National Bank posts record earnings of $138 million (+33%) for the second quarter of 2000

National Bank of Canada declared income before goodwill charges of $138 million or 69¢ per share for the quarter ended April 30, 2000, compared to $104 million or 57¢ per share for the same period in 1999. Return on common shareholders'equity before goodwill charges was 17.2% for the quarter as against 16.2% for the second quarter of fiscal 1999.

For the first six months of this fiscal year, the National Bank recorded income before goodwill charges of $260 million or $1.31 per share, up from $207 million or $1.13 per share for the first half of fiscal 1999. Return on common shareholders'equity before goodwill charges was 16.3% for the first six months, compared to 16.0% for the corresponding period of 1999.

Results by segment

Each business segment contributed to the strong growth in the Bank's quarterly earnings. Income before goodwill charges for Personal Banking and Wealth Management was up 71% to reach $65 million for the second quarter of 2000. Total revenues rose $100 million for an increase of more than 25% owing to retail brokerage activities at National Bank Financial and income from the correspondent network acquired with First Marathon. Operating expenses totalled $358 million for the quarter, representing 73% of total revenues, compared to $301 million or 77% for the same quarter last year. Commercial Banking income amounted to $37 million for the quarter as against $31 million for the second quarter of 1999, for an increase of 19%. Income rose by nearly 12% to reach $125 million, owing chiefly to the volume of loans and acceptances which grew 6% in Canada and 13% in the United States. Operating expenses of $48 million were up $4 million mainly due to Canadian operations. For the Financial Markets, Treasury and Investment Banking segment, income before goodwill charges totalled $44 million for the second quarter of 2000 versus $38 million in the corresponding quarter of 1999. At $176 million, total revenues for the second quarter increased 59% from the $111 million recorded in the second quarter of 1999, driven mainly by the institutional segment of National Bank Financial. Operating expenses were up $58 million to reach $101 million for the second quarter this fiscal year. Aside from the additional activities acquired with First Marathon, the increase was attributable to the composition of income from segments where higher commissions are paid.

Revenues

Total revenues, on a taxable equivalent basis, reached $833 million for the quarter ended April 30, 2000, up $179 million, or 27%, from the $654 million posted in the corresponding quarter of 1999. Net interest income rose 9% to reach $347 million, while other income was up more than 45% to $486 million. Brokerage activities at both National Bank Financial and National Bank Discount Brokerage together with trading income contributed strongly to the rise in income at the Bank.

Operating expenses

Operating expenses for the second quarter of 2000 totalled $551 million compared to $423 million for the same quarter of 1999. More than 80% of the increase in operating expenses was attributable to business volumes at National Bank Financial.

Loan losses and impaired loans

For the second quarter of 2000, the provision for credit losses was $46 million or one-fourth of the estimated losses for the year. The provision for credit losses was unchanged from the corresponding period in 1999. Impaired loans, as at April 30, 2000, stood at $44 million, compared to $49 million at the end of the same quarter a year earlier.

Assets

The Bank had total assets of $74.9 billion as at April 30, 2000, as against $74.7 billion a year earlier. The volume increase of about $1.6 billion in personal loans, approximately $800 million in mortgage loans, as well as $700 million in commercial loans in Canada and $750 million in the United States was offset by the effect of the securitization of residential mortgages and credit card receivables totalling more than $2 billion, along with a decrease of $2.2 billion in securities purchased under reverse repurchase agreements.

Savings

Personal deposits advanced $1.6 billion, or 8%, over the corresponding quarter of 1999. Off-balance sheet savings, totalling $42.0 billion, grew by $7.7 billion, with National Bank Financial accounting for 80%.

Capital

Shareholders'equity was $3.5 billion as at April 30, 2000 for a $168 million increase since the beginning of the fiscal year, stemming primarily from internally generated funds. Tier 1 and total capital ratios, in accordance with the rules of the Bank for International Settlements, were 7.3% and 10.3%, respectively, compared to 7.5% and 10.5% as at April 30, 1999. At its meeting on May 25, 2000, the Board of Directors declared regular dividends on the various classes and series of preferred shares, as well as a dividend of 19¢ per common share, payable on August 1, 2000 to shareholders of record on June 22, 2000.

For more information:

Refer to Note 26 on page 79 of the 1999 Annual Report for information on the impact of the adjustment to the general allowance for credit risk as at October 31, 1998.