National Bank Q2 net income up but falls just short of analyst estimates

National Bank of Canada hiked its dividend Thursday as it reported its second-quarter profit rose compared with a year ago, but fell just short of market expectations.

The lender increased its quarterly payment to shareholders by three cents to 68 cents per share.

Net income rose in personal and commercial banking, U.S. specialty finance and international, and wealth management divisions, tempered by a slowdown in its financial markets segment.

National Bank chief executive Louis Vachon said the lender had a "solid performance" in its second quarter.

"On the strength of favourable economic fundamentals, our performance was driven by positive momentum in our businesses, disciplined cost management, strong credit quality and solid capital ratios," he said in a statement.

The Montreal-based bank's net income for the quarter ended April 30 amounted to $558 million or $1.51 per diluted share, compared with $547 million or $1.44 per diluted share in 2018.

Analysts on average had expected a profit of $1.52 per share, according to Thomson Reuters Eikon.

In its personal and commercial arm, the bank reported net income of $234 million, up nine per cent from $215 million last year. The bank said personal lending grew, particularly due to mortgage lending, while commercial lending was up nine per cent from a year earlier.

National Bank's U.S. specialty finance and international division reported net income of $72 million during the quarter, up 14 per cent from $63 million a year earlier.

The bank's wealth management arm posted quarterly profits of $118 million, up five per cent from $112 million during the same period a year earlier.

In financial markets, however, the bank reported net income of $160 million, down 16 per cent from $190 million in the same quarter in 2018.

Provisions for credit losses, or money set aside for bad loans, during the quarter totalled $84 million, down from $91 million during the same period a year earlier.

The bank's common equity tier one ratio, a key measure of its financial health, was 11.5 per cent as of April 30, flat with the previous quarter, but higher than the 11.3 per cent it stood at a year prior.

National Bank's latest quarterly results were generally "in line," with small variances, said Robert Sedran, an analyst with CIBC Capital Markets.

The performance of its Canadian personal and commercial banking division with earnings up nine per cent is "by far the best of the group this quarter," he added in a note to clients.

"The bank is performing well in its home market and in the market furthest from home in Cambodia," Sedran said. "Other businesses had a more mixed quarter."

National Bank is the last of Canada's Big Six lenders to report their second-quarter earnings, with mixed results across the sector.

Bank of Montreal reported Wednesday an uptick in profit fuelled by growing contributions from its U.S. business, but missed analyst estimates amid severance costs in its capital markets division.

Earlier this week, the Bank of Nova Scotia posted a slight rise in quarterly profits also helped by its footprint outside of Canada, but also fell short of market expectations as its provisions for loan losses jumped, in connection with several acquisitions as per accounting rules.

Last week, the Canadian Imperial Bank of Commerce missed analyst estimates, while Royal Bank of Canada and Toronto-Dominion Bank delivered better-than-expected results.

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