Annual and Special Meeting of Shareholders: National Bank of Canada in a Position of Strength

Montreal, 7 March 2001 - 

In his address at the Annual and Special Meeting of Shareholders of National Bank of Canada held today, André Bérard, Chairman of the Board and Chief Executive Officer, declared that "the National Bank is in a strong position to tackle the major changes that the overhaul of the legislative and regulatory framework will have on the financial and banking services sector in Canada."

"During the next year," he added, "the National Bank will have to make some crucial decisions about its future."

Mr. Bérard then listed the factors which give the Bank the leeway it needs to respond to the changes currently affecting the industry, namely, the Bank’s profitability, its positioning on Quebec markets, its diversified revenue streams and its motivated staff.

Commenting on the doubts expressed by some financial market observers regarding the banking industry’s ability to keep on generating higher earnings at the same pace as in the last decade, Mr. Bérard stressed that the Bank’s balance sheet has been very positive for the past 10 years.

He recognized however that one challenge still remained: "To eliminate once and for all the valuation gap that exists between us and our peers in the Canadian banking industry."

"Creating value is the National Bank’s raison d’être and primary goal," Mr. Bérard stated, adding that the Board of Directors of the Bank had passed essential measures to give it the means to deal with any eventuality.

"As a medium-sized institution, new ownership provisions will enable the National Bank to radically alter its shareholding structure," Mr. Bérard explained. "Possible scenarios range from welcoming on board several large shareholders, though holding less than the 20% limit, to having one strategic shareholder who would hold up to 65%." Such a partner ought to be able to help grow the Bank’s core business in several ways: by combining the operations of the two institutions, by bringing additional expertise in certain areas, by providing technology that is expensive to develop, by increasing the Bank’s financial resources so that we can be a participant in the consolidation of the industry, or by opening up new markets for us.

Réal Raymond, President – Personal and Commercial Bank, stated that was very pleased with the strategic decisions made by his business segment, which accounted for approximately 70% of the Bank’s earnings last year. These decisions focused on three main objectives: to improve operating efficiency, to multiply the points of contact with various client groups, and to ensure a strong presence in the e-commerce market.

As at October 31, 2000, total savings under management with the National Bank group amounted to $64 billion or 13.8% more than in 1999. Moreover, the Bank made huge investments in its electronic networks in 2000, with a view to improving their reliability and enhancing their capabilities. These investments were also aimed at further improving the efficiency and security of transactions carried out by our individual and SME clients on the Internet.

Despite its growing use of information technologies, the National Bank firmly believes that its conventional bricks-and-mortar network for distributing products and services gives it a significant competitive advantage over the new players on the electronic banking and financial services market. The Bank in fact demonstrated its commitment to continuing to serve clients by traditional means when it acquired 17 former Bank of Montreal branches in December 2000.

Jean Turmel, President – Financial Markets, Treasury and Investment Bank, pointed out that in fiscal 2000, income for his business segment rose 47% through the contribution of all its constituent parts, particularly Treasury operations. As a result, its income climbed from $118 million in 1999 to $173 million in 2000.

Mr. Turmel, who also serves as Chairman of the Board of National Bank Financial, went on to say that the integration last year of First Marathon with Lévesque Beaubien Geoffrion was an unqualified success from every standpoint. The creation of National Bank Financial, which currently boasts 2,400 employees across Canada and generates most of its institutional revenues from operations outside Quebec, reinforces the diversification strategy of the National Bank group.

In closing, Mr. Turmel noted that "the sector and geographic diversification achieved with the acquisition of First Marathon should not only ensure that the business risks of the National Bank group are better balanced in the long term but should also promote revenue growth."

Finally, Mr. Bérard concluded by reaffirming that "the National Bank is stronger than ever, and performing better than ever. It is full of vitality, and passionate about serving the community and its clients. Its challenge is to give itself the means that will enable it to continue meeting the expectations of all its stakeholders."

National Bank of Canada is an integrated group whose mission is to provide comprehensive financial services to consumers, small and medium-sized enterprises and large corporations in its core market, while offering specialized services to its clients elsewhere in the world. The National Bank offers a full array of banking services, including all the investment banking services required by large corporations. It is an active player on international capital markets and, through its subsidiaries, is involved in securities brokerage, insurance and wealth management as well as mutual fund and retirement plan management. The National Bank has assets of over $75 billion and, together with its subsidiaries, it employs some 16,600 people. The Bank’s shares are listed on the Toronto Stock Exchange.

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