National Bank of Canada

All participants, please stand by. Your conference is ready to begin. Good afternoon, ladies and gentlemen, and welcome to the National Bank of Canada's Third Quarter Results Conference Call. I would now like to turn the meeting over to Ms. Linda Boulanger, Senior Vice President of Investor Relations. Please go ahead, Ms. Boulanger.

Thank you, operator. Good afternoon, everyone, and welcome to our Third Quarter presentation. Presenting this afternoon are Laurent Ferreira, President and CEO of the bank, Marie-Chantal Gingras, Chief Financial Officer, and Bill Bonnell, Chief Risk Officer. Also joining us for the Q&A session are Lucie Blanchet, Head of Personal Banking, Michael Denham, Head of Commercial and Private Banking, Denis Girouard, Head of Wealth Management, Etienne Dubuc, Head of Financial Markets and responsible for Credit G, and Stéphane Achard, responsible for International Activities. Before we begin, I refer you to slide two of our presentation, providing national banks caution regarding forward-looking statements. I would also like to remind listeners that the bank uses non-GAAP financial measures, such as adjusted results, to measure its performance. Management will be referring to adjusted results in their remarks unless otherwise noted as reported. With that, let me now turn the call over to Laurent.

Merci Linda, and thank you everyone for joining us. This morning, National Bank reported earnings per share of $2.21 and a return on equity of 15.3%. The solid performance was supported by revenue and pre-tax, pre-provision earnings growth in P&C, wealth and international, partly offset by a less constructive backdrop in financial markets. We continue to operate in a challenging environment. The Canadian economy has yet to absorb the full impact of rate hikes since the start of monetary policy tightening, resulting in lingering uncertainty. While the labour market is showing signs of easing, it remains robust at this point in time. For its part, the housing market is enduring the impact of higher rates amid demographic growth and limited supply. This development is likely to keep inflation higher for longer and limit the Bank of Canada's ability to offer short-term interest rate relief. Against this backdrop, our strategic positioning and defensive posture provides us with strength and resilience to face potential headwinds and take advantage of opportunities. First, the bank has a diversified business mix and strong earnings power backed by a disciplined approach to risk and cost management. Second, we have a solid credit profile. Our credit portfolios continue to perform well, and we are building up prudent reserves in line with business growth and credit normalization. Third, our capital position is strong with a CET1 ratio of 13.5%. This enables us to invest in organic growth while returning capital to shareholders through sustainable dividend increases. Our dividend payout ratio now stands at the low end of our 40 to 50% target range following the dividend increase announced last quarter. We will review our dividend in the fourth quarter consistent with usual practice. To summarize, With our capital levels, strong earnings power, and discipline on cost and credit, we are well positioned to navigate the economic uncertainty and grow the bank. Turning now to the performance of our business segments. Personal and commercial banking performed well with pre-tax, pre-provision earnings up 9% from last year, supported by margin expansion and solid balance sheet growth. As anticipated, We continue to see a slowdown in loan growth as clients adjust to higher borrowing costs. Earlier this month, we announced the acquisition of a commercial loan portfolio of Silicon Valley Bank's Canadian branch. This acquisition builds upon our 25-year presence in technology across the country and reaffirms our commitment to support the Canadian innovation sector. Wealth management had another strong quarter, generating 6% year-over-year growth in both revenue and pre-tax pre-provision earnings, supported by higher interest rates and our deposit base. Asset growth was also strong, coming in at 10% year-over-year, a result of market appreciation and strong net sales. In financial markets, corporate and investment banking delivered a strong quarter with revenues up 17% year-over-year, led by ongoing momentum in corporate banking. In global markets, securities finance had a strong quarter on the back of balance sheet demand and higher rates, which was offset by lower revenues in structured products. We also experienced lower trading activity across the franchise amid exceptionally low market volatility, and this was compounded by a strong third quarter last year. CreditG delivered solid results in the third quarter. Despite an uncertain macro environment and with market supply remaining low, the franchise generated asset growth of 3% sequentially, primarily driven by new portfolio purchases. The portfolio remains defensively positioned with continued strong underlying performance. We are pleased with the average asset growth delivered so far this year, in line with our double digit growth target for fiscal 2023. ABA's balance sheet growth continued in Q3, with loans and deposits up 25% from last year. The franchise continues to expand its customer base with a total number of clients up 36% year-over-year. Revenue growth continues to reflect pressure on deposit margin resulting from migration to term products in the context of higher interest rates and a competitive environment for deposits. While global economic growth is moderating, the longer-term outlook for Cambodia remains very attractive. Before I pass it over to Marie Chantal, I'd like to take a moment to recognize Denis Giroir for his countless contributions to the bank over his 33-year career with us. In that time, he has been instrumental in growing our financial markets franchise and forging its leadership position in key sectors. Over the last few months, Denis has led our wealth business on an interim basis, which further speaks to his leadership. I am personally very grateful that Denis will be staying on as a strategic advisor to the bank so that we can continue to benefit from his deep experience. Denis will fully transition to his advisory role once Nancy Paquette officially takes over the leadership of wealth management in Q1. Nancy is a proven leader, having made her mark in a range of strategic roles at the bank since joining in 2007. She is a seasoned financial service professional with a strategic vision and a client-centric mindset. We look forward to welcoming her to the senior leadership team as head of our wealth franchise, a key growth driver for the bank. Marie-Chantal, over to you.