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National Bank second-quarter net income slashed to $210 million from $404 million

MONTREAL – National Bank doesn’t think it will need to provision more money in order to cover bad debt tied to the oil and gas sector, CEO Louis Vachon said Wednesday.

The $183 million — after taxes — that was used to cover credit losses caused the bank’s second-quarter net income to fall 48 per cent, to $210 million or 52 cents a share, from $404 million or $1.13 a share a year earlier.

Vachon said the provision should be enough.

“Obviously, we want to put this situation behind us,” Vachon said on a conference call with analysts. “However, we never know how the price of oil will vary.”

Questioned by an analyst, Vachon said it was “correct” to assume the bank had enough latitude in front of it before having to provision more money if necessary.

The oil and gas sector, which has suffered due to the drop in oil prices, represents close to three per cent of National Bank’s portfolio.

Aside from the bad loans connected to the petroleum industry, Vachon said the quality of the bank’s credit portfolio meets the expectations of analysts.

Six-month net income through April 30 totalled $471 million or $1.19 a share, down from $819 million or $2.29 a share a year earlier.

Excluding the provision, National Bank profits increased by 2.2 per cent in the second quarter, to $420 million or $1.14 per share.

The bank also raised its dividend by one cent per share, or by two per cent, to 55 cents a share.

Analyst John Aiken of Barclays Capital tried to curb the pessimism surrounding the bank’s results.

“Aside from the provision, the results of National Bank are relatively solid,” he said. “And investor attention shouldn’t be focused solely on the energy sector in the future.”