National Bank on Friday unveiled results well above analysts’ expectations for its second quarter, as the Montreal financial institution prepares to navigate through a more uncertain economic environment.
Already muddied by the war in Ukraine and supply chain disruptions, the economic backdrop looks even more uncertain as economists expect the Bank of Canada to raise interest rates faster than expected. Some experts fear that the tightening of monetary policy will lead to a recession.
“This is not the scenario we foresee, but this risk exists and we take it into account in our decisions”, assured the President and Chief Executive Officer of the National Bank, Laurent Ferreira, during a teleconference with the analysts to discuss the most recent quarterly results.
Resilience, an asset
In this difficult economic context, the big boss of the National Bank believes that the resilience of the Canadian economy is an asset.
He pointed out that the Canadian economy was supported by the natural resources sector and that the unemployment rate remained relatively low in the country. He also noted that the fundamentals of the Quebec economy were solid and said the affordability of the real estate market was relatively better than elsewhere in the country.
During the call, analysts questioned management about its intentions regarding equity buffers.
The CET1 capital ratio, an important metric for assessing a bank’s ability to weather an economic shock, stood at 12.9% as of April 30, up from 12.4% for six months. earlier.
An increase in the dividend
In theory, an improvement in this ratio could mean that a bank has more leeway to make acquisitions, buy back shares or increase its dividend.
An analyst asked Mr. Ferreira if he would be comfortable with the idea of increasing this ratio to 11%.
“We are very comfortable with our equity,” he replied. In the uncertain environment we live in, going to 11% is not something we think about. The board of directors has also authorized an increase in the quarterly dividend of 6%, increasing it to 92 cents per share.
Results above expectations
National Bank’s most recent quarter results showed revenue increases for all of its business lines.
During the period ended April 30, the financial institution posted earnings of $2.55 per share, compared to $2.25 for the same quarter last year.
Analysts had expected earnings per share of $2.25, according to financial data firm Refinitiv. “This outperformance is explained by much stronger brokerage revenues,” explained Mario Mendonca, analyst at TD Securities.
Net profit of 893 million was up from the 801 million reported for the same period last year.