National hikes dividend despite earnings miss

National Bank of Canada reported net income of $738 million in its fourth quarter, dipping four per cent from a year ago as the bank sets aside more money for potential bad loans. While the bank missed analyst expectations, it raised its quarterly dividend.

The bank’s diluted earnings came to $2.08 per share in the three months ending Oct. 31 compared to $2.17 per share reported the same time last year. Average analyst consensus was for earnings of $2.24 per share. Despite slipping profits, the bank increased its quarterly dividend by five cents to 97 cents per share.

The bank said it had strong performance across its business segments with a five-per-cent year-over-year increase to its pre-tax income before credit losses of $988 million. However, the bank also reported $87 million in provisions for credit losses in its fourth quarter compared to $41 million in releases during the same quarter last year.

“We generated superior organic growth across all our business segments and the operating leverage was positive for the year. We maintain prudent allowances for credit losses and robust capital ratios,” said National Bank CEO Laurent Ferreira in a release. “In the fourth quarter of fiscal 2022, the pre-tax, pre-provision earnings for each business segment were up, with strong double-digit growth for the personal and commercial and the wealth management segments.”

For the full 2022 year, National Bank reported net income of $3.38 billion, growing by eight per cent from its fiscal year 2021. Diluted earnings reached $9.61 per share, though results were stunt ed by higher provisions for credit losses amid a shifting economic backdrop.

Quarterly revenue growth was led largely by National Bank’s personal and commercial banking segment, in which total revenues rose 15 per cent year-over-year to $2.33 billion on higher net interest income after the Bank of Canada aggressively increased interest rates this year.

John Aiken, senior analyst and head of research at Barclays Bank PLC, commended National Bank on its stronger earnings this quarter but noted it lagged in segments other than non-personal and commercial banking.

“Despite reasonably solid results in its operating segments, National’s earnings missed expectations because of losses in its ‘Other’ segment,” Aiken wrote in his note on Wednesday. “This is rarely well received by the market and we believe that this will be the focus despite a strong performance in its retail operations. Further, capital markets performance was weak on lower-than-expected trading and Credigy (Ltd.) had another poor quarter. These factors will likely result in underperformance for (National Bank).”

Wholly owned Credigy, an Atlanta-based specialty finance company, saw revenue slip by $12 million to $88 million in the fourth quarter.