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National Bank of Canada's (NTIOF) Q3 Earnings Increase Y/Y

Zacks Equity Research

National Bank of Canada’s NTIOF third-quarter fiscal 2019 (ended Jul 31, 2019) adjusted earnings per share were C$1.66, up 9% from the year-ago reported figure.

Results were driven by increase in non-interest income and net interest income. Also, rise in loans and deposits and strong capital position were positive factors. However, increase in provisions and higher expenses were headwinds.

After considering certain non-recurring items, net income was C$608 million ($457.7 million), reflecting a rise of 7% year over year.

Furthermore, on a year-over-year basis, all the segments witnessed improvement in net income. Personal & Commercial Banking, Wealth Management, Financial Markets and US Specialty Finance & International reported rise of 11%, 5%, 2% and 28%, respectively, in quarterly net income.

Revenues Grow, Expenses & Provisions Rise

Adjusted total revenues were up 5% year over year to C$1.95 billion ($1.47 billion). On a reported basis, total revenues came in at C$2.04 billion ($1.54 billion), reflecting an increase of 10%.

Net interest income was C$913 million ($687.3 million), up 5% from the year-ago quarter. The increase reflected rise in interest income, partially offset by higher interest expenses.

Non-interest income increased 5% to C$1.03 billion ($775.5 million). The rise was mainly driven by higher trading, trust service revenues and mutual fund fees.

Adjusted non-interest expenses totaled C$1.04 billion ($782.9 million), increasing 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 up 13% to C$86 million ($64.7 million).

Strong Balance Sheet & Capital Ratios

Total assets were C$276.3 billion ($209.4 billion) as of Jul 31, 2019, up 3% from the prior quarter. Average loans and acceptances grew nearly 2% sequentially to C$149.4 billion ($113.2 billion) and deposits rose nearly 3% to C$186.3 billion ($141.2 billion).

As of Jul 31, 2019, Common Equity Tier 1 ratio was 11.7%, up from 11.6% in the prior-year quarter. Furthermore, Tier 1 capital ratio was 15.2% compared with 15.4% as of Jul 31, 2018. Total capital ratio was 16.3%, down from 16.7%.

Adjusted return on common shareholders’ equity was 18.6%, up from 18.4% 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 trade tensions and interest rate uncertainty prevailing in the market, the bank remains focused on its strategy to manage costs, credit and capital.

National Bank of Canada Price and Consensus

National Bank of Canada Price and Consensus

National Bank of Canada price-consensus-chart | National Bank of Canada Quote

National Bank of Canada currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Canadian Banks

Royal Bank of Canada’s RY third-quarter fiscal 2019 (ended Jul 31) net income was C$3.3 billion ($2.5 billion), up 5% from the prior-year quarter. The bank witnessed higher revenues, and growth in loans and deposit balances. However, rise in expenses and higher provisions adversely impacted results to some extent.

Canadian Imperial Bank of Commerce CM reported third-quarter fiscal 2019 (ended Jul 31) net income of C$1.40 billion ($1.05 billion), reflecting a rise of 2% year over year. Results were driven by increase in non-interest income and net interest income. However, significant rise in provisions and higher operating expenses were the undermining factors.

The Bank of Nova Scotia BNS reported third-quarter fiscal 2019 (ended Jul 31) adjusted net income of C$2.5 billion ($1.9 billion), up 9% year over year. Increase in revenues, along with strong capital and profitability ratios, was the driving factor. However, escalating expenses and provisions were on the downside.

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