National Bank earnings up 2%, beating expectations

National Bank of Canada reported that net income rose two per cent in the first quarter of 2015 to $415 million or $1.16 a share.

That’s ahead of analysts’ expectations and up from a year earlier, when the bank earned $405 million or $1.15 per share.

National Bank president Louis Vachon said the bank saw solid performance from its three main lines of business – personal and commercial banking, wealth management and financial markets.

“Financial markets turned in an especially noteworthy performance on the strength of the trading business and banking services,” he said in a prepared statement.

The bank boosted earnings from financial markets by 23 per cent to $178 million because of higher trading activity and banking service revenues.

Analysts have been predicting disappointing earnings from Canadian banks because of the low interest rates and lower oil prices that were meant to cut into commercial banking revenue.

However, the impact of lower oil prices has yet to hit the most recent earnings. BMO reported slightly lower profit but expanded business and RBC came in with record profits.

National Bank, Canada's sixth largest bank, said it is managing to maintain its return on equity in the face of low rates and falling oil prices.

“Given the drop in oil prices and interest rates in recent months, we’re continuing to prudently manage our operations while staying apprised of opportunities,” Vachon said.

He said the bank has a "manageable" exposure in Canada's oil patch and rejected some news reports that raised concerns about Quebec's real estate market.

"What we see is actually the soft landing that a lot of people have predicted for Canada is actually happening in the Quebec real estate market," Vachon said, adding that prices in Montreal and Quebec City have been flat for three years.

National Bank of Canada expects economic conditions will improve this year in Central Canada as consumers get some breathing room from lower interest rates and fuel prices.

"We estimate that reduced gasoline prices in 2015 at today's current level will be equivalent to a $5-billion tax cut for Quebec and Ontario consumers," Vachon said.