National Bank of Canada Earnings - Q2 2026 Analysis & Highlights
National Bank of Canada reported strong Q2 2026 earnings driven by robust balance sheet growth, positive operating leverage, and successful integration of the Canadian Western Bank acquisition, while navigating macroeconomic uncertainty stemming from Middle East geopolitical tensions and labor market softening.
Key Financial Results
Earnings per share (EPS) of CAD 3.23, up 13% year-over-year.
Return on equity (ROE) of 16.8% in Q2 2026.
Revenue growth of 7% year-over-year, driven by solid performance across segments and strong balance sheet growth.
Pre-tax pre-provision profit (PTPP) grew 5% year-over-year.
All-bank efficiency ratio of 50.4%.
Expense growth of 9.5% year-over-year, though excluding litigation expenses and prior-year property tax reversals, expense growth was 7.4%, in line with revenue growth.
Year-to-date EPS growth of 12%.
Year-to-date ROE of 16.7%.
Business Segment Results
Personal & Commercial (P&C) Banking generated net income growth of 18% year-over-year, driven by strong growth in lending activity and mutual funds, as well as credit performance.
Personal Banking mortgage volumes up 12% year-over-year, supported by a resilient housing market and share gains in Quebec.
Personal deposits slightly down sequentially as strong equity markets drove increased client flows into investment solutions, with total personal savings up 8% year-over-year.
Commercial Banking deposits up 7% year-over-year and commercial loans up 5% year-over-year.
National Bank-originated loan portfolio grew 11% year-over-year despite macro uncertainty.
CWB legacy book declined by CAD 400 million sequentially, primarily driven by commercial real estate.
Wealth Management net income increased 18% year-over-year to CAD 277 million, supported by growth across the franchise including strong fee-based and transaction revenues.
Assets under administration grew 14% year-over-year to nearly CAD 940 billion, benefiting from resilient equity markets and strong net sales.
Capital Markets generated net income of CAD 490 million, reflecting strong client activity in equity structured products, commodities, rates, and higher market-making volumes.
Credigy generated net income of CAD 46 million, up 15% year-over-year, with average assets up 10% year-over-year and 1% sequentially.
ABA Bank net income increased 10% year-over-year, with loans up 12% year-over-year and deposits up 15% year-over-year.
Capital Allocation
Dividend increase of CAD 0.08 or 6%, bringing the quarterly dividend to CAD 1.32 per share.
Share repurchases of 8.8 million shares under the current NCIB program, representing approximately 60% of the program, with the program upsized during Q2 to enable the purchase of up to 14.5 million shares.
Share buybacks during Q2 reduced the CET1 ratio by 32 basis points.
Loans increased 9% year-over-year and 3% quarter-over-quarter, including the addition of the Laurentian Bank syndicated loans of CAD 657 million.
Deposits increased by CAD 9 billion, or 3% sequentially.
Macroeconomic Environment
Conflict in the Middle East is adding uncertainty by putting pressure on energy prices, inflation, and interest rates.
Canadian economy has grown modestly while the labor market continued to weaken.
Business investments have slowed down over the past couple of years due to tariff-related uncertainty and excessive regulation.
Uncertainty has increased significantly with the war in Iran, which has impacted the global and Canadian economies.
Conflict expected to drive inflation and higher rates as supply chains for critical goods are disrupted and reconfigured.
Quebec economy has experienced a delayed impact in terms of slowdown, with higher unemployment noted.
Labor market suffering more now across the country, including Quebec, with uncertainty around CUSMA and commercial tensions.
Growth Opportunities and Strategies
Canada is well-positioned to benefit from ongoing efforts to reindustrialize the economy, undertake major projects, make Canada an energy superpower, modernize the defense sector, and create champions and invest in Arctic infrastructure.
Commercial Banking deposit growth remains a strategic focus with three pillars: upgrading the online banking platform, expanding the Treasury management team, and enhancing deposit solutions through targeted offerings by client segments and industry.
National Bank-originated loan portfolio continues to grow with strong client activity, with core commercial banking growing more than real estate, focused on mid-market and large client segments across all geographical footprint.
CWB integration is complete on conversion and integration, with teams well positioned to return to generating new volume with early signs of recovery and visible improving pipeline.
Capital Markets continuing to invest in the franchise with strong execution across Global Markets and Corporate and Investment Banking divisions.
Credigy prioritizing secured assets, with two-thirds of investment volumes in mortgage portfolios in Q2.
Financial Guidance and Outlook
EPS growth for the second half of 2026 expected to be in line with year-to-date performance.
Expense growth anticipated to trend towards the low-single-digit range for the second half of the year, contributing to positive operating leverage.
ROE target of approximately 16% in fiscal 2026.
CET1 ratio target converging towards 13% by year-end of 2027.
Cost and funding synergies from CWB acquisition on track to reach CAD 270 million by the end of fiscal 2026, with target increased to CAD 300 million on an annualized basis.
Revenue synergies expected to reach approximately CAD 50 million by the end of fiscal 2026, with target of CAD 200 million to CAD 250 million by the end of fiscal 2028.
P&C NIM expected to be slightly down from Q2 levels in Q3, driven by mix dynamics in commercial deposits, partly offset by continued repricing benefits on core deposits.
All-bank NIM expected to remain relatively stable in Q3 from Q2 levels.
Impaired provisions expected to be within the 25 basis point to 35 basis point range for the full fiscal 2026.
Further gradual increases in PCL expected in the current context of heightened uncertainty and softer labor market conditions.
Commercial lending outlook remains positive, while acknowledging that the macro context has shifted with the conflict in the Middle East and heightened uncertainty around the path of inflation and interest rates.
Retail deposit growth expected to remain flat due to continuation of low interest rates through the end of 2026 limiting the relative attractiveness of deposits and continuing to drive outflows from GICs.
Credit Quality and Risk Management
Total PCL were CAD 233 million, including the initial provision on performing loans of CAD 6 million, or 1 basis point, related to the Laurentian Bank syndicated loan portfolio.
Adjusted total PCL were CAD 227 million or 30 basis points, down 2 basis points quarter-over-quarter.
PCL on impaired loans were CAD 192 million or 26 basis points, down 2 basis points quarter-over-quarter.
Total allowances for credit losses were CAD 2.6 billion, representing 5.1 times coverage of net charge-offs.
Performing allowances were CAD 1.7 billion, demonstrating a strong performing ACL coverage ratio of 2.2 times.
Gross impaired loan ratio was 114 basis points, up 3 basis points quarter-over-quarter.
GILs excluding USSF&I were 84 basis points, up 3 basis points sequentially.
Net formations were 13 basis points this quarter, with 12 basis points excluding the Laurentian Bank portfolio.
Commercial Banking net formations were 28 basis points and included one file in CRE residential insured.
Limited exposures to US non-bank financial, NAV lending, and software.
Capital Position and Liquidity
CET1 ratio ended the quarter at 13.54%, supported by capital generation of 41 basis points.
RWA growth consumed 38 basis points of capital.
Credit risk of 25 basis points primarily reflected balance sheet growth with 5 basis points from the acquisition of the Laurentian Bank syndicated loan portfolio.
Market risk consumed 9 basis points of capital, mainly driven by business growth.
Net interest income (NII), excluding trading, grew 7% year-over-year.
NII sequentially was down about 5%, with fewer days in the quarter accounting for over two-thirds of the decline.
NIM in Q2 was 2.16%, down 8 basis points quarter-over-quarter.
Treasury NII from Treasury was lower sequentially, representing 4 basis points, largely offset by non-interest income.
P&C NIM declined by 1 basis point, as loan growth outpaced deposit growth.
Regulatory and Strategic Transactions
Syndicated loan transaction with Laurentian Bank completed during the quarter.
Competition Bureau clearance received for the retail and SME portfolio transaction, which remains on track to close by year-end, subject to remaining regulatory approvals.
