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On Thursday, BMO Capital Markets adjusted its outlook on National Bank of Canada (TSX:NA:CN) (OTC: OTC:NTIOF) shares, raising the price target to Cdn$138 from Cdn$135, while reiterating an Outperform rating. The revision follows the bank’s recent financial performance, which surpassed analyst expectations. According to InvestingPro data, the stock currently trades at an attractive P/E ratio of 12.4x and shows potential upside based on its Fair Value analysis, despite technical indicators suggesting overbought conditions.
The positive adjustment was announced after National Bank of Canada reported an operating earnings per share (EPS) of $2.85, exceeding the anticipated figures of $2.44 and $2.39 by BMO Capital and the consensus respectively. The bank’s performance was notably bolstered by several key sectors. Financial Markets led the charge with record trading revenue, while U.S. Specialty & Finance saw significant contributions from ABA Bank. Additionally, Wealth Management experienced an uptick in fee revenue. However, the Personal & Commercial segment did not meet expectations, with a lower-than-projected contribution from Canadian Western Bank (TSX:CWB).
The bank’s total provisions for credit losses (PCL) stood at 45 basis points, excluding day 1 provisions from CWB, aligning with forecasts. Furthermore, National Bank of Canada showcased robust financial health with a return on equity (ROE) of 15.6% and a Common Equity Tier 1 (CET1) ratio of 13.4%.
In response to these results, National Bank of Canada has increased its dividend by approximately 4% during its semi-annual review, continuing its impressive 15-year streak of consecutive dividend increases. BMO Capital’s analyst emphasized the bank’s strong performance across several divisions, which underpinned the decision to maintain the Outperform rating and lift the price target. The analyst’s remarks highlighted the diverse sources of revenue that contributed to the bank’s earnings beat. For deeper insights into National Bank of Canada’s valuation and financial metrics, access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, National Bank of Canada reported its first-quarter 2025 financial results, revealing cash earnings per share of $2.93, which exceeded both BMO Capital’s and consensus estimates. The strong performance was driven by record trading revenue in the Financial Markets division and positive results from U.S. Specialty Finance & International, notably at ABA Bank. However, the Personal & Commercial Banking division lagged due to higher provisions for credit losses. The bank’s total provision for credit losses ratio was 41 basis points, surpassing BMO Capital’s forecast of 28 basis points. Despite these mixed results, National Bank maintained a strong return on equity of 17.6% and a solid Common Equity Tier 1 capital ratio of 13.6%.
Additionally, BMO Capital Markets adjusted its price target for National Bank to Cdn$135.00, down from Cdn$143.00, while maintaining an Outperform rating. The firm remains optimistic about the bank’s fundamentals and growth potential, despite the revised target. In another development, Jefferies downgraded National Bank from Buy to Hold, citing concerns over potential credit weaknesses and increased exposure to commercial lending following the acquisition of Canadian Western Bank. Jefferies also adjusted the price target to Cdn$126.00 from Cdn$147.00, reflecting a cautious outlook on the bank’s ability to manage anticipated credit challenges.
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