National Bank’s Shares Soar on Robust Q3 2024 Earnings
National Bank of Canada (TSX: NA) has seen a 5% surge in its share price on the TSX following the release of its third-quarter earnings report for 2024. The bank reported a net income of $1.03 billion for the quarter ended July 31, 2024, marking a 24% increase from $830 million in the same period last year.
The diluted earnings per share for the quarter rose to $2.89, up from $2.33 in the third quarter of 2023, reflecting a 24% increase. Adjusted net income, which excludes one-time items such as expenses related to the acquisition of Canadian Western Bank, reached $960 million, up from $781 million in the same period last year. Adjusted diluted EPS saw a similar rise, increasing by 23% to $2.68 from $2.18.
The bank’s performance was underpinned by growth across all its major business divisions. The Personal and Commercial Banking division, which is one of National Bank’s core segments, reported a net income of $366 million in the third quarter of 2024, up 15% from $319 million in the same quarter last year. The division’s total revenues for the quarter increased by 7% to $1.198 billion, driven by a combination of higher net interest income and volume growth in both loans and deposits.
The bank’s personal lending portfolio expanded by 4%, while its commercial lending portfolio grew by an impressive 14% year-over-year. This growth in lending activity was accompanied by a slight decrease in the net interest margin, which stood at 2.31%, down from 2.34% in Q3 2023.
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Despite this marginal decline, the overall increase in lending volumes contributed significantly to the division’s revenue growth. The division’s efficiency ratio improved to 51.3%, down from 53.8% in the previous year, indicating enhanced operational efficiency.
National Bank’s Wealth Management division also delivered strong results, with net income rising 19% to $217 million, compared to $183 million in the third quarter of 2023. The division’s total revenues for the quarter amounted to $716 million, representing a 14% increase from $629 million in the same period last year. This revenue growth was primarily driven by an increase in fee-based revenues and net interest income, reflecting the bank’s ability to capitalize on market opportunities and client activity.
The Wealth Management division saw its non-interest expenses rise by 11% to $416 million, up from $375 million in Q3 2023, largely due to investments in technology and higher compensation costs. However, despite these increased expenses, the division managed to improve its efficiency ratio to 58.1%, down from 59.6% a year earlier.
The Financial Markets division was a standout performer for National Bank in the third quarter, with net income surging by 55% to $318 million, up from $205 million in Q3 2023. This growth was driven by a 39% increase in total revenues, which reached $781 million.
Non-interest expenses in the Financial Markets division increased to $320 million, up from $272 million in the same quarter of the previous year. This rise in expenses was partly due to higher variable compensation linked to the division’s strong revenue performance and ongoing investments in technology to enhance trading and client service capabilities.
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The U.S. Specialty Finance and International (USSF&I) division also contributed positively to National Bank’s overall performance, with net income rising 23% to $158 million in the third quarter, compared to $128 million in the same period last year. Total revenues for the division increased by 24% year-over-year to $361 million, driven by strong growth at the bank’s Credigy and ABA Bank subsidiaries.
Non-interest expenses in the USSF&I division grew by 15% to $115 million, reflecting business expansion at both subsidiaries. The division’s efficiency ratio improved to 31.9%, down from 34.2% in Q3 2023, indicating that the division has effectively managed its cost structure amid revenue growth.
However, the division also saw an increase in provisions for credit losses, which rose by $17 million year-over-year, highlighting some of the risks associated with its international and specialty finance operations.
National Bank also noted that its capital position remains strong, with a Common Equity Tier 1 capital ratio of 13.5% as of July 31, 2024, unchanged from October 31, 2023. The bank’s leverage ratio under Basel III also stood firm at 4.4%, indicating a solid foundation for future growth and risk management.
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Looking ahead, National Bank’s management remains optimistic about the bank’s growth prospects, despite the challenges posed by the current economic environment.
“With our diversified business model and strong capital base, we are well-positioned to capitalize on growth opportunities while managing risks effectively,” said Laurent Ferreira, CEO of National Bank of Canada.
The bank also declared dividend of $1.10 per common share, payable on November 1, 2024.
National Bank of Canada last traded at $119.89 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
