National Bank CEO Sees ‘Full Pipeline of Deals’ Buoying Revenue


National Bank of Canada jumped the most in almost nine months after posting fiscal first-quarter profit that exceeded analysts’ estimates, fueled by strong results from its capital markets business.

The shares climbed as much as 5.3% in Toronto trading on Wednesday, the biggest intraday advance since May 27. They finished the day up 4.8% to C$79.48, a record close.

The Montreal-based bank, which gets the largest proportion of revenue from capital markets activities among Canada’s six largest banks, has benefited from a surge in trading as investors navigated the pandemic and resulting market volatility.

National Bank CEO Sees ‘Full Pipeline of Deals’ Buoying Revenue

A particularly strong performance for technology stocks in Canada has led to a boom in initial public offerings and equity financing, helping National’s investment banking revenue.

Those factors don’t look to be fading any time soon, even after a decline in technology stocks in recent days, Chief Executive Officer Louis Vachon said.

“It would take a major change in monetary and fiscal policy or another exogenous shock,” Vachon said in an interview. Regarding the drop in technology stocks, “I don’t think that’s sufficient right now to slow down or negatively affect the pipeline of deals.”

Net income in National Bank’s financial markets unit rose 37% to C$250 million ($200 million) in the three months ended Jan. 31. Total profit for the bank was C$2.15 a share, excluding some items, topping analysts’ C$1.71 average estimate.

Ferreira’s Future

National Bank’s Quebec-focused retail banking operations also had a strong quarter, with net income rising 8.3% to C$262 million. The business benefited from substantial gains in deposits and residential mortgages.

Those trends should stay in place as well, especially as increased vaccination rates allow consumers to release pent-up spending, Vachon said. That spending may take some time and could help other parts of National Bank’s business, such as credit cards or wealth management, he said.

“I think it’s going to be a pretty gradual process and a process which I think we’ll get to be involved with through some of our other businesses,” Vachon said.

Vachon, who is the longest-serving CEO of one of Canada’s six largest banks, acknowledged that the promotion of financial capital markets co-head Laurent Ferreira to chief operating officer positions Ferreira as his likely successor. The chief operating officer is usually a “transition position” and anyone who holds it has “a very, very good chance of becoming the next CEO,” Vachon said.

However, there is currently no firm timeline for Ferreira to take the reins, Vachon said.

“Because of the Covid situation, we’re giving ourselves a bit of flexibility,” Vachon said.

National Bank has risen 10.9% this year, outperforming the 9.4% gain of the S&P/TSX Commercial Banks Index.

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