Montreal-based National Bank of Canada plans to continue favouring Quebec in the coming year as the province’s relatively hot economy likely has more room to run, the lender’s chief executive officer said on Wednesday.
Although a resurgence in exports and oil production has helped put the overall Canadian economy “back in the saddle,” National noted in its third-quarter financial filings that Quebec’s economy has expanded eight months in a row, its best streak since at least 1997.
“The Quebec economy continues to be very resilient,” CEO Louis Vachon said during the bank’s third-quarter earnings conference call. “Looking forward, the outlook in Quebec remains favourable, with accommodative monetary policy and fiscal stimulus supporting (the) domestic economy and labour markets.”
Jobs in the province are being created at a rate not seen since 2007, National said, home sales are on track for a new record this year and housing affordability is better than the national average.
The bank’s current forecast calls for the Quebec economy to grow 2.2 per cent in 2019, compared to 1.4 per cent for Canada as a whole.
“Looking forward, we will maintain our overweight positions in the province of Quebec, as well as in secured lending, which we view as favourable in the current economic environment,” Vachon said.
National Bank reported a profit of $608 million for the three months ended July 31, up approximately seven per cent from the same quarter of 2018. Adjusted earnings per share were $1.66, an increase of about nine per cent and better than analyst expectations.
The solid fundamentals of the broader Canadian economy are providing “a favourable backdrop in our core markets,” Vachon said.
Particular areas of strength during the bank’s third quarter included its personal and commercial business, as well as its U.S. specialty finance and international operations, where year-over-year income rose approximately 28 per cent to $69 million. The international unit includes National’s Cambodian subsidiary, ABA Bank, where revenue rose 68 per cent to $79 million due to growing loans and deposits.
Provisions for credit losses, meanwhile, ticked up approximately 13 per cent for the quarter, to $86 million.
“(National) powered through a difficult operating environment, delivering a four-per-cent headline beat on (earnings per share),” Eight Capital analyst Steve Theriault said in a note.
The bank’s quarter also included a $79-million gain from selling shares of Quebec-based asset-manager Fiera Capital Corp., a $50-million gain tied to the sale of its Montreal head office (which it leased back for four years), and a $33-million loss from writing down the value of its investment in Côte d’Ivoire-based financial-services firm NSIA Participations.
CIBC World Markets analyst Robert Sedran said in a note that National had a “solid quarter all around,” pointing out its continued progression in personal and commercial banking and a surge in trading revenues.
“A good result that exceeded our above-consensus estimate and helped mitigate some of the downward estimate pressure that we have seen on all our bank estimates this quarter,” he said.
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