National Bank of Canada Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
National Bank of Canada's Q4 2025 earnings call highlighted strong financial performance, strategic acquisitions including Canadian Western Bank (CWB) and Laurentian Bank's Retail and SME banking portfolios, and a focus on organic growth and efficiency amid a complex macroeconomic environment. The bank is targeting EPS growth and ROE improvement, supported by cost synergies and disciplined capital deployment.
Key Financial Results
Q4 2025 EPS was CAD 2.82, and full-year EPS was CAD 11.28.
The bank met its medium-term financial objectives, including a return on equity of 15.3% and EPS growth of 9%.
The dividend payout ratio was 40.7%, supporting a 7% increase in the common share dividend in 2025.
Revenues grew 25%, and PTPP increased 32%, achieving positive operating leverage every quarter.
Excluding CWB, revenues increased 17% and PTPP was up 23%.
The bank ended the year with a CET1 ratio of 13.75%.
Business Segment Results
P&C Banking generated net income of CAD 336 million in Q4, after a CAD 62 million pre-tax impairment charge on intangible assets and higher impaired credit losses on the CWB portfolio.
Excluding CWB, Q4 P&C revenues were up 5% year-over-year.
Personal mortgages grew 8% year-over-year, and the commercial loan book grew 12% year-over-year.
Wealth Management saw net income growth of 18% for the quarter and 17% for the year, driven by strong organic growth and rising equity markets.
AUA in Wealth Management now totals close to CAD 875 billion.
Capital Markets reported strong quarterly results with revenues of CAD 877 million.
Capital Markets net income was up 34% from last year, reaching a record level of CAD 1.7 billion.
Credigy delivered net income of CAD 42 million in Q4.
At ABA Bank, net income increased 8% year-over-year in Q4, with revenues up 16%.
Capital Allocation
The bank announced a 5% quarterly dividend increase, effective Q1 2026.
Share buybacks were initiated in September.
The bank plans to convert approximately two-thirds of the CWB loan book to the advanced method in late 2026, expecting to add 50 to 75 basis points to the CET1 ratio.
The acquisition of Laurentian Bank's Retail and SME banking portfolios is expected to reduce the CET1 ratio by 25 to 30 basis points.
A CET1 ratio converging around 13% represents an optimal capital level to operate at by the end of 2027.
Industry Trends and Dynamics
Trade tensions with the US are affecting all provinces, causing job losses and a slowdown in the labor market.
Inflation is proving sticky, with uncertainty around monetary policy and interest rates.
Increased government focus on the economy, including tax cuts and investment in housing and infrastructure, is expected to support consumer consumption and resilience.
Government action supports the steel and softwood lumber industries.
Macroeconomic Environment
The geopolitical and geoeconomic situation will continue to shape business confidence and investments in 2026.
The Canadian economy continued to soften in 2025, marked by slower growth, rising unemployment, and tariff uncertainty.
The Bank of Canada cut interest rates to support economic activity.
Economic growth is anticipated to be slow yet positive in 2026 amid trade uncertainties.
The unemployment rate is expected to remain relatively steady but elevated.
Growth Opportunities and Strategies
The bank intends to grow and deploy capital to help fuel Canada's economy, leveraging its increased national presence.
The acquisition of Canadian Western Bank positions the bank for accelerated growth.
The acquisition of Laurentian Bank's Retail and SME banking portfolios aligns with growth and capital deployment strategies.
The bank aims to accelerate organic growth and operational efficiency.
The bank intends to grow dividends at sustainable levels.
Financial Guidance and Outlook
For 2026, the bank is targeting EPS growth within its medium-term objective of 5% to 10% and positive operating leverage, aiming for an ROE around 15%.
By 2027, the bank targets an ROE of 17%-plus, benefiting from synergies from CWB, growth in all sectors, efficiency improvements, and returning capital to shareholders.
P&C NIM is expected to gradually trend upward in 2026, with the all-bank non-trading NIM improving slightly in the second half of the year.
Impaired PCLs are expected to be in line with last year's range of 25 to 35 basis points for the full year.
The Laurentian Bank transaction is expected to be accretive to adjusted EPS by 1.5% to 2% in the first year following closing of the RESL portfolio and marginally accretive to adjusted ROE.
The transaction with Laurentian Bank is not expected to have a material impact on the fiscal 2026 outlook.
