National Bank of Canada NA-T chief executive officer Laurent Ferreira is calling on Ottawa to appoint an official dedicated to removing regulatory barriers to economic growth as the threat of U.S. tariffs puts further pressure on Canada’s economy.
Canada’s economic performance has fallen behind that of the U.S. and other G7 nations as productivity and GDP per capita have declined, Mr. Ferreira said during the bank’s conference call discussing first-quarter earnings.
“Canadian companies are facing excessive regulation and oversight,” Mr. Ferreira said. “Added to the mix, we face a U.S. administration with a pro-business and protectionist agenda.”
He said the federal government should appoint a non-partisan head of deregulation to identify and recommend ways to reduce “unproductive red tape.”
Mr. Ferreira said Canada must adapt to the changing circumstances in its relationship with the U.S.”
The government should launch several initiatives aimed at reducing regulatory burdens for businesses in order to bolster economic growth, he said. These measures could include reducing taxes on capital gains for business owners, removing interprovincial trade barriers and adopting a “Buy Canada Act” to prioritize domestic businesses and increase defence spending with Canadian procurement.
He also said the tax payable on the transfer of small- and medium-sized businesses to future generations or employees should be deferred to maintain Canadian ownership.
As geopolitical tensions and the threat of a trade war boost risks for the banks, National Bank set aside higher provisions for credit losses – the funds banks reserve to cover loans that may default.
“The increase is driven by uncertainty we’re observing,” chief risk officer Jean-Sébastien Grisé said during the conference call. “We really don’t know what the tariffs will look like, but it creates uncertainty.”
The bank reserved $254-million in provisions in the first quarter, higher than analysts anticipated and more than double the amount the bank allocated in the same quarter last year. This included $196-million against loans that the bank believes may not be repaid – a 33-per-cent increase from the previous year quarter.
It also increased the range of its expectations for impaired provisions in 2025 by five basis points, up to 25 to 35 basis points. (A basis point is one-hundredth of a percentage point.) This is a measure of what proportion of loans are expected to be impaired.
National Bank’s gross impaired loans – the total amount of loans that the bank believes are unlikely to be repaid – were driven higher by deteriorating credit among consumers in retail banking. Its commercial banking unit also boosted its estimates for impaired loans, largely owing to a few specific client accounts in technology, real estate and manufacturing.
The bank’s share price slumped almost 5.5 per cent to close at $120.47 on the S&P TSX Composite Index on Wednesday.
Analysts had anticipated that banks would start increasing provisions to mitigate the impact of a potential trade war with the United States. When Bank of Montreal and Bank of Nova Scotia reported results Tuesday, both banks pointed to the threat of tariffs and escalating tensions with the United States, which is also causing clients to delay borrowing and investing plans.
National Bank is the third major Canadian bank to report earnings for their fiscal first quarter, which ended Jan. 31. Scotiabank and BMO posted profit that beat analyst estimates. Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will close out the week for major bank earnings on Thursday.
On Wednesday, National Bank reported higher first-quarter profit that beat analysts’ expectations as capital markets and wealth management activity surged amid market volatility, offsetting the jump in provisions for loan defaults.
Major Canadian bank earnings have received a boost this quarter from strong performance in trading activity as equity markets whipsawed in the aftermath of the U.S. presidential election in November. National Bank’s net income rose 8 per cent to $997-million, or $2.78 per share, in the three months that ended Jan. 31.
Adjusted to exclude certain items, including which costs related to the acquisition of Canadian Western Bank, the bank said it earned $2.93 per share. That edged out the $2.66 per share analysts estimated, according to Refinitiv.
In early February – after the first quarter closed – Canada’s sixth-largest lender closed its deal to take over the CWB, allowing National Bank to significantly expand its footprint in Alberta and British Columbia.
National Bank is transferring CWB clients to its platforms incrementally, starting this summer. The lender expects to complete the transition in 2026.
The bank still expects to post $270-million in pre-tax savings from combining the two companies, achieving $135-million of those savings by the end of the first quarter in 2026.
While National Bank said it is still too early to provide estimates on the revenue targets for the combined company, chief financial officer Marie Chantal Gingras said net interest income – the difference between the interest that banks pay on deposits and charge on loans – will increase as the lender rolls out its cash management and retail and wealth products and services to CWB clients.