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National Bank’s core earnings meet expectations, total profit slips

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 second-quarter earnings did not live up to the expectations created by rival lenders, but the bank still managed to meet profit estimates.

The Montreal-based bank made $362-million last quarter or $1.01 per share, down 13 per cent from the year prior. After stripping out one-time items, which significantly boosted its profit one year ago, National Bank made $375-million, or $1.05 per share, a rise of 7 per cent.

After accounting for one-time items, analysts expected earnings of $1.04 per share.

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Much like its rival lenders, National Bank saw its Canadian personal and commercial banking operations earn more than the year prior, but profit fell shy of the level set just one quarter ago.

Wealth management, however, continued to stay hot, with earnings soaring to $68-million, a jump of 39 per cent over the prior year. Some of these gains came from the bank's acquisition of TD Waterhouse Institutional Services.

National Bank, however, could not buck the trading trend that has plagued many major global investment banks this year, even though other Canadian banks were left largely unscathed. In a tough market for fixed-income trading, many investment dealers are seeing their profits fall; National Bank's capital markets arm saw its profit drop to $128-million, down 9 per cent from the year prior.

In a move that will likely appease investors, National Bank boosted its dividend by 4 per cent to 48 cents quarterly. The hike comes just one month after chief executive Louis Vachon stressed that he is keen on boosting the bank's common equity capital ratio above 9 per cent, to match the levels at other Big Six banks.

Currently National Bank's capital ratio sits at 8.7 per cent, and management expects it to climb all on its own as the lender brings in more profits over the next few quarters.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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