National Bank of Canada

CWB said adjusted EPS declined by $0.28 year over year and $0.21 sequentially, with a $0.15 EPS hit from costs associated with a potential national bank transaction. Revenue was higher sequentially, driven by a 6% increase in net interest income and a 9 bp expansion in net interest margin; higher non-interest income fell 4% sequentially. The total provision for credit losses was 59 bps, and impaired loan provision for credit losses was 57 bps, up 33 bps from the prior quarter; gross impaired loans were 124 bps of gross loans, up 24 bps from last quarter. CET1 rose 12 bps to approximately 10.2%, and the board declared a common dividend of $0.35 per share, up $0.02 from last year. For Q4, management guided to adjusted EPS of $0.86 to $0.91 and expected operating leverage to be approximately neutral, with continued sequential loan growth, NIM expansion, and franchise deposits approximately flat.

Chris Fowler emphasized that the underlying franchise performed well, with disciplined loan growth, better funding, and improved NIM, but credit losses on two unusual exposures overwhelmed those positives in the quarter. He repeatedly framed the two problem loans as idiosyncratic, borrower-specific outcomes that do not reflect the broader book, and said he expects credit losses to trend back toward the normal historic range in Q4. He also highlighted confidence in the secured lending model and said the company remains focused on differentiated client service and profitable growth.

Matt Rudd walked through the funding and earnings bridge, noting franchise deposits were relatively stable year over year, with a 16% increase in term deposits offset by a 7% decline in demand and notice deposits and a 9% decline in capital market deposits. Sequentially, franchise deposits were up 1%, term deposits rose 3%, and capital market deposits increased 13% as the bank optimized funding costs. He said the quarter included a $0.15 EPS drag from potential national bank transaction costs, while the core earnings mix benefited from a 12 bp NIM increase, with asset-yield improvement and a better asset mix helping offset lower loan-related fees. He also pointed to CET1 at about 10.2%, up 12 bps, and noted the dividend was kept at $0.35 per share.

Analysts focused heavily on the two impaired loans, asking how much of the impaired PCL came from them, what collateral or sectors were involved, and whether the issues were fraud-related. Management said about 20% of impaired loans were specific to those two files and about 30 bps of total impaired PCL related to them, adding that the problems were not fraud-related, not tied to a single industry or geography, and not representative of the rest of the book. Questions also covered slower loan growth, which management attributed mainly to selective origination rather than customer attrition, and expense growth, where management said the heavier investment phase is largely behind them but mid-single-digit expense growth remains the structural expectation. On the National Bank acquisition, management said timing remains subject to regulatory review, the banks are still operating separately, and no meaningful transition influence is in place yet.