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National Bank of Canada profit beats on trading strength

(Reuters) -National Bank of Canada reported a better-than-expected first-quarter profit on Wednesday as robust performance at its trading and investment banking unit cushioned the hit from an increase in loan loss provisions.

Easing fears of a recession have encouraged investors to wade back into stocks and other fixed-income products, boosting markets and trading desks at banks.

Revenue at National Bank’s financial markets unit jumped 10% to C$755 million ($556.09 million) in the first quarter, helped by strong demand for equity products.

Fee-based revenue from the company’s wealth management unit also rose 8% to C$375 million.

However, an uncertain economic environment and high borrowing costs have raised the threat of more borrowers falling behind on their loan repayments, prompting lenders to set aside bigger rainy-day funds.

Montreal-based National Bank’s provisions for credit losses in the first quarter rose to C$120 million from C$86 million.

The windfall from high interest rates has also tapered off as banks pay out more on deposits to retain customers from chasing higher-yielding alternatives.

National Bank’s net interest income, or the difference between what banks earn on loans and pay out on deposits, slumped 31.7% to C$751 million in the first quarter.

On an adjusted basis, the lender earned C$2.59 per share, beating analysts’ estimates of C$2.36, according to LSEG data.

($1 = 1.3577 Canadian dollars)


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