National Bank posts profit of $347 million, but oilpatch blemishes show

MONTREAL – Canada’s sixth-largest bank posted quarterly profits Wednesday in line with expectations, though blemishes from its limited exposure to the woes in the oilpatch are beginning to show.

National Bank said it earned $347 million for the three months ended Oct. 31, taking the full-year net income to $1.62 billion.

“In 2015, National Bank achieved strong financial results in a context of a slowing Canadian economy,” National Bank president and CEO Louis Vachon said in a statement.

The Montreal-based bank later told analysts that it expects the Quebec and Canadian economies to grow 1.5 to 1.6 per cent in 2016. The low Canadian dollar should help manufacturing and service sectors along with employment in B.C., Ontario and Quebec, while low energy prices will hurt Alberta where it has limited exposure.

“We continue to view the potential impacts of a prolonged oil price decline as manageable and within our historical range of credit losses,” said Bill Bonnell, executive vice-president risk management.

Provisions for loan losses increased nine per cent to $61 million. Impaired loans from the mining and oil and gas portfolio jumped more than 60 per cent to $62 million.

The profit growth in the quarter was in line with analyst estimates but constrained by one-time items, notably $62 million after taxes for restructuring costs such as severance pay and writeoffs of offices and equipment.

The bank announced in October that it was eliminating “several hundred” jobs mainly in Quebec as part of a restructuring resulting from the economic slowdown and “increasingly fierce competition.”

It said it earned 95 cents per share during the quarter, but it would have been $1.16 per share without the special items.

Its revenues increased three per cent to $1.4 billion in the quarter and by five per cent to $5.75 billion for the year.

The bank says its quarterly dividend will be raised by four per cent with more upside likely in the new year, reflecting its ability to grow profit despite weakening economic conditions. The dividend will go up by two cents to 54 cents per common share, payable Feb. 1.

John Aiken of Barclays Capital said the results were “not terribly surprising” and support increased shareholder returns to come in form of share buybacks and additional dividend increases.

“Given that we believe that National has the capability to continue to outpace its peers in terms of domestic retail loan growth as well as potentially being least impacted by a deterioration in consumer credit, the bank remains poised to perform well in 2016 on a relative basis,” he wrote in a report.