-ago quarter. The increase reflected fall interest expenses, partially offset by lower interest income.

Non-interest income increased 10.2% to C$951 million ($691.5 million). The rise was mainly driven by increase in almost all the components except for card revenues.

Adjusted non-interest expenses totaled C$1.12 billion ($0.81 billion), increasing 9.3% from the year-ago quarter. Higher compensation and employee benefits along with occupancy and technology costs led to the jump.

Total provision for credit losses was C$504 million ($366.5 million) compared with C$84 million in the year-ago quarter.

Strong Balance Sheet & Capital Ratios

Total assets were C$317 billion ($227.2 billion) as of Apr 30, 2020, up 9.6% from the prior quarter. Average loans and acceptances grew 3.5% sequentially to C$160 billion ($114.7 billion) and average deposits rose nearly 3% to C$205.1 billion ($147 billion).

As of Apr 30, 2020, Common Equity Tier 1 ratio was 11.4%, down from 11.5% in the prior-year quarter. Furthermore, Tier 1 capital ratio was 14.4% compared with 15.1% as of Apr 30, 2019. Total capital ratio was 15.5%, down from 16.2%.

Adjusted return on common shareholders’ equity was 10.7%, down from 17.8% a year ago.

Our Viewpoint

We believe that continued improvement in loan balances and diversified product mix will drive National Bank of Canada’s organic growth. Also, despite concerns over the coronavirus outbreak and economic slowdown prevailing in the market, the bank remains focused on its strategy to manage costs, credit and capital.

National Bank of Canada Price and EPS Surprise


National Bank of Canada Price and EPS Surprise
National Bank of Canada Price and EPS Surprise

National Bank of Canada price-eps-surprise | National Bank of Canada Quote

Performance of Other Banks

Mitsubishi UFJ Financial Group Inc. MUFG reported profits attributable to owners of parent for fiscal 2019 (ended Mar 31) of ¥528.1 billion ($4.9 billion), down 39% year over year. Results included the impact of net extraordinary losses, which resulted from one-time amortization of goodwill of overseas consolidated subsidiaries.

ICICI Bank’s IBN fourth-quarter fiscal 2020 (ended Mar 31) net income was INR12.21 billion ($161 million), up 26% from INR9.69 billion ($128 million) in the prior-year period. Excluding coronavirus-related provisions, net income would have been INR32.60 billion ($431 million).

Itau Unibanco Holding S.A. ITUB posted recurring earnings of R$3.9 billion ($0.88 billion) in first-quarter 2020, significantly down 43.5% year over year. Including non-recurring items, net income was R$3.4 billion ($0.77 billion), plummeting 49.3% year over year.

The Royal Bank of Scotland Group plc RBS reported first-quarter 2020 profit attributable to its shareholders of £288 million ($368.6 million), significantly down from £707 million in the prior-year quarter. Operating income totaled £519 million ($664.3 million) as compared with £1.01 billion reported in the year-ago quarter.

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