National Bank of Canada

Good morning and welcome to National Bank of Canada's Second Quarter Results Conference Call. I would now like to turn the meeting over to Marianne Rossi. Please go ahead, Marianne.

Thank you and welcome everyone. We will begin the call with remarks from Laurent Ferreira, President and CEO, Marie-Chantal Gingras, CFO, and Jean-Sebastien Griset, Chief Risk Officer. Our business heads are also present for the Q&A session, including Julie Lévesque, Personal Banking, Judith Ménard, Commercial and Private Banking, Nancy Paquette, Wealth Management, Etienne Dubuc, Capital Markets, and Bill Bonner, International. Before we begin, please refer to slide 2 of our presentation for forward-looking statements and non-GAAP measures. Management will refer to adjusted results unless otherwise noted. I will now pass the call to Laurent.

Merci, Marianne, and thank you, everyone, for joining us. In the second quarter, we delivered EPS of $3.23, up 13% year over year. We generated a return on equity of 16.8%, while maintaining a strong CET1 ratio of 13.54%. Despite macroeconomic uncertainty, clients remained active throughout the quarter, and market conditions were favourable. This was reflected in strong growth in both our balance sheet and our fee-based businesses. We also benefited from credit performance, the realization of cost and funding synergies, and momentum in revenue synergies from CWB, as well as share buybacks. On the capital deployment front, we remain active on our NCIP. To date, we have repurchased 8.8 million shares under our program, which was upsized during Q2 2020. to enable the purchase of up to 14.5 million shares. Our strong earnings power and capital position also support an increase in our dividend, with today's announcement of an $0.08 or 6% increase. This brings the quarterly dividend to $1.32 per share. During the quarter, we completed the syndicated loan transaction with Laurentian Bank, and earlier this month, we received clearance from the Competition Bureau for the retail and SME portfolio transaction, which remains on track to close by year end, subject to remaining regulatory approvals. We are committed to operating with strong capital levels and continue to target a CET1 ratio converging towards 13% by year end of 2027. Turning now to our economic outlook. Uncertainty has increased significantly with the war in Iran, which has impacted the global and Canadian economies. We expect the conflict to drive inflation and higher rates as supply chains for critical goods are disrupted and reconfigured. This uncertainty could further impact business investments, which have slowed down over the past couple of years due to tariff-related uncertainty and excessive regulation. But if we look beyond the near term, Canada is well positioned to benefit from ongoing efforts to re-industrialize our economy, undertake major projects, make Canada an energy superpower, modernize our defense sector and create champions, and invest in Arctic infrastructure to support defense, energy, and critical mineral development. On this, I want to acknowledge the leadership shown by the federal and provincial governments to rebuild Canada's economic sovereignty. Structural changes are required to adjust to the evolving economic and geopolitical landscape, and National Bank will be there to support clients and our country's economic priority. Turning now to our business segments, PNC Banking generated net income growth of 18% year-over-year, driven by strong growth in lending activity and mutual funds, as well as credit performance. Operating leverage was positive in the quarter. Personal banking mortgage volumes was up 12% year over year, supported by a resilient housing market and share gains in Quebec. Personal deposits were slightly down sequentially as strong equity markets drove increased client flows into investment solutions and generally higher portfolio levels, contributing to an 8% increase in total personal savings year over year. In commercial banking, deposits were up 7% and commercial loans were up 5% year-over-year. Despite macro uncertainty, clients were active within the National Bank-originated loan portfolio, growing by 11% year-over-year. The CWB legacy book declined by $400 million sequentially, primarily driven by commercial real estate. Our outlook for the year on commercial lending remains positive. while acknowledging that the micro context has shifted with the conflict in the Middle East and with heightened uncertainty around the path of inflation and interest rates. Net income in our wealth management segment increased 18% year-over-year to $277 million supported by growth across the franchise, including strong fee-based and transaction revenues. Asset under administration grew 14% over the same period to reach nearly $940 billion, benefiting from resilient equity markets and strong net sales. Capital markets generated net income of $490 million. This notable performance reflects the strength of our business mix and strong execution. Trading conditions were favorable in the quarter. Our performance in global markets was primarily driven by strong client activity, including in equity-structured products originations, commodities, and rates, as well as higher market-making volumes more broadly. Record results in corporate and investment banking reflected sustained client activity across M&A, corporate banking, and ECM, as well as continued investments in our franchise. CreditG generated net income of $46 million, up 15% year-over-year. Average assets were up 10% over the same period and 1% sequentially, as we continue to benefit from recurring flows from established partnerships. We remain highly disciplined in pursuing new deals given the prevailing competitive market dynamics and pricing conditions. At ABA Bank, net income increased 10% year-over-year, reflecting balance sheet growth and lower PCLs, partly offset by a higher efficiency ratio. Loans were up 12% year over year, while deposits grew 15% over the same period. I will now pass the call to Marie-Chantal.