National Bank Of Canada Beats Profit Estimates For Second Quarter

National Bank of Canada closed out a mostly strong quarter for Canadian lenders on Friday, reporting second-quarter profit that beat estimates on lower-than-expected provisions for credit losses (PCL), with continued growth in lending and fee income helping offset higher expenses and still subdued margins.

Net income excluding one-off items was C$893 million ($700.61 million), or C$2.55, in the three months ended April 30, compared with C$801 million, or C$2.25, a year earlier. Analysts had expected C$2.25 a share.

All but one of Canada's biggest banks posted better-than-expected profit in the quarter, as they continued to reduce allowances for loan losses set aside early in the pandemic.

Taking a rosier view of consumer health and outlook for businesses than some economists and analysts have, the banks are generally betting that delinquencies will remain low and loan growth will continue even as they acknowledge some worsening of economic conditions.

National Bank took C$3 million of PCLs, down from a year earlier but ticking up from releases over the past three quarters. Analysts had expected C$44 million.

But strength in its lending business, particularly 18% year-on-year growth in business borrowing, lifted earnings 11% even excluding the impact of provisions and taxes.

That allowed revenue, which grew 9.2%, to outpace a 7.8% increase in expenses. Costs have been ticking higher at all the banks, driving by rising inflation and a tight labor market.

Wealth management pre-tax, pre-provisions earnings rose 2% from a year earlier and financial markets increased 5% as higher trading revenue offset a decline in investment banking income from a record quarter a year ago.

($1 = 1.2746 Canadian dollars)