National Bank of Canada NA-T is expressing tempered optimism about the Canadian economy amid what it observes to be trade tensions de-escalating and the tariff shock softening.
Chief executive officer Laurent Ferreira told The Globe and Mail on Wednesday that he believes the peak of the uncertainty over trade and tariffs has passed and trusts that the U.S. administration is working with the Canadian federal government to ensure a commercial agreement that benefits both countries.
“I am also very encouraged with the mindset in Ottawa, and the focus on economic growth and putting back the Canadian economy on track for productivity and continued growth,” he said.
Still, Mr. Ferreira said there is reason to remain cautious. “In terms of the full impact of the tariffs and how it impacts business confidence and investments, there’s uncertainty around that,” he said.
Mr. Ferreira said the U.S.-Mexico-Canada Agreement (USMCA), which replaced NAFTA, has sheltered Canada from the worst of tariffs. “I’m not privy to all the conversations between our government and the U.S. administration, but I’m sure there is going to be give and take, and in the end I have full confidence that our government will make sure that the renegotiation of the USMCA will be beneficial for our country as well.”
National Bank reported a slightly higher fiscal third-quarter profit than in the same quarter last year on Wednesday but missed analysts’ estimates amid tariffs and trade tensions.
The bank reported net income of $1.07-billion, up three per cent from $1.03-billion a year earlier.
That translates to $2.58 per share for the three months that ended July 31, down from $2.89 a share a year earlier.
Adjusted to exclude certain items, National Bank said it earned $2.68 per share, falling short of the consensus estimate among analysts polled by Bloomberg, who were expecting adjusted earnings of $2.70 per share.
National Bank held its quarterly dividend steady at $1.18 cents per share.
The country’s sixth largest bank by assets is the fourth bank to report earnings for the fiscal third quarter, after Bank of Nova Scotia BNS-T and Bank of Montreal BMO-T reported higher profits that beat estimates on Tuesday, and RBC RY-T did the same Wednesday morning.
Provisions for credit losses, or money the bank sets aside to cover soured loans, amounted to $203-million, up from $149-million in the same quarter last year. Of that increase, $13-million was from the addition of loans made by Canadian Western Bank, which National Bank acquired in a $5-billion deal in February.
Retail customers are showing resilience, but National Bank chief risk officer Jean-Sébastien Grisé said Wednesday that unemployment will likely be the future driver of outcomes.
Unsecured borrowers such as renters are among customers who are “seeing some stress,” he said, as opposed to homeowners. Younger customers are feeling more of a pinch in being able to make credit payments as a result of a higher youth unemployment rate.
National Bank executives also said they are making progress on integrating Canadian Western Bank with their own businesses. National Bank has booked cost savings of $69-million from the merger so far, and moved a first tranche of clients from Canadian Western over to its systems.
Vice-chair Michael Denham said on Wednesday’s conference call that the bank has been “very pleased” with its ability to retain Canadian Western clients as it moves them over.
The bank reported revenue for the quarter totalling $3.45-billion, compared with $3-billion in the same quarter last year.
The bank’s personal and commercial banking segment reported net income of $370-million in the third quarter compared to $366-million in the same quarter last year.
Its wealth management segment reported a net income of $244-million, a 12 per cent increase from $217-million last year. Financial Markets profit was $334-million, up five per cent from $318-million last year.
Its U.S. specialty finance and international segment reported a profit of $178-million in the third quarter, up 13 per cent from $158-million in the same quarter last year.
The Bank announced Wednesday morning a plan to buy back up to eight million shares, or about two per cent of its outstanding shares. It is subject to the approval of the Office of the Superintendent of Financial Institutions and the TSX.