National Bank of Canada Says Basel Requirements May Reduce Capital Ratios

National Bank of Canada, the country’s sixth-largest bank by assets, said capital requirements to be announced later this year may eventually reduce capital ratios by about 250 basis points.

The prediction was made by Chief Executive Officer Louis Vachon on a conference call with analysts today. The Montreal- based lender said it expects to be “more precise” about its plans for capital in late November, after the Basel Committee on Banking Supervision meets to discuss rules.

The estimate “is a projection that we’re making that the National Bank will be impacted by in 2018,” Chief Financial Officer Patricia Curadeau-Grou said in a telephone interview. “We’ve made a lot of assumptions there in terms of the top-line growth, the impact of different other elements which would account for an impact of 250.”

National Bank reported today a Tier 1 capital ratio of 13 percent at the end of July, up from 10.7 percent at the end of Oct. 2009. The lender said today that profit fell for the first time in six quarters on lower fees from capital markets-related businesses.

Royal Bank of Canada and other Canadian lenders haven’t yet disclosed estimates for Basel’s potential impact on capital levels.

“I think it’s too preliminary to be disclosing publicly what the impact is because it’s still a moving target,” Barbara Stymiest, Royal Bank’s group head of strategy, treasury and corporate services, said today in an interview at Bloomberg’s Toronto headquarters. “It’s difficult to say where you are when the rules aren’t final, the minimum levels aren’t final and the phase-in periods aren’t final.”

National Bank rose C$2.35, or 4.2 percent, to C$58 in 4:10 p.m. trading on the Toronto Stock Exchange. It was the biggest-one day gain since May 4, 2009.

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

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