Earnings call transcript: National Bank of Canada Q3 2025 sees stock dip post-earnings

National Bank of Canada reported its Q3 2025 earnings with an EPS of $2.68, matching analysts’ expectations. However, revenue fell short of forecasts, coming in at 3.45 billion USD compared to the expected 3.49 billion USD. This revenue miss contributed to a pre-market stock price decline of 3.76%, with shares closing at 144.75 USD, down from the previous close of 150.41 USD. According to InvestingPro data, 7 analysts have recently revised their earnings upwards for the upcoming period, suggesting potential strength ahead despite the current revenue miss.

Key Takeaways

• National Bank of Canada met EPS expectations but missed revenue forecasts.
• The bank’s stock dropped 3.76% in pre-market trading following the earnings report.
• Year-over-year revenue increased by 19%, indicating strong growth despite the miss.
• The bank plans to repurchase up to 8 million shares, reflecting confidence in its long-term strategy.
• Canadian economic resilience and positive trade outlooks were highlighted as supportive factors.

Company Performance

National Bank of Canada demonstrated solid year-over-year growth with a 19% increase in revenue. The bank’s return on equity stood at 14%, and it maintained a positive operating leverage of 2%. The commercial loan book expanded by 13%, and personal mortgages grew by 5%, reflecting robust performance across its lending sectors. Despite these gains, the revenue shortfall against forecasts weighed heavily on investor sentiment.

Financial Highlights

• Revenue: 3.45 billion USD, up 19% year-over-year
• Earnings per share: 2.68 USD, matching forecast
• Return on equity: 14%
• Operating leverage: 2%
• Commercial loan book growth: 13% year-over-year
• Personal mortgages growth: 5% year-over-year

Earnings vs. Forecast

National Bank of Canada met EPS expectations with an actual EPS of 2.68 USD, aligning with the forecast. However, revenue came in at 3.45 billion USD, missing the expected 3.49 billion USD by a margin of 1.15%. This revenue miss contrasts with the bank’s historical trend of meeting or exceeding expectations, and it marks a notable deviation from its previous quarters’ performance.

Market Reaction

Following the earnings announcement, National Bank of Canada’s stock experienced a 3.76% decline in pre-market trading. The stock’s movement is significant, given its 52-week range of 106.67 USD to 151.97 USD. The broader market has shown resilience, but the revenue miss and subsequent stock dip highlight investor concerns about the bank’s near-term revenue generation capabilities. InvestingPro analysis indicates that the stock generally trades with low price volatility, making today’s movement particularly noteworthy. Based on InvestingPro’s Fair Value analysis, the stock currently appears to be trading near its fair value range.

Outlook & Guidance

Looking ahead, National Bank of Canada anticipates full-year EPS growth slightly above mid-single digits and expects the return on equity to be around 15%. The bank plans to continue its share repurchase program and achieve its year-one synergy target of 135 million USD by December 2025. Potential benefits from AIRB conversion are expected to materialize mainly in 2026.

Executive Commentary

"We are pleased with the strong performance and growth delivered year to date," said CFO Marie Chantal Gengras, highlighting the bank’s solid financial metrics. CEO Laurent Perreras noted, "The Canadian economy has shown some resilience," pointing to favorable macroeconomic conditions. Lucie Blanchet, Head of Personal Banking, added, "We continue to see a good balance sheet growth for Q4."

Risks and Challenges

• Revenue Miss: Falling short of revenue expectations could signal challenges in sustaining growth momentum.
• Market Volatility: Fluctuations in the broader market may affect investor confidence and stock performance.
• Economic Uncertainty: Tariff uncertainties and global economic pressures could impact future earnings.
• Interest Rate Changes: Potential interest rate fluctuations may affect net interest margins.
• Integration Risks: Continued integration of CWB presents operational challenges and execution risks.

Q&A

During the earnings call, analysts inquired about the bank’s capital management strategy and credit quality trends. Executives detailed the progress of CWB integration and addressed market risk and RWA fluctuations, offering reassurance about the bank’s strategic direction and risk management practices.

Full transcript - National Bank of Canada (NA) Q3 2025:

Conference Operator: morning and welcome to National Bank of Canada’s Third Quarter Results Conference Call. I would now like to turn the meeting over to Marianne Ratti, Vice President and Head of Investor Relations. Please go ahead, Marianne.

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada: Merci and welcome everyone. We will begin the call with remarks from Laurent Perreras, President and CEO Marie Chantal Gengras, CFO and Jean Sebastien Gruzet, Chief Risk Officer. Our business heads are also present for the Q and A session, including Lucie Blanchet, Personal Banking Judith Menard, Commercial and Private Banking Michael Denham, CWB Integration Nancy Packet, Wealth Management Etienne deuts, Financial Markets and Delbonneil International. Before we begin, please refer to Slide two of our presentation for forward looking statements and non GAAP measures. Management will refer to adjusted results unless otherwise noted.

I will now pass the call to Laurent.

Laurent Perreras, President and CEO, National Bank of Canada: Merci, Marianne, and thank you, everyone, for joining us. This morning, we reported earnings per share of $2.68 and return on equity of 14% for the 2025. Our results reflect strong revenue fundamentals across our segments, firm traction in cost and funding synergies as we integrate CWB and a strong credit performance. We also ended the quarter with a CET1 ratio of 13.9%. This solid capital position provides us with ample flexibility and optionality.

This morning, we announced our intention to repurchase up to 8,000,000 shares. Our decision to buy back shares at this point in time does not factor in benefits from CWB’s AIRB conversion. We will also review our dividend next quarter as per usual practice. Turning to the economy. The Canadian economy has shown some resilience, but has been strained by tariff uncertainty, resulting in job losses in certain industries and an overall softer labor market.

The USMCA trade agreement has been so far an effective safeguard for Canada. The full impact of tariffs is still unfolding and will continue to shape business confidence and investments. While the path of inflation and of long term rates remain uncertain due to tariffs and growing government deficits, we have a more constructive view on the economy now that the initial tariff shock is behind us and that trade tensions are de escalating. We are also encouraged by the focus of our federal and provincial governments on making structural changes to increase productivity and economic results. Investments in energy, security and nation building infrastructure will stimulate growth and put us on the right path.

As we look ahead, geopolitics and geoeconomics remain a source of instability, but we are encouraged by some of the positive outcomes of trade negotiations and the government focus on the Canadian economy. Turning to the CWB integration. I am very pleased with our momentum and strong execution. Funding and cost synergies continue to progress at a rapid pace. Earlier this month, we marked an integration milestone with the successful completion of our first client migrations onto the National Bank platform.

On that, I would like to recognize our teams who are working seamlessly together to ensure a positive onboarding experience for clients. Our migration process will continue over the months ahead, setting the table for revenue synergies, which we will discuss in more detail on our Q4 call. Looking now at our business segments. PNC Banking generated net income of $386,000,000 including $74,000,000 from the CWB transaction for the third quarter. Excluding CWB, revenues were up 2% year over year for the segment against a strong level of non interest income in the prior year.

We continue to grow our balance sheet. Our commercial loan book grew 13% year over year with continued opportunities in insured residential real estate and broad based growth across our industries and geographies. Personal mortgages grew 5% year over year with strong origination level as anticipated entering the second half of the year. Wealth Management grew third quarter net income by 13% year over year on the back of strong organic growth. Net sales in our channels and rising equity markets supported double digit growth in fee based revenues.

Financial Markets generated strong quarterly results, growing net income by 5% over the past year. Corporate and Investment Banking delivered record revenues of $4.00 $8,000,000 for Q3. This was driven by strong performance across the franchise and a particularly active quarter for our M and A and DCM teams. Global Markets performance was resilient, growing revenues 3% year over year. This reflects broad based growth in our rates and commodities businesses, while equity trading activity and volatility was down quarter over quarter.

Credigy delivered net income of $43,000,000 this quarter, up 2% year over year. While average assets remained relatively stable sequentially, investment volumes picked up at quarter end, resulting in balances increasing 5% quarter over quarter. The market remains competitive, but we are starting to see more deal flow and opportunities that meet our investment criteria, including a solid pipeline for Q4. At ADA Bank, net income increased by 16% year over year. Deposits were up 21% supported by a 34% increase in client growth and loans were up 8%.

We are encouraged by the favorable outcome of a trade deal between The U. S. And Cambodia, which will keep the local economy competitive and set the stage for continued growth. I will now pass the call to Marie Chantal.

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada: Thank you, Laurent, and good morning, everyone. My comments will begin on Slide eight. The bank delivered strong performance in the third quarter. Organic growth across all segments was complemented by the CWB transaction. On an all bank basis, revenue increased 19% year over year, PPP rose 21% and operating leverage was positive at two percent.

Starting with results from CWB. The loan portfolio was stable compared to last quarter, while term deposits declined by $1,000,000,000 mainly reflecting the planned roll down of broker deposits. The CWB transaction added $284,000,000 to revenues, including funding synergies of $13,000,000 in NII and the amortization of the Fairmark of $27,000,000 It also added $142,000,000 to expenses reflecting momentum in the realization of cost synergies. PPP was relatively unchanged quarter over quarter. Now moving to our results excluding CWB.

Revenue grew 10 year over year. Corporate and Investment Banking delivered record advisory and DCM underwriting fees and Wealth Management’s record AUM drove double digit fee income growth. Balance sheet growth was solid while treasury generated higher revenues. Expenses were up 8% year over year. Compensation and strategic investments in technology were the main drivers as we continue to invest in our franchise.

Recall that in Q3 twenty twenty four, the bank had a lump sum reimbursement of $11,000,000 that reduced expenses in the P and C segment. With strong revenue growth and positive operating leverage, PTPP increased by 11% year over year. Moving to slide nine. NII excluding trading grew 4% quarter over quarter reflecting solid balance sheet growth, higher treasury revenues, dividend recorded in USSFI and the impact of fewer days in Q2. This was partially offset by the amortization of the fair value mark, which was $10,000,000 higher than last quarter.

The All Bank NIM excluding trading remained relatively stable quarter over quarter at 2.22%. P and C NIM was down five basis points, primarily driven by asset mix in our underlying commercial portfolio as well as by deposit mix. The all bank NIM benefited from higher treasury revenues and USSFI dividends. Turning now to slide 10. We continue to deliver solid expansion across the balance sheet with strong momentum throughout the franchise.

Total loans reached $293,000,000,000 up 7% year over year excluding CWB. Deposits grew 11% year over year to $3.00 $3,000,000,000 when excluding CWB. Looking at quarter over quarter performance, deposits rose by 3%. Personal demand deposits increased by almost $1,000,000,000 driven primarily by strong growth in personal banking. Non retail deposits were up 5%.

Now turning to capital on Slide 11. We ended the quarter with a CET1 ratio of 13.9%. Internal capital generation was strong, adding 33 basis points to CET1. RWA declined by one basis point sequentially as solid loan growth was largely offset by continuous refinements and lower market risk. In addition, CET1 in Q3 benefited from other items including a capital release from the divestiture of certain international investments as well as an income tax recovery of $47,000,000 During the quarter, we benefited from the AIRB conversion of a small CWB portfolio contributing two basis points to CET1.

We are working closely with our regulators and following the CEMA process, the framework under which capital model applications are assessed. And we still expect the capital benefit from the conversion to the advanced method to be realized towards the 2026. Turning to Slide 12, we are pleased with our progress in realizing synergies at a faster pace than expected. We have realized synergies of $69,000,000 to date, representing $173,000,000 on an annualized basis or 64% of our three year target. With this momentum, we anticipate achieving our year one target of $135,000,000 in December 2025.

As Laurent noted, we successfully completed our first client migration wave in August. The next waves are planned over the upcoming months and a majority of clients will migrate over this period. The ongoing migration continues to drive momentum in the realization of our synergies. To conclude, we are pleased with the strong performance and growth delivered year to date and are well positioned to achieve the 2025 objectives outlined last quarter. Excluding the amortization of the fair value mark, we expect full year EPS growth will be a bit higher than the mid single digit range and we continue to anticipate full year ROE to be around 15%.

With the strength of our capital and the strategic advantage CW brings to our businesses, we are in a good position to capitalize on the opportunities that lie ahead. I will now turn the call over to Jean Sebastien.

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: Good morning everyone. Starting on Slide 14, we are pleased with the strong credit performance this quarter. Total PCLs were two zero three million dollars or 28 basis points, down 17 basis points sequentially. We added seven basis points of performance provisions in Q3, primarily driven by portfolio growth and model calibration, partly offset by the macroeconomic outlook. PCL on impaired loans were $150,000,000 or 21 basis points, down 11 basis points quarter over quarter.

Personal banking provisions were relatively flat sequentially. Commercial banking provisions declined quarter over quarter to $58,000,000 CWB’s portfolio continues to perform in line with expectations with impaired provisions of $26,000,000 or 28 basis points. In Financial Markets, there was a recovery of $1,000,000 At Credigy, we saw lower PCL on POKEY loans. At ABA, impaired provisions declined to US11 million dollars Turning to Slide 15. Our total allowances for credit losses reached 2,300,000,000.0 representing five times coverage of our net charge offs.

Our performing allowances reached $1,600,000,000 representing a strong performing ECL coverage ratio of 2.1 times. We have been building allowances for the past thirteen quarters and remain comfortable with our prudent provisioning levels. Turning to Slide 16, our gross impaired loan ratio was 102 basis points, up four basis points sequentially. Excluding USSF and I, deals were 73 basis points, two basis points higher than Q2. Net formations this quarter were lower sequentially.

At ABA, net formations declined quarter over quarter and remained below the level seen in Q4 last year. On Slide seventeen and eighteen, we highlight our Canadian RESL portfolio. Of note, approximately 80% of the portfolio has now been repriced at higher interest rates. Upcoming renewals are showing a significantly reduced payment shock compared to a year ago. And our variable rate mortgage portfolio has been benefiting from the lower interest rates.

In conclusion, we are pleased with the credit performance in the quarter. While we continue to monitor the evolving market conditions, our defensive qualities, resilient business mix and prudent levels of allowances position us well to navigate the current economic landscape. Looking ahead, while uncertainties remain in the forward path of the economy, we now expect impaired PCL to end up around the middle of the 25 basis to 35 basis points range for the full year. And with that, I will now turn the call back to the operator

Unidentified Speaker: for the Q and A.

Conference Operator: Thank you. We’ll now take questions from the telephone lines. Session. The first question is from Sohrab Movahedi from BMO Capital Markets. Please go ahead.

Sohrab Movahedi, Analyst, BMO Capital Markets: Okay. Thank you. Loran, can you just talk us through how you decided to size the buyback? Why only 2% with the 39% CET1 unlikely

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: to go up?

Laurent Perreras, President and CEO, National Bank of Canada: Absolutely. And thank you for your question, Saurabh. I think you our capital management over the past couple of years has been very prudent going through post pandemic, the inflation cycle, all the economic uncertainty And did a lot of work over the past year on capital refinement. I think some of the information is on our slide as well as divestiture. We’ve been working on selling some of our assets over the past year in Africa.

So that came to fruition in Q3. We also first wave integration of CWB, but we’re still not done, right? We still have some work to do over the path of the next little while and capital optimization with conversion of models to AIRB. Look, think the we came up with a number on buyback at this point in time, which I think is in line with our continued strategy to focus on organic growth. We have really good momentum.

You see it on our balance sheet growth. So again, buybacks are in our view a complement, not a growth strategy. So I think at this point in time, given that we are at a very strong capital level, we feel like it was a good time for us to announce a buyback. And as mentioned in my remarks, this is before conversion of our portfolios, AIRB. And look, we see still see some good momentum in our balance sheet growth and teams are very focused on that.

So I think it’s the appropriate level of share buyback that we think is the right balance with the rest

Doug Young, Analyst, Desjardins Capital Markets: of the business.

Sohrab Movahedi, Analyst, BMO Capital Markets: Okay. Well, maybe we’ll elaborate on that at a different time. But are you suggesting then that the organic growth opportunities ahead of you are likely to be more RWA intensive than historical growth? Like is there going to be a shift in risk appetite here? I’m just trying to understand with this sort of a capital level, why an embarrassingly low 2% NCIB?

So maybe there’s growth opportunities, but I’m just trying to understand is that growth going to be more capital intensive? Or is there any reason not to believe this capital is going to continue to stockpile?

Laurent Perreras, President and CEO, National Bank of Canada: No, there’s no change in strategy or arguably intensity going forward. So nothing has really changed in our focus on growing all of our business segments.

Sohrab Movahedi, Analyst, BMO Capital Markets: So your internal capital generation, you did 33 basis points this quarter. I mean, like we could be sitting with 14% plus next quarter?

Laurent Perreras, President and CEO, National Bank of Canada: Look, there’s all sorts of factors that come into capital. You’ve seen a significant drop in market risk over the quarter. So

Unidentified Speaker: I’m not going to

Laurent Perreras, President and CEO, National Bank of Canada: go into projection for the next quarter in terms of our CET1. But yes, we’re still seeing a lot of strong organic growth. We’re going to give another update in terms of revenue synergies, our more elaborate capital plan as well at Q4. But at this point in time, we’re we think that the buyback that we announced is the appropriate number.

Sohrab Movahedi, Analyst, BMO Capital Markets: Okay. Thank you very much for taking my question.

Conference Operator: Thank you. The next question is from Doug Young from Desjardins Capital Markets. Please go ahead.

Unidentified Speaker: Hi, good morning. Good morning. So first question on Canadian Banking and I guess two part, just trying to get a sense, it seemed like it was your non interest revenue was kind of flat line. I figured it would be up a little bit more, but maybe there’s something in there. And then lower NIMs sequentially, Just trying to get a sense, is this a new run rate for the NIM?

And then I’ve got a few follow ups. Yes.

Lucie Blanchet, Personal Banking Head, National Bank of Canada: Thank you. It’s Lucy. So if you look at the non interest revenues effectively, we had two nonrecurring elements of last year. So again, in the insurance portfolio and also last year in the same period of time, we had very high commercial client activities in the international business. And we compare that to lower than average activity this quarter.

So that’s for the noninterest revenue, and we continue to deliver pretty good NII growth. So if we go to the NIM, I think that’s the other part of your question. When we look at the sequential decline, it’s mainly driven by the combination of our overall P and C business mix, combined also with lower spreads on some of the assets and deposit class. And I think it may be worth unpacking some of those elements for you. And I’ll start with deposit spread maybe.

So on the deposit spread, we had the strongest retail demand deposit growth this quarter since COVID actually, adding close to $1,000,000,000 demand deposit, and that was partly offset by the repricing of the fixed term portfolio. However, there is seasonality in Q3 related to the government municipality deposit due to the tax payments. And they’ve always been stronger in Q3. And we brought in almost $1,500,000,000 sequentially, and these are lower margin deposits. So they have contributed to one bps in lower deposit spreads.

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: You want me to

Unidentified Speaker: Yes. And just is this kind of so it doesn’t feel like this is an unusual quarter. It feels like this is kind of like more than normal run rate. Did I get that right or?

Lucie Blanchet, Personal Banking Head, National Bank of Canada: Well, so far we continue to see a good balance sheet growth for Q4. So the loan growth both in retail and commercial should continue to outpace the deposit growth. So if we look at Q4, we could be potentially one or two basis points down in terms of NIM, but still with very good balance sheet and confident that we’re going to generate good NII.

Unidentified Speaker: Good NII. Okay. That’s fair. And then a few of the portfolio has been now converted to AIRB?

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada: Hi, Doug. It’s Marie Chantal. So far we’ve done this quarter and the past quarter small conversion of portfolio totaling five basis points cumulative so far.

Unidentified Speaker: And what percentage of CWB’s loan book has been shifted over? Is it 80% sorry, 10%, 5%, 20%?

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada: It’s very minimal. We’ve yes, we’re very happy that we were able to convert small portion. As I said, it represented only two basis points this quarter. So it’s very minimal. We expect, as said in my remarks, working on the process of converting the majority of the commercial portfolio.

I’m saying majority because there are some portion of that portfolio that will remain on standardized, for example, equipment finance. So we’re working very closely with our regulators for that conversion and we expect to be able to benefit from that conversion mostly towards the 2026.

Unidentified Speaker: And that’s the first kind of that’s the first conversion that would happen? Is that I guess the first next time frame is the 2026 when we would see another benefit from the ARB conversion? At

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada: the 2026, yes, would be the first important portion of that conversion happening.

Unidentified Speaker: Okay. And then just lastly at Credigy, average assets I think were down quarter over quarter. You can correct me if I’m wrong. But I figured the environment would be pretty good for this business over the coming year and opportunities there. I know this can be lumpy and so maybe that’s just the case.

But I’m just kind of curious if you’re seeing increased competitive pressures in the certain businesses that Credigy is going after. Are they kind of gearing up to pivot again to another segment, away from where they stand today? Just maybe a little bit of an update on that business.

Etienne Deuts, Financial Markets Head, National Bank of Canada: Hi, Doug, it’s Etienne. So you’re right, it’s still competitive out there. But Credigy has continued to adapt the strategy and execute. So we continue to have success buying and financing first and secondly mortgages. That’s about two thirds of the deal flow this quarter.

And we love those. These mortgage deals continue to produce very solid risk adjusted returns for us. We saw really the pace of business accelerate during the second half of the quarter. And we see some good things, some regulatory tailwinds that could drive more activity from U. S.

Regional banks, including increased M and A activity that softened some source of opportunity there. And so that’s something that we’re monitoring very closely. Generally, the core of our strategy is high FICO homeowners and they’re on solid ground with very resilient labor market and solid home prices still in The U. S. So we’re seeing increased deal flow, especially like I said starting in the second half of Q3.

And so that led to about a 5% growth in balances. So looking at the current deal pipeline, we think this momentum continues in the coming quarters. So overall, we feel really good about our guidance of average asset growth in the mid single digits for full year 2025.

Unidentified Speaker: Okay. I appreciate the color. Thank you.

Conference Operator: Thank you. The next question is from Matthew Lee from Canaccord Genuity. Please go ahead.

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: Hi, can you hear me

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada: now? Yes.

Unidentified Speaker: Hi. Thanks for squeezing me in here. Okay. Maybe just talk a little bit about client migration and CWB. I think

Etienne Deuts, Financial Markets Head, National Bank of Canada: a couple of quarters ago,

Unidentified Speaker: you kind of mentioned that you didn’t expect to have any client losses as you brought customers onto the national system. Has that been the case?

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: Matthew, it’s Michael Denham. The short answer is yes. We’re very pleased with the client retention. As Laurent mentioned, we’ve just migrated the first set of clients and a little bit of couple of weeks ago and we’re in very close touch with the team there and the clients and we’re very satisfied so far with our ability to retain Canadian Western bank clients.

Unidentified Speaker: Okay. And then I think in the deck you kind of mentioned that CMBB commercial loan book has been sort of flat. Is that a conscious decision to slow growth while the integration occurs? Or is that maybe more a reflection of a quiet commercial loan growth environment in general?

Judith Menard, Commercial and Private Banking Head, National Bank of Canada: So I’m going to take this question, Matthew. It’s Judith. We are still growing the loan book of CWB as we speak because there’s a lot of term loans that need to be replenished. So, and of course the integration is very busy for the team as you can imagine training, understanding all the new systems. So it is kind of a balanced approach of continuing generating new loans while people are getting trained.

Unidentified Speaker: Okay, got it. Thanks. I’ll pass the line.

Conference Operator: Thank you. The next question is from Jill Shea from UBS. Please go ahead.

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada0: Good morning. Thanks for taking the question. Perhaps just on credit quality, really appreciate the color on the impaired PCLs landing closer to that middle of the range of the 25 to 35 basis points. With the 21 basis points that you did this quarter and then just looking at your first half results, not to put too fine a point on it, but it implies the impaired PCLs are back up around 30 basis points or so next quarter. Could you just walk us through the puts and takes this quarter and how you think about just the credit trends as we look forward into next quarter?

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: Thank you, Jill. So it’s J. S. I’ll take that question. So obviously, we’re pleased with the credit performance this quarter.

But you’re right, it’s not a new normal. We’re still in the credit cycle. And the lumpiness that you would have seen in previous quarter is likely to continue. We are seeing early signs of improvements,

Unidentified Speaker: and I’ll give you a

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: couple of examples. For retail, customers are showing resilience. We have about 80% of our RESO portfolio that has been repriced and the delinquency is still low. In wholesale, insolvency trends are stabilizing. We have downgrade rates that are reducing and clients have more time to prepare for possible tariff shocks and the renegotiation of USMCA.

But we do need to stay cautious. For retail, the largest driver is always unemployment and it continues to be the future driver of outcomes. We are seeing some stress among unsecured borrowers who are renters, but for the homeowners it’s going pretty well. We’re also seeing that younger customers are feeling more of an impact given the higher unemployment numbers for that cohort. We’re also continuing to see geographical differences with Quebec outperforming in unsecured credit.

What I look there is if we’re well covered and our ACL coverage for credit cards remains above 8%, which is very prudent. In wholesale, lumpiness is still expected, especially in industries where collateral and enterprise values have remained under pressures. We’re talking about manufacturing, talking about transportation. And there are still some tariff related risks. Specifically, the USMCA right now is being used as a blanket or a shelter and if it’s significantly modified there would be impacts.

So in this environment, you’ve seen us continue to be prudent by building seven basis points of performing provisions, which brings our total coverage ratio to over two times.

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada0: Okay. Thank you very much. I’ll pass the line.

Conference Operator: Thank you. The next question is from Darko Mihelic from RBC Capital Markets. Please go ahead.

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada1: Hi, thank you. Good morning. I just have a couple of questions here on CWB. The first thing is, if I look at your shareholders report, I can see the revenues and I can make the adjustments for the mark and for the synergies. And where I land is a revenue number of around $298,000,000 of CWB standalone.

And that would be a zero growth year over year. So I’m just wondering if you can maybe walk me through, what it is that is sort of happening beyond loan growth at CWB that there would be zero revenue growth for this bank on a standalone basis?

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada: Hi, Darko. It’s Pascal. I’ll take that question and then maybe Judith can give some more color on what’s happening in terms of the business. So you’re absolutely right that when you look at the revenue growth sequentially for CWB, it’s stable. There is the effect of acquisition accounting that you have to take into consideration.

And also when you look at the CWB portfolio because of the transaction that occurred, it’s not necessarily 100% comparable quarter to quarter because of most importantly the fair value mark. But when you look at the balance sheet on the loan and that’s I think that’s what’s most important, it remained pretty much stable sequentially quarter over quarter. She did that as given some color a bit earlier. So we’re pretty pleased with the way the portfolio is behaving considering that we’re in the middle of an integration.

Judith Menard, Commercial and Private Banking Head, National Bank of Canada: So I would add on more color on the business side. So the integration as we see it now is going very well so far with the first branch converted successfully with more branches planned in the coming months that was a success. So I’ve met with many CWB clients and overall sentiment toward the combination is very positive. CWB clients value our expanded offering and the additional services we now provide to see the value. So I want to emphasize, as I said at the last question, that our CW teams have been supporting clients and getting trained through the integration while also actively originating new loans.

Having said that, we expect the CWB loan portfolio to be relatively stable during the integration period as mentioned. So excluding the planned roll down of broker GICs and wealth management, deposits have also remained stable. So we feel that we’re very well positioned to accelerate growth and realize revenue synergies as the integration progresses.

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada1: Okay. Thank you for that. Can you maybe help me reconcile one other thing here with respect to your results as presented? I mean, one of the things, if I draw your attention to Page four of your shareholders report, In there, you showed sort of the CWB impact. And in that consolidated results line, if I scroll down, I see provisions for credit losses adjusted of just $13,000,000 But in your slide deck, you’re suggesting that CWB’s impairment on impaired loans is $26,000,000 So is that to say that the total PCL essentially has a reserve release at CWB of around $13,000,000 Or is there something else that I should be thinking about?

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: So first, just in terms of there is a small reserve release in CWB, which is as expected as when you look at the bank level, the performing provisions were really driven by growth of the portfolio. And there hasn’t been that growth at CWB. And we’ve seen less migration or we continue to see migration from Stage two to Stage three, which also makes in Stage two. So yes, there was a little release in the DCB provisions.

Marianne Ratti, Vice President and Head of Investor Relations, National Bank of Canada1: When you say little, is $13,000,000

Jean Sebastien Gruzet, Chief Risk Officer, National Bank of Canada: little or Well, Darko, need to remember we took $230,000,000 of performing provisions last quarter also, right? So it’s normal that there’s little puts and takes the quarter after.

Laurent Perreras, President and CEO, National Bank of Canada: Okay. Okay, great. Thank you.

Conference Operator: Thank you. The next question is from Paul Holden from CIBC. Please go ahead.

Doug Young, Analyst, Desjardins Capital Markets: Yeah, thank you. Good morning. A couple of questions for Etienne. I guess, first off, looking at the equity trading results, not exactly what we would have expected versus what peers have produced equity trading down for national year over year. And just want to get a better sense of the drivers of that.

I can look at the Appendix 12 and see there were some trading day losses, but they look pretty small. So anyways, maybe that’s part of the factor, but I imagine it’s not the entire explanation.

Etienne Deuts, Financial Markets Head, National Bank of Canada: So thanks for your question, Paul. It’s Tim. So maybe take a step back and talk about the quarter as a whole because we’re really pleased with the third quarter results for Financial Markets in a very different market environment than Q2, but still the platform delivered its third best quarter ever. So I think that demonstrates the strength and the diversification of the platform. The results are consistent with the pacing we anticipated heading into the quarter.

We knew there would be lower volumes due to seasonality. We anticipated lower equity volatility. So overall, a more normal market backdrop and that caused lower equity and FX trading results sequentially. Although our market share continues to progress in several key segments there, these businesses are doing well. And as markets normalize, Corporate and Investment Banking caught some great tailwinds and delivered record revenues with, as Laurent alluded to, DCM and M and A leading the way, but really all segments did well in CIB.

So overall, total revenues for financial markets were up 13% year over year. And I think the key highlight there is the resiliency and diversification of the platform. And Paul, you alluded, yes, there were a few down days during the quarter. I think I counted four. And these are days that down days that occurred during equity market rally.

So as you know, we have a very defensive positioning. This was extremely profitable for us in Q2. We are maintaining that defensive positioning because we think we want to maintain that diversification of cyclical and countercyclical market regimes and to do well in both. So really since our focus is on liquidity providing and structuring, we won’t benefit as much as some peers from when credit tightens a lot like it did this quarter. So really, what you saw is the source of our defensive positioning in equities as a result.

But overall, really pleased with the performance of the business.

Doug Young, Analyst, Desjardins Capital Markets: Understand. Okay. So it’s consistent with the National’s long vol comment I think you gave us on the last quarter, and that makes sense. Okay. Second question for you, Elyse, think it’s for you.

So, Loran, I think, highlighted that the market risk RWA was down Q over Q and that helped the CET1. And I get that you don’t want to forecast the CET1 from quarter to quarter. But I think it would be helpful to understand why market risk RWA was down as much as it was quarter over quarter and if there is a potential for it to go back up to where it was in Q2?

Etienne Deuts, Financial Markets Head, National Bank of Canada: Well, there is definitely the potential, Paul. As volatilities go down, market risk tends to go down. Also I make a comment that we tend to deploy more as markets get volatile. We’re in there with clients providing liquidity. And so we may raise density because of that.

So as markets go back to being volatile, because of our defensive positioning, we’ll be well positioned and we’ll be in there providing liquidity, being very active with clients. So if markets go back to being more volatile, while we think we’re in great position to profit from that, but look for market RWAs to creep back up.

Doug Young, Analyst, Desjardins Capital Markets: Okay. Again, makes sense. Okay. Thank you for that, Achin. Thank you.

Conference Operator: You. There are no further questions at this time. I would like to turn the meeting back over to Mr. Ferreira.

Laurent Perreras, President and CEO, National Bank of Canada: Thank you. So as we look ahead, the bank is in a strong financial position and we are focused on the execution of our CWB integration as well as growth across all of our business segments. So on that, thank you for joining us today.

Conference Operator: Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.

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