National Bank of Canada Q3 Earnings Call Highlights

Key Points

• Strong quarterly performance: National Bank’s adjusted EPS rose 26% year over year to CAD 3.39, while revenue increased 18%, ROE reached 16.8% and CET1 capital stood at 13.51%.
• Broad-based segment growth: Wealth management net income climbed 22%, capital markets rose 32% and personal and commercial banking increased 13%, supported by mortgage, fee-income and balance-sheet growth.
• CWB integration remains on track, but AIRB benefits are delayed: The bank has realized CAD 238 million in cost and funding synergies and exceeded its fiscal 2026 revenue-synergy target, while the acquired portfolios’ AIRB conversion is now expected in late 2027 with a lower-end capital benefit.

National Bank of Canada TSE: NA reported third-quarter fiscal 2026 adjusted earnings per share of CAD 3.39, up 26% from a year earlier, as revenue growth across its fee-based businesses, strong balance-sheet expansion and favorable market conditions supported results.

President and CEO Laurent Ferreira said revenue increased 18% year over year, while the bank generated nearly 6% positive operating leverage. Return on equity was 16.8%, and the common equity tier 1 capital ratio ended the quarter at 13.51%.

Ferreira said the unresolved trade conflict with the U.S. continues to create uncertainty for Canadian businesses, investment and consumer affordability. Still, he said the bank sees opportunities to deploy capital toward reindustrialization, infrastructure, defense and energy as governments and businesses focus on strengthening Canada’s productive capacity.

The bank said it expects to complete its current normal course issuer bid in September and intends to launch a new program at that time, subject to regulatory approval. Its dividend payout ratio was 38.8%, with the dividend set for review next quarter.

Segment Results

Personal and commercial banking net income rose 13% from a year earlier, supported by mortgage growth, fee income, commercial balance-sheet growth and positive operating leverage. Personal mortgages increased 14% year over year, driven by renewals, a resilient Quebec housing market and market-share gains, Ferreira said.

Julie Lévesque, executive vice president of personal banking, said mortgage growth was primarily driven by execution across the bank’s distribution and broker channels rather than aggressive pricing. She characterized mortgages as an entry point for deeper client relationships involving deposits, investments, credit cards and advisory services.

Personal savings rose 7% year over year as rising equity markets supported demand for investment products. Commercial deposits increased 12%, reflecting seasonal government-client inflows and higher commercial balances. Commercial loans rose 4%, while the National Bank-originated commercial loan portfolio grew 10%. The acquired Canadian Western Bank legacy book was relatively stable sequentially.

Wealth management net income climbed 22% to CAD 299 million, reflecting higher fee-based income and transaction volumes. Capital markets net income rose 32% to CAD 442 million. Global Markets revenue totaled CAD 578 million, aided by client activity, structured-product origination and securities-finance opportunities, while corporate and investment banking revenue increased 13%.

Credigy reported net income of CAD 39 million. Revenue grew 13%, primarily because of a gain on the sale of a portfolio, while average assets rose 8%. At ABA Bank, net income increased 1% as 6% revenue growth was partly offset by a higher efficiency ratio and higher provisions for credit losses. ABA loans rose 11% and deposits increased 7% year over year.

Margins, Expenses and Capital

Chief Financial Officer Marie-Chantal Gingras said pre-provision, pre-tax earnings increased 24% year over year, while expenses rose 11.7%. Higher variable compensation tied to the bank’s performance was the main expense driver, alongside investments in talent, technology and operational resilience. The quarter also included CAD 11 million in litigation expenses. Excluding variable compensation and litigation costs, expenses rose 7.7%.

Net interest income excluding trading rose 7% sequentially, with approximately half of the increase attributable to the higher number of days in the third quarter. The all-bank net interest margin increased two basis points from the prior quarter to 2.18%.

Treasury contributed three basis points to the all-bank margin, while a reclassification of non-interest income to net interest income added four basis points. These benefits were partly offset by a seven-basis-point sequential decline in the personal and commercial banking margin, which Gingras attributed largely to rapid personal mortgage growth and commercial deposit-mix effects from seasonal government deposits.

The bank expects both personal and commercial banking margin and all-bank net interest margin to remain relatively stable in the fourth quarter. Lévesque said mortgage spreads faced pressure amid competition in new originations and renewals, but maintained that the mortgage portfolio’s overall economics continue to support earnings.

Loans increased 11% year over year and 4% sequentially, while deposits rose 11% from a year earlier and 1% from the prior quarter. The bank repurchased 2.3 million shares during the quarter, reducing its CET1 ratio by 26 basis points.

CWB Integration and AIRB Timeline

National Bank said it has captured CAD 238 million in cost and funding synergies from its acquisition of Canadian Western Bank and remains on track to reach CAD 270 million by the end of fiscal 2026, or about CAD 300 million on an annualized basis. It also achieved its fiscal 2026 revenue-synergy target ahead of schedule, realizing CAD 52 million, mostly from fee income, against a CAD 50 million target.

The bank continues to target CAD 200 million to CAD 250 million in revenue synergies by the end of fiscal 2028. It also said it will introduce separate personal and commercial banking disclosures beginning in the fourth quarter to provide more visibility into performance and CWB-related revenue synergies.

Gingras said the bank completed the required two-quarter regulatory parallel run for transitioning acquired CWB portfolios to its advanced internal ratings-based, or AIRB, framework. However, it will defer its regulatory submission into fiscal 2027 because additional model refinements are needed amid higher observed default rates.

The AIRB conversion is now expected to occur late in 2027, with the anticipated CET1 benefit tracking toward the lower end of the previously disclosed 35-to-55-basis-point range for the first portfolio. Gingras said the bank still expects about 20 basis points of capital benefit from other refinements in the fourth quarter of 2026.

Credit Performance Remained Within Guidance

Chief Risk Officer Jean-Sébastien Grisé said total provisions for credit losses were CAD 246 million, or 31 basis points, unchanged from the prior quarter. Impaired-loan provisions totaled CAD 224 million, or 28 basis points, up two basis points sequentially and within the bank’s full-year guidance range of 25 to 35 basis points.

The bank added three basis points of performing provisions, largely reflecting portfolio growth and a macroeconomic scenario update at Credigy involving higher long-term interest rates. Total allowances for credit losses stood at CAD 2.7 billion, equal to 5.3 times net charge-offs. The gross impaired-loan ratio was stable at 114 basis points.

Grisé said the bank expects retail provisions to remain influenced by unemployment trends, while wholesale credit performance could continue to be uneven because of periodic large files. He said the bank’s diversified portfolio mix, defensive provisioning and allowance levels position it to manage the uncertain environment.

About National Bank of Canada (TSE:NA)

With $618 billion in assets as at April 30, 2026, National Bank of Canada (the 'Bank') is one of Canada's six systemically important banks. The Bank has more than 35,000 employees in knowledge-intensive positions and operates through three business segments in Canada: Personal and Commercial Banking, Wealth Management and Financial Markets. A fourth segment, U.S. Specialty Finance and International, complements the growth of its domestic operations. Its securities are listed on the Toronto Stock Exchange TSX: NA.

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