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 operational efficiency amid a complex macroeconomic environment. The bank is targeting EPS growth and ROE improvements, 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 (ROE) 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% in 2025, achieving positive operating leverage every quarter.
Excluding CWB, revenues increased 17% and PTPP was up 23%.
Q4 2025 revenues increased 28% year-over-year, and PTPP grew 33%, with positive operating leverage at 4.4%.
Excluding CWB, Q4 revenues grew 18% year-over-year, expenses were up 14%, and PTPP rose 21%.
Business Segment Results
P&C Banking generated net income of CAD 336 million in Q4, which included 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.
Wealth Management net income grew 18% for the quarter and 17% for the year, driven by strong organic growth and rising equity markets.
Assets Under Administration (AUA) totaled close to CAD 875 billion.
Capital Markets revenues were up CAD 877 million in the quarter.
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 the fourth quarter.
ABA Bank net income increased 8% year-over-year in the fourth quarter.
ABA Bank revenues were up 16% over the same period.
Capital Allocation
The bank announced a 5% quarterly dividend increase, effective Q1 2026.
Share buybacks were initiated in September.
The bank ended the year with a CET1 ratio of 13.75%.
Share buybacks during the quarter reduced the CET1 ratio by 11 basis points.
Since September, the bank has bought back 2.1 million shares, or approximately 27% of its current program.
The transaction with Laurentian Bank 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 in the current environment and by the end of 2027.
Industry Trends and Dynamics
Trade tensions with the US are affecting all provinces, causing job losses in certain sectors and a slowdown in the labor market.
Increased government focus on the economy, including tax cuts and investment in housing and infrastructure, should support consumer consumption and resilience.
Government action supports the steel and softwood lumber industries.
The private sector and provincial governments must also play a role in revitalizing manufacturing sectors, strengthening supply chains, and building strategic development projects.
The bank intends to grow and deploy capital to help fuel Canada's economy.
Macroeconomic Environment
The geopolitical and geoeconomic situation that has defined 2025 will continue to shape business confidence and investments in 2026.
Inflation is proving sticky, with the path of monetary policy and interest rates uncertain.
The Canadian economy continued to soften, marked by slower growth, rising unemployment, and tariff uncertainty throughout 2025.
The Bank of Canada cut interest rates to support economic activity.
Economic growth is anticipated to be slow yet positive amid persistent trade uncertainties in 2026.
The unemployment rate is expected to remain relatively steady but elevated.
Lower interest rates should provide some support for consumer spending and the housing market.
Growth Opportunities and Strategies
The acquisition of Canadian Western Bank in early 2025 positions the bank for accelerated growth.
Cost and funding synergies from CWB are being realized at an accelerated pace, and the bank expects to meet its target more than a year ahead of plan.
The bank introduced a target of between CAD 200 million and CAD 250 million in revenue synergies to be realized over the next three years from CWB.
The bank plans on converting approximately two-thirds of the CWB loan book to the advanced method in late 2026, adding 50 to 75 basis points to its CET1 ratio.
The acquisition of Laurentian Bank's Retail and SME banking portfolios aligns with the bank's growth and capital deployment strategies.
The bank aims to accelerate organic growth and operational efficiency.
The bank intends to grow dividends at sustainable levels.
The bank plans to continue repurchasing shares and has flexibility to increase the size of the program.
The bank is pursuing a phased implementation of the AIRB conversion of several CWB portfolios, with the largest benefits expected in Q4 2026.
The bank is focusing on post-integration servicing through the first half of the year, initially earning mostly ancillary revenues, with NII growth accelerating towards the second half of the year.
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.
The bank is targeting an ROE of around 15% in 2026.
By 2027, the bank is targeting an ROE of 17% plus.
The bank expects to grow personal mortgages in the mid-single-digit range and commercial loans in the high-single-digit range in 2026, including CWB.
The bank expects impaired PCLs to remain within the range of 25 to 35 basis points for the full year 2026.
The transaction with Laurentian Bank 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 before any revenue synergies.
The transaction with Laurentian Bank is not expected to have a material impact on the bank's fiscal 2026 outlook.
The bank anticipates a PTPP loss ranging between CAD 225 million and CAD 275 million in the other segment for 2026.
