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The venture into the US should supplement its strength in Quebec…

National Bank Of Canada is a leading financial institution, ranking amongst the six largest commercial banks in Canada. National Bank offers a wide range of banking and financial services, including corporate and investment banking, securities brokerage, insurance, wealth and retirement management.

By geography, Quebec is its largest market accounting for more than 60% of its total revenues. The bank also has an international footprint constituting 15% of total revenues and other Canadian provinces comprising nearly 25% of total revenues.

National Bank’s business can be divided into – Personal and commercial banking which accounts for nearly 43% of National Bank’s revenue, followed by financial markets (24%), wealth management (22%), and US specialty finance and international (11%).

It had over $597 billion in assets under management in the year-end. National Bank has experience of 160 years and is known for providing client-centric integrated financial services. It has branches in almost every province of Canada.

It is one of Canada’s largest integrated financial service providers, with convenient self-banking channels, 403 branches, 940 banking machines across Canada, and a large scale digital presence. In addition, it also has 98 wealth management service outlets across Canada.

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Revenue Growth & Market Exposure

National Bank is a Canadian super regional bank with a leading franchise in Quebec. The bank caters to individual customers, small and medium-sized enterprises, and large corporations. It offers specialized services in the international markets as well.

Over the years, National Bank has earned the trust of its clients to address all of their financial needs. National Bank is the most preferred financial service provider for its clients, especially the SMEs. The bank continues to heavily invest in its platforms to deepen client relationships, combining advisory services and technology to create a more personalized approach.

National Bank is favorably placed to leverage from its leading position in Quebec and increasing market presence across Canada. Its personal and commercial banking has a strong presence in central and other markets in the country and meets the financial needs of close to 2.6 million individuals and 138,000 businesses.

National Bank’s expertise in specialized markets should help it expand in the growing commercial markets. The bank’s digital transformation is also bearing fruit. Its wealth management business is firmly established across Canada and is gaining from favorable markets and net inflows.

Its U.S. Specialty Finance and International business further complement the growth of its domestic operations. National Bank’s investments are directed towards fueling organic growth in its core markets, enhancing client experience, and generating positive operating leverage.

The bank has an 80% ownership in Credigy (U.S.) and 100% ownership in ABA Bank (Cambodia). Both these investments continue to provide attractive growth potentials with performances exceeding expectations.

National Bank is all set to acquire the remaining ~20% interest in Credigy in Q1’21. The bank witnessed growth across the P&C segment driven by strong mortgage and deposit growth but suffered from lower interest rates and client activity as a result of the pandemic.

National Bank’s allowances for credit losses totalled over $1.3 billion, which nearly doubled from last year’s level. It witnessed a solid performance in Q4 from both Global Markets and C&IB. National Bank also continued to gain market share in Quebec retail market. It benefitted from prudent provisioning in an uncertain economic scenario.


National Bank has shown a dividend growth of more than 7% CAGR over the last decade. It has a reasonable payout ratio of 49% and a current dividend yield of 3.9%. National Bank is a Canadian Dividend Aristocrat with a proven history of attractive dividend yield and consistent annual dividend growth.

National Bank has grown its dividend for ten consecutive years. It last raised its dividend by more than 6% annually. The bank paid $953 million in dividends in the last year.

National Bank has set a medium-term target to achieve a 5%-10% growth in EPS and maintain a payout ratio of 40%-50%. Its credit quality also remains strong. 

National Bank maintains a CET1 ratio at 11.8% giving it the flexibility to invest in its businesses and return capital to shareholders. The bank could not deliver on its medium-term objective of EPS growth in FY 2020 due to the unprecedented COVID-19.

It, however, registered an 8% growth in income before provisions for credit losses and income taxes in the last year. The bank has successfully grown its revenues and EPS by 8% and 24% CAGR, respectively, over the last three years.

National Bank is focusing on driving growth organically and increasing customer satisfaction across all its segments. The bank is well-positioned to gain from its balanced mix of businesses and a diversified revenue base.

National Bank’s Wealth Management segment is the leading franchise in Quebec with a strong foothold across Canada while its Financial Markets business provides a diversified earnings stream.

A leading franchise in Quebec, diversified business mix, and sound balance sheet should support future growth.

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The Canadian personal and commercial banking segment is highly competitive. National Bank competes with other leading Canadian banks like TD Bank, Royal Bank, Scotiabank, Canadian Imperial Bank of Commerce, and Bank of Montreal.

Bank of Montreal is the eighth largest bank in North America by assets, while CIBC caters to 11 million individual, small business, commercial, corporate and institutional clients in Canada, the U.S. and around the world.

Scotiabank is a leading international financial services provider with a rich history of 185 years and Bank of Montreal is the eighth largest bank in North America by assets.

Bottom Line

National Bank suffered from business closures, low interest rates, volatile stock markets, declining oil prices, and government measures in response to COVID-19.

However, resilient franchise and sound diversification of earnings stream supported its performance during the year.

Given its strong reputation as a “super-regional Canadian bank”, National Bank should continue to benefit from the resilient Quebec economy.

Its growing focus in international markets with a concentration on its two successful subsidiaries should further strengthen the business mix. The bank’s prudent allocation and business mix position it well to pursue growth across its businesses in 2021.

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