The lobby of National Bank of Canada on King Street in Toronto.Fernando Morales/The Globe and Mail
With its operations humming, executives at National Bank of Canada are turning their attention to the bank's capital levels.
While rival Big Six banks all have common equity ratios above 9 per cent – meaning their common equity amounts to at least 9 per cent of their risk-weighted assets – National Bank's equivalent ratio is lagging, coming in at 8.3 per cent.
National Bank is making it a goal to get in line with its peers. "When we looked at where our major competitors are, they have all been above 9 [per cent], and stayed above 9, even after the buybacks," chief executive officer Louis Vachon said on a conference call.
If the bank continues to perform that way it currently is – and that's rather strongly – National Bank expects to add 0.20 percentage points to its common equity ratio each quarter. That means it will take roughly a year to get above the 9-per-cent target.
National Bank didn't fully rule out any major acquisitions that would suck up capital in the meantime, but Mr. Vachon acknowledged that any big deal would have be funded with common equity – something the banks don't like issuing.
"If we do anything significant, we would probably have to issue common equity," he said.
Tim Kiladze