National Bank Profit Rises on Gain From Cambodia Acquisition

  • Third-quarter profit improves as loan-loss provisions fall
  • Capital markets earnings down 13% as trading revenue declines

National Bank of Canada became the sixth Canadian lender to beat analysts’ estimates, posting a 5.5 percent jump in fiscal third-quarter profit helped by a gain tied to its acquisition of a Cambodian lender.

Net income for the quarter ended July 31 rose to C$478 million ($365 million), or C$1.31 a share, from C$453 million, or C$1.28, a year earlier, the Montreal-based company said Wednesday in a statement. Earnings excluding some items were C$1.33 a share, beating the C$1.20 average estimate of 11 analysts surveyed by Bloomberg.

Earnings were helped by a C$41 million gain from the revaluation of the firm’s investment in Advanced Bank of Asia Ltd. National Bank acquired a controlling stake in the Cambodia bank in May, building on its initial 10 percent investment in 2014. The Canadian lender had record profit in personal and commercial banking and higher wealth management earnings, countering a 13 percent decline in its capital-markets division.

"Credit quality and capital look good, though operating trends were soft relative to peers," Scotia Capital analyst Sumit Malhotra said in a note to clients. "We were surprised that the bank opted to include the C$41 million revaluation gain on its ABA stake in its definition of ‘core.’"

Shares Decline

National Bank shares fell 1.8 percent to C$46.71 at 10:26 a.m. in Toronto, the worst performance in the eight-company S&P/TSX Commercial Banks Index. The stock earlier fell as much as 2 percent, the lowest intraday since June 27.

“Net income showed good growth, mainly in the wealth management and personal and commercial segments, the latter benefiting from the good credit quality of its loan portfolio," Chief Executive Officer Louis Vachon, 54, said in the statement.

Personal and commercial banking, National Bank’s biggest division, rose 5.2 percent to C$203 million, while wealth-management profit rose 5 percent to C$80 million. The capital-markets unit posted profit of C$174 million, a 13 percent decline from a year earlier, as trading revenue declined.

Revenue rose 2.2 percent to C$1.61 billion from a year earlier, while provisions for loan losses dropped 20 percent to C$45 million, according to the statement. Both beat analysts’ estimates.

National Bank was hurt earlier in the year by a surge in soured energy loans, prompting the firm to increase provisions in the second quarter. Impaired oil-and-gas loans were C$149 million in the third quarter, down from C$178 million in the second quarter. The bank had C$2.54 billion of oil-and-gas loans at the end of July, compared with C$2.93 billion at the end of April, according to the disclosures.

The lender, Canada’s sixth-biggest by assets, is the last of the country’s big banks to report results.

Before it's here, it's on the Bloomberg Terminal.