Canada’s National Bank beats profit forecasts with lower provisions, lending growth

The National Bank of Canada logo is seen outside of a branch in Ottawa

By Nichola Saminather and Noor Zainab Hussain

(Reuters) -National Bank of Canada beat analysts’ second-quarter profit estimates on Friday, driven by higher earnings in its personal and commercial business and a large drop in funds set aside to cover potential loan losses.

National Bank became the fifth Canadian bank to beat expectations for earnings in the quarter through April, with all the lenders releasing provisions on performing loans on improving economic expectations, and healthy capital markets and wealth management units.

The smallest of Canada’s six big banks took provisions on credit losses of C$5 million ($4.1 million), versus analysts’ estimates of C$81 million. This included the release of C$62 million previously set aside for performing loans that could have soured.

Shares in National Bank fell 2.9% to C$94.19, after earlier touching a record high, while the Toronto benchmark rose 0.4%.

National Bank saw increases of 7% in personal loans and 5% in commercial lending, and profits rose at its wealth management and U.S. specialty finance and international businesses.

But earnings excluding the impact of provisions and taxes in its financial markets unit fell 10% from the year-ago period.

National Bank’s net income excluding one-off items rose to C$2.25 a share in the three months through April, compared with C$1.01 a share a year earlier. Analysts had expected C$2 a share, according to IBES data from Refinitiv.

Separately, smaller lender Canadian Western Bank posted adjusted earnings per share of 84 Canadian cents a share, versus expectations of 75 cents on higher net interest margins and loan growth, while making fewer provisions than expected.

Canadian Western’s shares fell 2.9%..

($1 = 1.2095 Canadian dollars)

(Reporting by Nichola Saminather in Toronto and Noor Zainab Hussain in Bengaluru; Editing by Aditya Soni and David Evans)