Scotia Capital, 4 December 2009
• National Bank of Canada (NA) fourth quarter operating earnings increased 3% YOY to $1.40 per share, below expectations. Operating earnings were lower than expected due to negative sequential swing of $0.18 per share from securitization, lower security gains of $0.04 per share, and other charges of $0.12 per share as well as higher-than-expected salaries & benefits (including variable compensation). Underlying earnings were relatively strong. Operating ROE was 16.9%.
Implications
• Financial Markets earnings doubled to $140 million from a year earlier but declined from the record $167 million in the previous quarter. Trading revenue was extremely strong at $197 million versus $168 million in the previous quarter.
• Retail earnings disappointed, declining 8% YOY and 16% QOQ mainly due to higher operating expenses and credit costs. Wealth Management earnings were $26 million up slightly QOQ but down 42% YOY.
Recommendation
• Our 2010E EPS is unchanged at $6.40. We are introducing our 2011E EPS at $7.00. Share price target is unchanged at $75.
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• National Bank of Canada (NA) fourth quarter operating earnings increased 3% YOY to $1.40 per share, below expectations. Operating earnings were lower than expected due to negative sequential swing of $0.18 per share from securitization, lower security gains of $0.04 per share, and other charges of $0.12 per share as well as higher-than-expected salaries & benefits (including variable compensation). Underlying earnings were relatively strong. Operating ROE was 16.9%.
Implications
• Financial Markets earnings doubled to $140 million from a year earlier but declined from the record $167 million in the previous quarter. Trading revenue was extremely strong at $197 million versus $168 million in the previous quarter.
• Retail earnings disappointed, declining 8% YOY and 16% QOQ mainly due to higher operating expenses and credit costs. Wealth Management earnings were $26 million up slightly QOQ but down 42% YOY.
Recommendation
• Our 2010E EPS is unchanged at $6.40. We are introducing our 2011E EPS at $7.00. Share price target is unchanged at $75.
