MONTREAL — National Bank plans to increasingly reward its shareholders over the coming months after its profits soared to a record $312 million in the first quarter and beat analyst expectations.
The Montreal-based bank said it plans to redeem $516 million of rate-reset preferred shares that it has outstanding and pass along about $32 million in annual savings to common shareholders. It will also review its 66-cent per share quarterly dividend in three months and is set to reactivate a program to repurchase common shares.
“We expect to continue to generate excess capital and plan to optimize our capital structure,” CEO Louis Vachon said Thursday during a conference call.
The country’s sixth-largest bank, whose operations are focused largely in Quebec, earned $1.80 per share, rising above the $1.64 per share consensus estimate gathered by Thomson Reuters.
Quarterly profits increased from $215 million or $1.22 a year earlier. Revenues were $1.15 billion, up from $1.08 billion.
Vachon said the bank continued to benefit in the quarter from the favourable economic environment and its own growth initiatives.
National Bank (TSX:NA) raised its dividend last quarter, making it the first Canadian bank to do so since the economic downturn two years ago.
“Going forward, we foresee the growth in personal lending volumes slowing down over the year while commercial lending should remain strong,” he told analysts, noting that provisions for credit losses will remain within projections.
Healthy conditions for wealth management and financial markets should remain favourable for the next few quarters, he added.
The bank’s Tier 1 capital ratio increased to 14.6 per cent as of Jan. 31, up from 14 per cent three months earlier. Return on equity stood at 19 per cent.
Sumit Malhotra of Macquarie Securities said an increase in wholesale net interest income underpinned the solid all-around first-quarter results.
“Interestingly, the net interest income growth seems to be coming from the Financial Markets segment, where (margin and income) trends have historically been volatile,” he wrote in a report.
Personal and commercial banking earnings increased 13 per cent to $157 million, wealth management net income was up 91 per cent to $44 million, but financial markets decreased five per cent to $137 million.
National was the only Canadian bank not to experience a surge in non-compensation costs last quarter and expense control continued in the first quarter.
“We view this as a typically solid quarter for National, with the only caveats being our question regarding the sustainability of the uptick in wholesale net interest margin and modest disappointment that the core capital markets numbers were not stronger given the conducive backdrop,” Malhotra added.
On the Toronto Stock Exchange, National Bank shares gained $2.18, or 3.04 per cent, to $73.96 in afternoon trading.