National Bank of Canada Q2 Profit More Than Doubles, Beats Estimates; Shares Down 3%

Shares of National Bank of Canada (NA) fell 3% in early trading Friday even after Canada’s sixth-largest bank posted better-than-expected Q2 profits, driven by lower provisions on credit losses and strength in financial markets.

Profit came in at C$801 million (C$2.25 per diluted share) for Q2 2021, beating analysts’ estimates of C$2.00 per share. The profit for Q2 2020 was C$379 million (C$1.01 per diluted share).

In addition, revenue was in line with estimates at nearly C$2.2 billion, up 10% from C$2 billion in the prior-year quarter.

Profit in National Bank’s personal and commercial banking division more than quintupled to C$321 million. The bank has received a boost from its domestic market of Quebec, where strong housing demand is supporting mortgages.

In addition, its wealth management business profit grew 17% to C$165 million in the quarter, driven by booming stock markets.

Finally, net income in the bank’s financial markets business net income rose 50% to C$238 million in the latest quarter.

Credit loss provisions in the quarter fell to C$5 million compared with C$504 million in the same quarter last year. (See National Bank of Canada stock analysis on TipRanks)

National Bank’s President and CEO Louis Vachon said, “For the second quarter 2021, the Bank delivered another strong performance. We continue to operate in an improving economic environment more conducive to business growth, with our Q1 momentum carrying over into Q2. Our solid results once again reflect the fact that we have made the right strategic choices and have built a strong, diversified and agile franchise. With an industry-leading ROE, strong capital levels, and prudent allowances for credit losses, we are well-positioned to selectively seize growth opportunities as we gradually exit the pandemic.”

Following the results, Canaccord Genuity analyst Scott Chan maintained a Hold rating on NA with a C$94.50 price target, for no upside potential.

The rest of the Street is cautiously optimistic on NA with a Moderate Buy consensus rating based on 3 Buys and 4 Holds. The average analyst price target of C$93.92 implies 1% downside potential from current levels.

TipRanks’ Smart Score

NA scores a 6 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock returns are likely to be in line with the overall market.

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