National Bank of Canada

Good morning and welcome to National Bank of Canada's First Quarter Results Conference Call. I would now like to turn the meeting over to Marianne Araté, Vice President and Head of Investor Relations. Please go ahead, Marianne.

Merci and welcome, everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO, Mathis-Fontal Gingras, CFO, and Jean-Sebastien Griset, 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 Paquet, Head of Wealth Management, Etienne Dubuc, Head of Financial Markets, and Sefa Macha, Head of International. 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 on this otherwise notice. I will now turn the call over to Laurent.

Merci, Marianne, and thank you, everyone, for joining us. Let me begin the call by addressing the macroeconomic and geopolitical context before turning to our results. Canada's economic performance has fallen behind the U.S. and other G7 nations. There has been a considerable decline in our productivity and GDP per capita, coupled with insufficient investments in manufacturing and R&D. Canadian companies are facing excessive regulation and oversight. Added to the mix, we face a US administration with a pro-business and protectionist agenda. Now, we must not only rebuild our relationship and negotiate economic and trade terms with our largest partner, we must also get investments off the ground in our country. Concretely, Canada must consider appointing a non-partisan head of deregulation to identify and recommend removal of unproductive red tape, accelerating depreciation on capital investments for businesses, reducing taxes on capital gains for business owners, Allowing the deferral of tax payable on a transfer to future generations or on a sale to employees to preserve Canadian ownership of businesses. Focusing on permits, not subsidies. Adopting a Buy Canada Act to promote and give priority to local businesses, notably to increase defense spending with Canadian procurement in the aerospace industry, manufacturing sector, and critical infrastructure. Finally, R&D or AI should focus on growing our industries and our economy. I also urge decision-makers to remove all interprovincial trade regulation hindering Canadian productivity. Canada is a resource-rich country. It is our responsibility to ensure that our people benefit from the full economic potential of our energy, natural resources, agriculture, and manufacturing sectors today and in the future. Now, the heightened uncertainty brought by potential tariffs may pressure our economic growth and could prolong the credit cycle. As a Canadian-centric bank with strong capital levels and an expanded national footprint, we have a pivotal role to play in shaping our economy. At National Bank, we are determined to support our clients through this turbulent time and to help finance much needed investments in our productivity and economic growth. Turning now to our financial results. This morning, the bank reported earnings per share of $2.93 for the first quarter of 2025, up 13% year over year, and a return on equity of 17.6%. This performance reflects strong execution across business segments and our diversified earnings power. We ended the quarter with a CET1 ratio of 13.6%. Our acquisition of Canadian Western Bank, which closed subsequent to quarter end on February 3rd, will have a minimal impact. This leaves ample room for business growth. Our dividend payout of 40.6% in Q1 reflects last quarter's dividend increase and a robust earnings growth. We will review our dividend next quarter consistent with usual practice. Our acquisition of CWB marks a pivotal moment for National Bank. Our combined organizations will allow us to deliver more banking products and services for all Canadians and Canadian businesses. Over the last few weeks, our teams have been working hard on the integration. Together with our new colleagues, I look forward to leveraging our cultures and values. will not only accelerate National Bank's domestic growth, but extend our banking capabilities to the benefit of all our clients. Turning now to the performance of our segments. PNC Banking generated net income of $290 million in Q1, with underlying growth more than offset by the credit cycle impact. The momentum in our loan portfolio was in line with expectations. Personal mortgages grew 3% year over year, supported by a solid pace in our client channels. Commercial loans were up 13% over the same period, with strength in insured residential real estate and broad-based growth across industries and geographies. Wealth management had a strong start to the year, with Q1 net earnings up 23% year over year. Revenues were up in all categories with strong growth in assets and demand deposits. This was driven by market appreciation, strong net entries in all distribution channels, and high activity level. The franchise also generated positive operating leverage. Financial markets exceeded our expectations in Q1 with year-over-year net income growth of 35%. Global markets generated a record top line with elevated activity across most businesses. We benefited from particularly strong issuance volumes in structured products and significant opportunities in securities finance. On a corporate and investment banking side, revenues were up 3%. Credit G's net income was up 8% year over year. Average assets grew 7% over the same period and were relatively stable sequentially. The U.S. market remains competitive and we are maintaining our usual discipline, only pursuing opportunities with risk-reward profiles that meet our criteria. We continue to be successful in financing and acquiring mortgage portfolios, while risk-adjusted returns on unsecured assets are generally less compelling right now. Finally, ABA Bank. Consistent with past orders, the local economy continues to operate below potential. with lower tourism spend directly impacting our customers. As a result, ABA grew its loan book by 9% year-over-year in the first quarter. Against this backdrop, ABA is leveraging its strength, including its digital payment and cash management capabilities. It also continues to increase its client base, which was up 31% year-over-year in Q1, translating into deposit growth of 19%. Before turning it over to Marie Chantal, I would like to say a few words on the executive appointments announced last December and effective March 1st. Michael Denham, who successfully led the integration of our private and commercial banking activities, will lead CWB's integration as EVP and Vice Chair, a role he is exceptionally qualified for. With this transition, Judith Menard is being promoted to Executive Vice President and the Head of Commercial and Private Banking. This is a natural next step given her trajectory with the bank since 1998 and her previous success expanding our commercial and private banking model beyond Quebec. In addition, Dominique Paradis, who has played a pivotal role in overseeing the bank's legal team and corporate governance, was promoted to Executive Vice President and General Counsel. With their appointments, Judith and Dominique will also join the Senior Leadership Team. This being Stéphane Achard's last call prior to his retirement at the end of April, I'd like to take a moment to recognize him. Stéphane has made a lasting impact at the bank and the business community with his leadership and dedication to clients. I extend my gratitude for his many contributions and on behalf of all of us, I wish him the very best in his well-deserved retirement. Finally, I would also like to thank Bill Bunnell for stepping in to oversee our international investments, delaying his own retirement plans, and once again, demonstrating his dedication to the bank. Marie-Chantal, over to you.