News Column

NBC-National Bank posts record results for the First Quarter of 2014

February 25, 2014



ENP Newswire - 25 February 2014

Release date- 24022014 - The financial information reported herein is based on the unaudited interim condensed consolidated financial statements for the first quarter ended January 31, 2014 and prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) and set out in the CPA Canada Handbook.

The figures for the year ended October 31, 2013 have been adjusted to reflect changes in accounting standards and the impact of the stock dividend of one common share on each issued and outstanding common share declared on December 3, 2013. The effect of this dividend was the same as a two-for-one split of common shares. A financial information supplement issued on January 31, 2014, entitled 'Supplementary Financial Information - Adjusted to Reflect Changes in Accounting Standards and the Common Stock Split' is available at nbc.ca. Additional information about National Bank of Canada, including the Report to shareholders - First Quarter 2014 and the Annual Information Form, can be obtained from the Bank's website at nbc.ca or on SEDAR website at sedar.com.

National Bank is reporting $405 million in net income for the first quarter of 2014 versus $373 million in the first quarter of 2013. Diluted earnings per share for the quarter ended January 31, 2014 stood at $1.15, up 10% from $1.05 in the same quarter of 2013.

Excluding the specified items described on page 4, this quarter's net income was a record amount of $384 million, up 12% from $344 million in the first quarter of 2013, and the quarter's diluted earnings per share was a record $1.09, up 12% from $0.97 in the same quarter of 2013.

'First quarter results are showing strong momentum for National Bank,' said Louis Vachon, President and Chief Executive Officer. 'In Personal and Commercial Banking, loan and deposit growth remained strong and net interest margins improved on a sequential basis. Also, credit quality remained excellent. Wealth Management benefited from good organic growth and the contribution from newly acquired TD Waterhouse Institutional Services. Financial Markets also did well with solid client-driven activities and good cost control.' Highlights: $405 million in net income for the first quarter of 2014, up 9% from $373 million in the same quarter of 2013; Diluted earnings per share of $1.15 for the first quarter of 2014, up 10% from $1.05 in the same quarter of 2013; Return on equity of 19.8%; As at January 31, 2014, the Common Equity Tier 1 (CET1) capital ratio under Basel III was 8.3% versus 8.7% as at October 31, 2013.

Highlights Excluding Specified Items(1): $384 million in net income for the first quarter of 2014, up 12% from $344 million in the same quarter of 2013; Diluted earnings per share of $1.09 for the first quarter of 2014, up 12% from $0.97 in the same quarter of 2013; Return on equity of 18.8%.

Financial Indicators Results excluding Results specified Q1 2014 items (1) Growth in diluted earnings per share 10 % 12 % Return on common shareholders' equity 19.8 % 18.8 % Dividend payout ratio 39 % 42 % CET1 capital ratio under Basel III 8.3 % (1) See the Financial Reporting Method section on page 4.

National Bank of Canada Press Release, First Quarter 2014 2

Personal and Commercial

Net income totalled $168 million in the first quarter of 2014, up 3% from $163 million in the first quarter of 2013. The segment's contribution rose $13 million or 5%. At $658 million, first-quarter total revenues rose $19 million or 3% year over year. Rising 7% from a year ago, personal lending experienced sustained growth, with the strongest increases coming from consumer loans and mortgage lending, and commercial lending grew 5% from a year ago. The net interest margin was 2.25% in the first quarter of 2014 versus 2.24% the preceding quarter and 2.32% in the first quarter of 2013. At 57.5%, the efficiency ratio improved from 58.2% in the first quarter of 2013.

Wealth Management

The acquisition of TD Waterhouse Institutional Services (TD Waterhouse) was completed on November 12, 2013. First-quarter net income totalled $68 million, a 42% increase from $48 million in the same quarter of 2013. First-quarter total revenues amounted to $324 million versus $277 million in the same quarter of 2013, a $47 million or 17% increase that was driven particularly by growth across all revenue streams and by the TD Waterhouse acquisition. First-quarter non-interest expenses stood at $231 million, up 9% year over year. Excluding specified items(1), the efficiency ratio was 68.3%, an improvement from 73.7% in the first quarter of 2013.

Financial Markets

Net income totalled $144 million in the first quarter of 2014, up 27% from $113 million in the same quarter of 2013. At $365 million, revenues increased $62 million or 20% owing mainly to growth in trading activity revenues, gains on available-for-sale securities and other revenues. At $168 million, non-interest expenses increased slightly in the first quarter of 2014, rising $7 million year over year, particularly due to higher variable compensation associated with revenue growth. At 46.0%, the efficiency ratio improved from 53.1% in the first quarter of 2013.

Other

Net income totalled $25 million for the first quarter of 2014 versus $49 million in the same quarter of 2013, a decrease that stems particularly from a lower contribution from Corporate Treasury. During the first quarter of 2014, a $33 million rise in the value of restructured notes was recorded, whereas a $26 million decrease in past services costs had been recorded in the first quarter of 2013 to reflect changes to the provisions in pension plans and other post-retirement plans subsequent to changes in accounting standards.

Capital Management

The Common Equity Tier 1 (CET1) capital ratio under Basel III was 8.3% as at January 31, 2014 versus 8.7% as at October 31, 2013. The decrease came essentially from the Wealth Management acquisition and from the coming into force of the credit valuation adjustment.

(1) See the Financial Reporting Method section on page 4.

National Bank of Canada Press Release, First Quarter 2014 3

HIGHLIGHTS

(millions of Canadian dollars)

Quarter ended January 31 2014 2013 (1) % Change Operating results Total revenues $ 1,364$ 1,232 11 Net income 405 373 9 Net income attributable to the Bank's shareholders 389 356 9 Return on common shareholders' equity 19.8 % 20.7 % Earnings per share(2) (dollars) Basic $ 1.16$ 1.06 9 Diluted 1.15 1.05 10 EXCLUDING SPECIFIED ITEMS(3) Operating results Total revenues $ 1,326$ 1,222 9 Net income 384 344 12 Net income attributable to the Bank's shareholders 368 327 13 Return on common shareholders' equity 18.8 % 19.0 % Earnings per share(2) (dollars) Basic $ 1.10$ 0.98 12 Diluted 1.09 0.97 12 Per common share(2) (dollars) Dividends declared $ 0.46$ 0.41 Book value 23.68 20.76 Stock trading range High 46.86 40.02 Low 41.72 37.53 Close 41.72 39.66 As at January 31, 2014 As at October 31, 2013 (1) % Change Financial position Total assets $ 195,300$ 188,219 4 Loans and acceptances 99,722 97,338 2 Deposits 111,248 102,111 9 Subordinated debt and equity 11,098 11,379 ( 2) Capital ratios under Basel III(4) Common Equity Tier 1 (CET1) 8.3 % 8.7 % Tier 1 10.7 % 11.4 % Total 13.6 % 15.0 % Impaired loans, net of total allowances (172) (183) As a % of average loans and acceptances (0.2) % (0.2) % Assets under administration and under management 309,653 258,010 20 Total personal savings 161,827 157,515 3 Interest coverage 13.58 11.18 Asset coverage 3.45 3.76 Other information Number of employees 19,784 19,691 - Number of branches in Canada 451 453 - Number of banking machines 938 937 -

(1) Certain amounts have been adjusted to reflect changes in accounting standards. See Note 2 to the unaudited interim condensed consolidated financial statements in the Report to Shareholders for the first quarter ended January 31, 2014.

(2) Reflecting the impact of the common stock split. See Note 13 to the unaudited interim condensed consolidated financial statements in the Report to Shareholders for the first quarter ended January 31, 2014.

(3) See the Financial Reporting Method section on page 4.

(4) The ratios have been calculated using the 'all-in' methodology, and the October 31, 2013 ratios have not been adjusted to reflect changes in accounting standards.

National Bank of Canada Press Release, First Quarter 2014 4

FINANCIAL REPORTING METHOD

(millions of Canadian dollars, except per share amounts)

When assessing its results, the Bank uses certain measures that do not comply with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) and set out in the CPA Canada Handbook. Securities regulators require companies to caution readers that net income and other measures adjusted using non-IFRS criteria are not standard under IFRS and cannot be easily compared with similar measures used by other companies. Financial information Quarter ended January 31 2014 2013 (1) % Change Excluding specified items Personal and Commercial 168 163 3 Wealth Management 76 53 43 Financial Markets 144 113 27 Other (4) 15 Net income excluding specified items 384 344 12 Items related to holding restructured notes(2) 30 9 Acquisition-related items(3) (9) (6) Item related to employee benefits(4) - 26 Net income 405 373 9 Diluted earnings per share excluding specified items(5) $ 1.09$ 0.97 12 Items related to holding restructured notes(2) 0.09 0.03 Acquisition-related items(3) (0.03) (0.03) Item related to employee benefits(4) - 0.08 Diluted earnings per share(5) $ 1.15$ 1.05 10 Return on common shareholders' equity Including specified items 19.8 % 20.7 % Excluding specified items 18.8 % 19.0 %

(1) Certain amounts have been adjusted to reflect changes in accounting standards. See Note 2 to the unaudited interim condensed consolidated financial statements in the Report to Shareholders for the first quarter ended January 31, 2014.

(2) During the quarter ended January 31, 2014, the Bank recorded $5 million in financing costs ($3 million net of income taxes) related to holding restructured notes. It also recorded $45 million in revenues ($33 million net of income taxes) to reflect the rise in the fair value of these notes (2013: $12 million in revenues ($9 million net of income taxes) to reflect the rise in the fair value of the commercial paper not included in the Pan-Canadian restructuring plan).

(3) During the quarter ended January 31, 2014, the Bank recorded $11 million in charges ($9 million net of income taxes) related mainly to the Wealth Management acquisitions and consisting mostly of retention bonuses (2013: $8 million, $6 million net of income taxes) in addition to the Bank's share in the integration costs incurred by Fiera and its share in the integration costs and intangible asset amortization related to the Bank's interest in TMX.

(4) During the quarter ended January 31, 2013, the Bank recorded a $35 million decrease ($26 million net of income taxes) in past service costs to reflect changes to the provisions of its pension plans and other post-retirement plans subsequent to changes in accounting standards.

(5) Reflecting the impact of the common stock split. See Note 13 to the unaudited interim condensed consolidated financial statements in the Report to Shareholders for the first quarter ended January 31, 2014.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: ENP Newswire


Story Tools