National Bank of Canada surpassed analysts' expectations for its second-quarter earnings, driven by robust performance in its personal and commercial banking division and a significant reduction in funds set aside for potential loan defaults.
Strong Earnings Growth
The Montreal-based lender reported net income of $1.2 billion for the three months ending April 30, a 38% increase from $896 million in the same period last year. Diluted earnings per share reached $3.06, compared to $2.28 a year earlier.
On an adjusted basis, which excludes one-time items, net income rose 12% to $1.3 billion, with adjusted earnings per share of $3.23, up from $2.85 and above the $3.13 consensus estimate from analysts.
Credit Quality Improves
Provisions for credit losses (PCLs), the money banks reserve to cover bad loans, dropped sharply to $233 million, less than half the $545 million recorded in the same quarter last year. This improvement reflects better credit conditions and disciplined risk management.
Dividend Increase
The bank announced a dividend hike of eight cents, bringing the quarterly payout to $1.32 per share for the second quarter of 2026.
Segment Performance
Personal and commercial banking net income surged nearly 169% to $355 million, propelled by higher net interest income and the acquisition of Canadian Western Bank last year.
The wealth management unit posted an 18% increase in net income to $274 million, driven by growth in fee-based revenue.
Capital markets earnings declined 3% to $488 million, as lower global markets revenues were partially offset by higher corporate and investment banking revenues.
The U.S. specialty finance and international business earned $186 million, up 10% from a year earlier.
CEO Commentary
Chief Executive Laurent Ferreira attributed the results to business diversification and client activity, supported by credit discipline, synergies from the Canadian Western Bank acquisition, and share buybacks.
National Bank is among the first of Canada's Big Six banks to report quarterly results, alongside Bank of Nova Scotia and Bank of Montreal. Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce are scheduled to report on Thursday.
