National Bank posts strong home mortgage growth,

MONTREAL — National Bank of Canada has been growing its home mortgages business with the help of more specialists and by working with brokers, but it hasn’t lowered its underwriting standards to achieve the growth, the bank said Friday.

MONTREAL — National Bank of Canada has been growing its home mortgages business with the help of more specialists and by working with brokers, but it hasn’t lowered its underwriting standards to achieve the growth, the bank said Friday.

Canada’s sixth-largest bank said it has increased the number of mortgage development officers doing business with real estate agents and mortgage brokers.

“The good growth we’ve had is not coming from lower underwriting standards,” chief executive Louis Vachon said, a day after National Bank posted a first-quarter profit of $332 million, up from $322 million a year ago.

“It comes from a significant shift that you’ve seen in Ontario for a while and is now developing in Quebec,” Vachon said during a conference call.

Vachon made the comment after an analyst noted the National Bank (TSX:NA) had 13 per cent loan growth in personal lending and mortgages, outpacing the industry.

“We’ve been a little bit more receptive to mortgage brokers than compared to some of our competitors who have, frankly, been a little bit more ambivalent about doing business with mortgage brokers,” Vachon said.

Rejean Levesque, executive vice-president of personal and commercial banking, said while growth was “pretty strong” in mortgages he expects it to slow to the mid-to-single digits in the second and third quarters.

Levesque said that outside Quebec as much as 45 per cent of mortgages come from the brokerage business and the bank is doing a better job of tapping into that.

“We have increased the number of mortgage development officers doing business with real estate agents, but it also came from the broker side of the brokerage business.”

Patricia Curadeau-Grou, responsible for the bank’s risk management, said the bank has added 60 mortgage specialists and doesn’t anticipate any problems going forward with working with mortgage brokers.

“We’re fairly comfortable with the type of business they’re bringing in and we haven’t changed the underwriting criteria.”

Mortgage brokers represent home buyers in getting a competitive interest rate among a variety of financial institutions.

In its financial results released late Thursday, National Bank said its profit amounted to $1.99 per diluted share for the quarter ended Jan. 31 up from $1.86 a year ago. Revenue totalled $1.24 billion, up from $1.16 billion.

Excluding one-time items, the bank said it earned $334 million or $2 per diluted share, up from $322 million or $1.86 per share a year ago.

The average analyst estimate had been for a profit of $1.82 per share on $1.15 billion in revenue, according to those polled by Thomson Reuters.

RBC Capital markets analyst Andre-Philippe Hardy said he continues to expect that shareholders will profit from the bank’s growth through higher dividends.

“We continue to expect the bank’s shareholders to benefit from improvements in relative revenue growth in its domestic retail business relative to the 2007—2010 period and from disciplined capital management, with higher dividends likely,” Hardy wrote in a research note.

Hardy said his 12-month price target is up $2 to $87 based on higher excess capital and the sale of Natcan Investment Management to Fiera Sceptre.

Last week, National Bank signed a deal to sell its asset management business to Fiera Sceptre Inc. (TSX:FSZ) in a $309.5-million agreement that will see it take a large stake in the business.

National Bank will swap Natcan Investment Management Inc. for a 35 per cent stake in Fiera, a Montreal-based independent investment firm.

Shares in National Bank were up 81 cents, or just more than one per cent, at $78.29 in afternoon trading on the Toronto Stock Exchange.

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