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The entrance for National Bank on the corner of York St. and Adelaide St. West in Toronto's Financial district.Charla Jones/The Globe and Mail

National Bank of Canada's traditional base in Ontario and Quebec drove upbeat results for the bank in the third quarter, as the region benefited from stronger economic activity.

"We continue to believe that Central Canada will perform better than [world] regions, as confirmed by recent indicators," Louis Vachon, National Bank's chief executive officer, said in a conference call with analysts.

He pointed to rising investment in plants and equipment and strong export numbers from Quebec, as well as continuing mergers and acquisitions activity and commercial loan growth – apparently confirming views among observers that cheaper energy prices and a lower Canadian dollar can deliver some economic benefits.

The bank reported that its profit in the fiscal third quarter rose to $453-million, up 3 per cent from last year. After making some adjustments, profit was $1.25 a share, beating analysts' expectations by 6 cents.

The shares, which had been hit hard along with other Canadian bank stocks over the past year, rose 5.3 per cent in Toronto.

Within the bank's businesses, earnings from personal and commercial banking rose 6 per cent, driven by gains in consumer loans, mortgage loans and commercial lending. Nearly 84 per cent of the bank's loans were to borrowers in Quebec and Ontario.

However, National Bank is not immune to struggling oil and gas companies, which account for about 2.8 per cent of the bank's total loan portfolio.

"We continue to see our Canadian producers take the right actions to reduce costs, raise capital and to benefit from the weaker Canadian dollar," said Bill Bonnell, the bank's executive vice-president of risk management. "We will continue to monitor this portfolio very closely and see the potential impact of a prolonged oil price decline as manageable."

He added that during the quarter, the bank reduced its oil and gas related loans by about $400-million because of asset sales and M&A activity. There were no new impaired loans during the quarter.

"Credit does not appear to be an immediate concern for National Bank," John Aiken, an analyst at Barclays Capital, said in a note.

"Further, with lower exposure to consumer and commercial borrowers in Alberta on a relative basis, we anticipate that it should be able to sidestep most of the credit headwinds facing its peers."

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