National Bank Results Quarterly profit beats forecasts,

Nearly 84 per cent of loans issued to borrowers located in Ontario or Quebec

MONTREAL— National Bank of Canada says it has a shot at increasing earnings next year even if loan losses, including to the oil sector, grow.

The Montreal-based bank — the sixth-largest in Canada — said a precedent was set in 2009 when earnings per share rose even though the provisions for credit losses was almost twice the current level.

“It’s not a promise, but I’m telling you we’re going to try and I’m telling you it’s been done before,” CEO Louis Vachon said Wednesday during a conference call after reporting thirdquarter earnings.

The bank said it has limited exposure to the oilpatch. Loans to that sector accounted for just 2.8 per cent of the $113.4 billion in total loans in the third quarter, which grew 9 per cent from the prior year.

“We will continue to monitor this portfolio very closely and see the potential impact of a prolonged oil price decline as manageable,” added Bill Bonnell, executive vice-president of risk management.

National Bank’s total exposure to the petroleum-based provinces of Alberta, Saskatchewan and Newfoundland and Labrador was just 9.1 per cent of total loans.

Nearly 84 per cent of the bank’s loan book is to borrowers in Quebec and Ontario, which is benefiting from the big drop in oil prices.

Provisions for credit losses amounted to $56 million, down 2 per cent from the second quarter.

The bank is forecasting slow economic growth in the coming quarters — 1.3 per cent in Canada and Quebec, where most of the bank’s operations are based, this year and 1.6 per cent in 2016.

In response to low growth, the bank said it will focus on reducing its growing expenses. Vachon said the Canadian banking sector also has room to improve its efficiency by getting rid of cheques and reducing or eliminating the use of cash.

“If it’s been done in Sweden, there’s no reason why it should not be done in Canada,” he said.

The bank beat expectations as its third-quarter profit grew 3 per cent to $453 million.