National Bank beats estimates on adjusted Q1 profits by a penny

MONTREAL – National Bank of Canada (TSX:NA) reported adjusted net income of $2.02 per diluted share for the first quarter of fiscal 2013, beating analyst estimates by a penny.

Total revenue for the quarter, however, was $1.24 billion, mostly flat compared to the year earlier period and below analyst expectations of $1.29 billion.

Quebec’s largest bank said net income for the quarter ended Jan. 31 was $364 million, or $2.03 per diluted share for the first quarter of fiscal 2013, up from $351 million or $1.99 in the same quarter of fiscal 2012.

“The first quarter results were driven by excellent performance in the wealth management segment and the personal and commercial segment, whose earnings rose 24 per cent and five per cent, respectively,” said Louis Vachon, president and CEO.

“The bank is continuing to invest in improvements to client service delivery and operational effectiveness — key advantages in periods of moderate economic growth. Furthermore, the Bank will maintain its sound management of costs, risk and capital.”

National said its personal and commercial banking businesses posted net income of $178 million compared to $169 million year over year.

Its wealth management segment’s net income was $51 million for the quarter, up from $41 million.

Net income, however, was down for National’s financial markets segment to $115 million from $121 million year over year.

National recorded $32 million in provisions for credit losses, $13 million less than in the same quarter of 2012 — attributed mainly to corporate loan losses recovered in the quarter.

National Bank was expected to earn $2.01 per share in adjusted profits on $1.29 billion of revenues in the first quarter, according to analysts polled by Thomson Reuters.

That compared with $2 per share on $1.24 billion of revenues in the prior year.

National could be especially vulnerable to the economic slowdown because it is among the banks that rely most on their domestic banking operations.

Barclays analyst John Aiken downgraded National, falling from overweight to equal weight.

“We favour the banks that have smaller contributions from domestic retail net interest income and have greater exposure to capital markets,” Aiken wrote in a note.

National is facing two potential class-action lawsuits in connection to Poseidon Concepts Corp. (TSX:PSN), which has said up to $106 million in revenue should not have been recorded as such in 2012.

National Bank Financial Inc., a subsidiary of National Bank of Canada, was the lead underwriter of a January 2012 share offering.

The allegations have not been tested in court.

Moody’s rating agency recently downgraded six Canadian banks, claiming they are more vulnerable than before to a major shock to the economy.

The downgrades at the TD Bank, Scotiabank, BMO, CIBC, the National Bank and Desjardins reflect the agency’s ongoing concern that Canadian household debt is at historic highs.