National Bank of Canada

This conference is being recorded. Cette conférence est enregistrée. All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen, and welcome to National Bank of Canada's fourth quarter results conference call. I would now like to turn the meeting over to Madame Marianne Raté, Vice President and Head, Investor Relations. Please go ahead, Madame Raté.

Merci, and good morning, everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO, Marie-Chantal Gingras, CFO, and Bill Bonnell, Chief Risk Officer. Also present for the Q&A session are Lucie Blanchet, Head of Personal Banking and Client Experience, Michael Denham, Head of Commercial and Private Banking, Nancy Paquette, Head of Wealth Management as of November 1st, Etienne Dubuc, Head of Financial Markets, also responsible for Credit G, and Stéphane Achat, Head of International, responsible for ABA Bank. Before we begin, I would like to refer you to slide two of our presentation for information on forward-looking statements and non-GAAP financial measures. The Bank uses non-GAAP measures, such as adjusted results, to assess its performance. Management will be referring to adjusted results unless otherwise noted. I will now turn the call over to Laurent.

Merci, Marianne, and thank you, everyone, for joining us. This morning, National Bank reported earnings per share of $2.44 for the last quarter of 2023 and of $9.60 for the full year. On the back of strong execution, organic growth, and tight expense management, we delivered on our pre-tax, pre-provision earnings objective for 2023 with 7% growth over last year. Through sustainable dividend increases, we reached our target dividend payout ratio range of 40 to 50%. Our ratio now stands at 41%. This is excluding this morning's 4% quarterly dividend increase effective Q1 2024. We also generated a return on equity of 16.8% while growing our capital position and ended the year with a CET1 ratio of 13.5%. Looking at the Canadian economy, which contracted 1.1% in Q3, the effects of tighter monetary policy are kicking in. This is putting pressure on our customers, with consumers and businesses having to adjust to higher boring costs. Domestic demand has slowed, and the labour market is softening. Housing costs are rising due to higher rates, limited supply, and population growth. As a result, we are operating in an environment where the outlook for economic growth remains challenging. In this context, our diversified business mix and our disciplined approach to credit, capital, and cost management positions us well and will continue to guide our path forward. We have a solid credit profile and are building prudent reserves in line with business growth and credit normalization. Our capital deployment strategy remains unchanged, as does our target of generating ROE of 15 to 20%. Our objective is to maintain strong capital ratios, invest in business growth, deliver sustainable dividend increases, and provide flexibility. Turning now to the performance of our business segments. Personal and commercial banking delivered strong results in Q4, and for the full year, with pre-tax pre-provision earnings up 16% in 2023 over last year. These results were supported by deposit-driven margin expansion from rising rates, as well as solid volume growth on both sides of the balance sheet. 2023 also marked another successful year on the client acquisition and satisfaction fronts. Our commercial loan book experienced strong growth with lending volumes up 3% sequentially. Personal loans were up 1% quarter over quarter as mortgage growth continued to moderate. As always, we remain disciplined on new originations, balancing volume growth, margins, and credit quality. 2023 was a record year for wealth management, with total revenues exceeding $2.5 billion. Pre-tax, pre-provision earnings were up 8% over last year, benefiting from our strong client franchise. Our wealth management business delivers superior returns year after year and is a key pillar of our growth strategy. Looking to 2024, fee-based revenues from our client franchise will remain reliant on market performance. Our focus is to continue growing our client base as was the case in 2023. For our core banking operations in PNC and wealth, we expect the increase in net interest income from higher rates to moderate. Our financial markets business delivered net income in excess of $1 billion once again in 2023, demonstrating resilience in all market conditions. Corporate and investment banking delivered 16% revenue growth in Q4, capping off a record year with revenues of $1.2 billion. This highlights investments we have made in talent over the last several years. Global markets also delivered a strong quarter. We expanded our activities in securities finance through the year. Structured products also benefited from a pickup in volumes and normalizing equity volatility in Q4 compared to the prior quarter. We continue to grow and diversify our financial markets business and build upon our expertise in select areas while maintaining disciplined risk management. Looking at next year, the segment will be subject to the proposed Canadian dividend tax measure. Despite this change, we expect to deliver year-over-year net income growth for financial markets in 2024. CreditG also delivered a solid overall performance in 2023. Revenues in Q4 increased 13% sequentially, reflecting the performance of our portfolios and prepayment revenue. In an uncertain macro environment, the franchise selectively deployed capital throughout the year with success, growing average assets by 13% consistent with our 2023 objectives. CreditG continues to demonstrate its ability to execute in various economic environments. It has invested over $2.5 billion in 2023 and has reached for the first time the $10 billion Canadian dollar mark in average assets in the fourth quarter. Looking at next year, we are seeing positive momentum in deal flow and foresee double-digit asset growth for 2024. ABA Bank delivered a solid performance in 2023 with continued momentum in client acquisition. It was again recognized as the best bank in Cambodia by Euromoney and Global Finance. In Q4, ABA generated double-digit growth in loans and deposits, although revenues reflected continued margin pressure from the deposit mix. From a macro standpoint, the Cambodian economy continues to adjust to softer external demand and a slower recovery in tourism. In this context, we will remain focused on delivering balanced growth. Longer term, the outlook continues to be very attractive. Cambodia remains a high growth economy with favorable demographics, presenting substantial growth opportunity for ABA. As we enter 2024, We are committed to our prudent and disciplined approach to capital, credit, and cost management across our businesses. Our defensive positioning and the earnings power of our diversified business mix provides us with resilience and flexibility in a less constructive environment. This will enable us to continue to generate sustainable long-term value for our shareholders. Marie Chantal, over to you.