National Bank of Canada Earnings - Q4 2025 Analysis & Highlights
National Bank of Canada reported strong Q1 2026 results driven by solid organic performance across retail and business segments, successful CWB integration with cost and funding synergies exceeding targets, and strategic capital deployment through share buybacks and dividend growth, while management outlined a path to 17%+ ROE by 2027 amid a challenging macroeconomic environment characterized by trade tensions and economic uncertainty.
Key Financial Results
EPS of CAD 3.25, representing an 11% year-over-year increase.
Return on equity of 16.6% for the quarter.
CET1 ratio of 13.74%, supported by capital generation of 41 basis points.
Revenues rose 21% year-over-year and PTPP grew 23%, driven by solid organic performance across all segments and the CWB transaction.
Excluding CWB, revenues increased 11% year-over-year and PTPP rose 12%.
Net interest income excluding trading grew 5% sequentially.
Loans rose 23% year-over-year or 9% excluding CWB, reflecting contributions from all segments.
Deposits increased CAD 5 billion or 2% sequentially.
Business Segment Results
P&C Banking: Revenues of more than CAD 1.5 billion and net income of CAD 442 million. Personal mortgages grew 3% sequentially, a strong start against a mid-single-digit growth target for 2026. Commercial loans grew 1% sequentially, with expectations to start growing the CWB portfolio in the second half of the year.
Wealth Management: Net income increased 13% year-over-year to CAD 274 million, supported by strong growth in fee-based and transaction revenues. Assets under administration grew 3% sequentially to reach close to CAD 900 billion with resilient equity markets and strong net sales.
Capital Markets: Generated net income of CAD 443 million, up 6% year-over-year, driven by strong contributions from both trading and non-trading businesses. Strong performance in equities was supported by opportunities in securities finance and elevated issuances in structured products.
Credigy: Delivered net income of CAD 47 million with average assets up 9% year-over-year and 1% sequentially. More than CAD 700 billion deployed in Q1 with strong deal flow.
ABA Bank: Net income increased 9% year-over-year, reflecting balance sheet growth and a build in performing PCLs. Revenues were up 13% with deposits and loans up 18% and 11% respectively.
Capital Allocation
Share buyback program upsized to repurchase up to 14.5 million shares from 8 million currently pending regulatory approval. To date, 6.4 million shares have been repurchased under the program.
Share buybacks during the quarter reduced the CET1 ratio by 33 basis points.
Capital deployment priorities are to drive organic business growth and operational efficiency and to grow dividends at sustainable levels, complemented by share buybacks and selective tuck-in acquisitions in P&C and Wealth.
Target CET1 ratio converging towards 13% by the end of 2027.
Synergy Realization from CWB Acquisition
CAD 176 million of cost and funding synergies realized to date, exceeding the year one target of CAD 135 million.
On track to deliver CAD 270 million by the end of fiscal 2026.
Revenue synergies progressing as planned towards CAD 50 million target by year end.
Fourth and final client migration completed, with conversion finished and training ongoing.
Credit Quality and Provisions
Total PCLs were CAD 244 million or 32 basis points, down 1 basis point quarter-over-quarter.
PCL on impaired loans were CAD 215 million or 28 basis points, stable quarter-over-quarter and within guidance of 25 basis points to 35 basis points for the full year.
Total allowances for credit losses were CAD 2.5 billion, representing 5.9 times coverage of net charge-off.
Gross impaired loan ratio was 111 basis points, with GILs at 81 basis points excluding USSF&I, remaining flat quarter-over-quarter.
Macroeconomic Environment
Canadian economic growth has remained modest and the labor market continues to be soft.
Headwinds persist, including trade tensions and uncertainty around CUSMA.
The geopolitical and economic backdrop continues to weigh on the economy, with the country far from its GDP potential.
Trade tensions and uncertainty around CUSMA are affecting the country and business investment has slowed down.
A lower interest rate environment, diversification of trading partners and plans to fast track nation building projects, should help support economic activity.
Management is encouraged by government actions and momentum across the country to reestablish economic sovereignty, particularly pleased with concrete actions towards re-industrialization including Canada's Defence, Security and Resilience Bank and Defence Industrial Strategy.
Growth Opportunities and Strategies
Strategic review of the P&C sector underway throughout the year with updates expected towards year-end, with management highlighting upside in P&C ROE performance.
Revenue synergies from Capital Markets solutions are being realized, with key levers including enhanced risk management solutions, balance sheet expansion within existing and new client relationships, deployment of cash management capabilities, and leveraging CWB equipment financing expertise.
CWB portfolio expected to start growing in the second half of 2026 following integration completion.
Credigy pursuing disciplined approach to new deals given competitive market dynamics and pricing conditions, with deal pipeline suggesting activity could be slower in Q2 2026.
Capital Markets franchise evolution focused on scaled, high-return activities with increased share of wallet and leads, particularly in infrastructure, power, energy, mining, and industrials sectors.
Mortgage growth strategy emphasizing quality over volume with disciplined growth in the Optimum portfolio, which represents around 4% of the real estate book on the personal side.
Financial Guidance and Outlook
2026 ROE target raised to around 16% from around 15% previously.
EPS growth in 2026 now expected to be at the top end of the 5% to 10% outlook.
Path to 17%+ ROE objective for fiscal 2027 with organic earnings growth over 2026 expected to add approximately 110 basis points to ROE.
Incremental CWB revenue synergies expected to contribute 20 basis points in 2027.
EPS accretion of 1.5% to 2% from the Laurentian transaction expected to add approximately 30 basis points to ROE, assuming close by end of 2026.
Reaching a CET1 ratio of 13% by end of fiscal 2027 expected to account for approximately 40 basis points of ROE increase.
RWA growth expected to reduce ROE by approximately 100 basis points, net of AIRB conversion benefit.
P&C NIM expected to remain relatively stable from Q1 levels, with better deposit margin largely offset by balance sheet mix as loan growth continues to outpace deposit growth.
Credigy expected to grow in the 5% to 10% long-term target range for the full year, with margins expected to be fairly stable and continue to be attractive and accretive.
Capital Markets PTPP guidance of CAD 1.8 billion to CAD 2 billion for the full year, with management feeling increasingly good about hitting the upper part of this range.
Impaired provisions expected to remain within 25 basis points to 35 basis points range for the full year.
Other segment PTPP loss guidance adjusted to CAD 225 million from the previous range of CAD 225 million to CAD 275 million.
Competitive Landscape
Market share expansion in Quebec supported by strong brand positioning and deep long-standing real estate relationships.
Disciplined pricing strategy maintained to support sustainable penetration while improving margins.
Competitive market dynamics and pricing conditions in the Credigy market are not meeting the bank's pricing thresholds in most cases.
Capital Markets franchise strengthened connectivity with market themes and increased share of wallet and share of leads through focused investments over several years.
