Q1 2021 National Bank of Canada Earnings Call
And then some of the of younger lap of Hilty Duckenfield they'd be tussock the level of pre owned at the end of Hulu I had thought of it get it because that's stone and who isn't here one of the best guilty.
[music].
Yeah.
[music].
Okay.
[music].
Uh huh.
Okay.
[music].
Okay.
And.
Uh huh.
Okay.
Okay.
All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.
No wonder if some of the overlap of hilty duckenfield they'd be tough Super simple pre owned at the end of Hulu I had thought of it get it goes that's stone and who isn't there some of the best guilty.
[music].
Okay.
Okay.
Okay.
Thanks.
[music].
Okay.
This conference is being recorded so it's cool sales that don't go as you see.
All participants please standby your conference is ready to begin.
Good afternoon, ladies and gentlemen, and welcome to the National Bank of Canada first quarter results Conference call.
And I'd like to turn of meaning over time is and in double Nanci Senior Vice President of Investor Relations. Please go ahead and is one of LNG.
Thank you operator, good afternoon, everyone and welcome to National Bank's first quarter presentation.
And any of this afternoon or do we have a strong president and CEO.
Bill Bonello, Chief risk Officer, and just snipe, Aha Chief Financial Officer.
Following our presentation, we will open the call for questions.
Also joining us for the Q&A session.
Uh huh.
<unk> operating off of sure of the bank since February 1st.
Finance shock and and just see blotchy co heads of P&C banking.
And Guy and you all head of wealth management day, Nisha Halal head of financial markets, and John Dagenais Senior VP finance.
Before we begin I refer you to slide two of our presentation, providing and national Bank caution regarding forward looking statements with that let me now turn the call over and should we restaurant.
And Don and thank you everyone for joining us.
Today, and the bank reported strong first quarter results was a pre tax pre provision earnings of 18% from last year.
I'm very satisfied with our performance, which was driven by excellent momentum and all our business lines.
We generated strong organic growth and and industry leading Roe.
While maintaining high capital levels and prudent reserves.
This speaks to our franchise and ability to adapt and to some diversification of our earnings.
Well uncertainty remains on the exact path and timing of a full recovery.
The economy is adopting tier and youll reality, and creating an environment conducive to revenue growth.
With more people working from home coupled with historically low interest rates will continue to see significant pent up demand and the housing market.
Furthermore, consumers are spending less savvy more and investing more.
Finally markets are very strong stimulated by monetary policy, and new technological and financial innovation.
Looking at our home province, we remain optimistic about the economic recovery.
<unk> government has and a solid first of all position.
Quebec wanted to it's the lockdown with the lowest unemployment rates and Canada, and the Quebec consumer is lower and desert and higher savings than they can and average.
Many of sectors of the economy of of adopted so we expect of negative impacts of the current Lockdown did you be significantly more contained and last spring.
Following a contraction of five 2% in 2020, we expect the Quebec economy to rebound by close to 4% and.
And 2021.
On credit and we're confident and the quality of our well diversified loan book and our strong risk management framework.
While the risks some risk remained and the short term we are prudently provision with significant reserves of $1 4 billion almost double of what we had a year ago.
Bill will provide further details.
In terms of capital deployment, our strategy remains unchanged.
Number one priority is to maintain strong capital ratios, allowing us to support our clients and generate strong asset growth.
We will also look at increasing dividends and share buybacks once restrictions are lifted.
Turning now to the performance of our segments for the first quarter.
PMC delivered a solid performance of pretax pre provision earnings of 3% on a year over year basis.
Our franchise experienced strong growth on both sides of the balance sheet and both retail and commercial.
Our strategic choices and the investments, we have made and overtime and P&C and our focus on good execution are producing tangible results.
Residential mortgages continue to display, particularly strong momentum with volumes up 8% year over year and 3% quarter over quarter.
This is more than offsetting music client activity and the context of government support and economic restrictions.
And in commercial banking, we are experiencing good momentum and both loan and ancillary revenues.
As we look ahead, we expect the underlying trends to persist for both businesses and.
More than ever we are committed to our advice first strategy.
Their current context remains conducive to further our relationships with personalization digitization and of collaboration between our distribution networks.
Well management of pretax pre provision earnings are up 19% on a year over year basis fueled by strong inflows.
Favorable markets and the elevator transaction levels.
Furthermore, recent investments and our direct brokerage business are paying off as we are experiencing top tier growth on several fronts, including and the number of trades.
New accounts and revenues.
We are very pleased with the strategic positioning of our wealth business.
And that's your markets continued to perform very well and Q1, we pretax pre provision earnings up 35% on a year over year basis.
Sustained investments in talent and technology and products over the years are bearing fruit.
All of our businesses, we are well positioned to take advantage of favorable market conditions and delivered strong revenue growth.
The consistency of our performance demonstrate the agility and the resiliency of our franchise for.
For the time bank, we continue to see solid momentum for the business as a whole.
Our international segment also delivered very solid quarter.
<unk> revenues were up 58% from last year, driven by solid portfolio of performance and a $26 million gain on a opportunistic seller of one portfolio.
For 2021 credit G as a solid pipeline and the outlook is very positive.
Apa's Bank net income was up 39% year over year, driven by strong loan growth and loans and deposits.
We are pleased to announce that <unk> was named best Digital bank in Cambodia of 'twenty and 'twenty by Euromoney, recognizing the excellence of a digital platform for the second year and a rope.
Our international segment is well positioned to deliver double digit earnings growth again this year.
To wrap up we had a very strong starts of the year and our momentum from Q1 is carrying over into Q2.
Activity and financial markets and wealth management continued to benefit from supportive market conditions.
We are seeing very good momentum and real estate and merger and acquisition.
And our international business is our position.
To continue to deliver strong growth and returns.
Fiscal and monetary policies remain very favorable for financial activity.
And should ensure a pickup and economic activity later in 'twenty, and 'twenty, one and 'twenty and 'twenty two.
Based on what we are seeing today and should those trends continue.
Revenue growth should remain quite positive and the foreseeable future.
Given our performance in Q1, and our current outlook.
We're well positioned to achieve mid to high single digit pretax pre provision earnings growth for fiscal 'twenty and 'twenty one.
And we continue to work towards achieving positive operating leverage over the same period.
As the economy adopt and recovers I am confident that we have the right team culture and strategy and place to generate revenue growth and deliver strong returns for our shareholders.
Before I turn over the call over to Bill I would like to say a few words and I'm not a fan of that obviously, we set an appointment as CEO of the bank.
And nobody has an outstanding leader with a strong track record of driving performance and <unk>.
23 year of bank veteran Knowhow and its been at the heart of building, our differentiated financial markets franchise, and instrumental and the successful execution of the bank transformation over the past few years.
It has no role he will be providing fresh perspective, and strategic leadership to our business segments and operations.
So from the whole team I would like to congratulate love of once again all of this well deserved appointment with that I will now turn the call over to Bill.
And I see Louis and good afternoon, everyone.
I'll begin my remarks on slide seven.
Total provision for credit losses were $81 million or 19 basis points and the first quarter, reflecting ongoing strong performance across our loan portfolios and how resilient business mix.
Provisions on impaired loans declined to $75 million or 17 basis points five basis points lower than last quarter.
The primary driver of the decline was the cyclical low level of provisions and retail portfolios within the retail portfolios of grizzle benefited from a strong housing market and saw further improvements and delinquencies and credit cards early stage delinquencies saw a moderate increase from last quarter, but remained well below pre pandemic levels.
Commercial and corporate provisions were stable quarter over quarter and performance remained very strong and our international segment.
Provisions on performing loans also declined in the quarter to $6 million or two basis points. There was a small reversal and retail provisions, reflecting the ongoing strong performance and Russell and the update to our macroeconomic scenarios.
Strong loan growth and the I first nine updates drove the performing provisions and our non retail and international portfolios.
Looking ahead, we maintain our total PCL target range of 25 to 35 basis points for the full fiscal year of 2021.
Given the good performance, we're seeing and the portfolios, we expect to end up closer to the bottom and of that range.
As we mentioned last quarter. This target range did not assume a material reversal from performing allowances due to significant improvements and macro scenarios.
Since I expect that you may have questions about the potential timing of reversals I'll share with you our current thinking on both performing allowances and on what maybe you had four impaired provisions.
First performing allowances should be expected to decline over time due both to them due to both migration and when there are improvements and our forward looking macro scenarios.
We recognize that in recent months there has been encouraging progress regarding vaccines and success and measures to combat the spread of the virus. In addition, horrors of access capital from receptive capital markets and from ongoing support programs.
However, we also recognize that large parts of the country are still subject to stringent COVID-19 restrictions and significant uncertainty remains and the path of the recovery.
And we felt it was appropriate to maintain our prudent and level of performing allowances. Given these uncertainties and we will continue to reassess the situation each quarter.
Regarding and paired provisions we continue to believe that they will increase over time.
Retail impaired provisions should rise from these very low levels, particularly in credit cards, when utilization rates increase and physical supports is reduced.
Non retail and parents will likely be concentrated and the COVID-19 impacted sectors and could be lumpy from quarter to quarter.
However, the timeline for increases and the parents may stretch out longer than we had initially thought and could extend past the second half of this year.
Also we think that the size of cumulative losses over this period may be lower than what we initially thought, particularly given our underweight exposure and cards and our limited exposure and COVID-19 impacted sectors.
On slide eight we provide details of our allowances for credit losses.
And the first quarter total ACL increased slightly to almost $1 $4 billion up 76% from last year.
Nonperforming allowances increased to $357 million and now represents 47% of gross impaired loans.
Performing allowances were stable at just over $1 billion.
As you can sleep see on slide nine performing allowances comfortably cover three times, our last 12 months and paired Pcl's and total allowances cover of five nine times. The last 12 months net charge offs, we remain very comfortable with the prudent level of our allowances because we built up over the past year.
Turning to slide 10.
Gross impaired loans decreased across all segments to $757 million or 45 basis points.
And new formations for concentrated and commercial due primarily to two accounts and the oil and gas production sector.
This sector was hard hit during 'twenty and 'twenty, but has seen significant improvements and energy prices and capital markets activities. This year.
Retail formations declined meaningfully primarily due to strong performance and the rest of the portfolio.
And most of other sectors had net negative formations in the quarter.
Turning to slide 11, the distribution of our rest of the portfolio remained stable with 54% of the portfolio located in Quebec, and 37% of the portfolio of being insured.
Uninsured mortgages and HELOC for condos represents seven 6% of the total portfolio and have an average LTV of 59%.
And the appendices, you'll find additional information on the loan portfolios and market risks and that I'll turn it over at tissue slot.
Thank you Bill and good afternoon, everyone turning to page 13.
The bank delivered a strong performance and the first quarter further highlighting the song diversification of our business mix.
With revenues up 13% year over year, and a solid operating leverage of 4%.
The bank delivered strong pretax pre provision growth of 18%.
As always we maintain our disciplined approach to cost management, we attained and efficiency ratio of 51, 7% in the first quarter of reverse showing and recur.
Are your expenses compared to last year.
Like higher variable compensation, and giving strong revenue growth.
Larger business volumes, and higher investments and brand and technology.
While uncertainty remains we are seeing positive momentum continuing into Q2 and all of our businesses.
We are committed to achieving good revenue growth and are implementing initiatives to support this objective.
And our investments are primarily focused on providing our clients with the best experience supporting new business initiatives and simplifying our systems and processes.
As Louis mentioned earlier, giving our performance and the first quarter and of momentum. We are seeing we believe we can deliver mid to high single digits pretax pre provision growth for fiscal 'twenty, 'twenty, one and potentially achieve positive operating leverage over the same period.
Now turning to page 14 on capital.
We ended the first quarter with a strong CET one ratio of 11, 9% up 12 basis points from last quarter.
During the quarter, we delivered an excellent net income generation of 51 basis points, resulting from strong performance in all business segments.
We reinvested are excellent and net income generation and two organic client driven growth.
Risk weighted assets extension of 41 basis points essentially.
Came from strong organic growth and our businesses. The main drivers included higher volumes and commercial franchise.
Continued growth and financial markets, including increase authorization and corporate banking and client activity in global markets as well as loan growth at E. B a bank.
The impact from credit to immigration was limited this quarter.
Continues improvement from retail the credit scores were offset by rerouting of wholesale borers, and COVID-19 impacted industries, including oil and gas.
For fiscal 'twenty and 'twenty, one they're regulatory scalar for ECL relief decreased from 70% to 50 per cent.
To change subtracted seven basis points from a risk TD one ratio in the first quarter.
Looking forward, we expect our CET one ratio to continue to creep higher and how is that we're a strong internal capital generation supports both good organic business growth and the ability to return capital to shareholders. When restrictions are eventually lifted and.
In addition, we are very confident that our strong capital levels combined with our prudent level of credit reserves provides good of resiliency in these uncertain times.
Now turning to page 15, all of liquidity, our LCR of continues to be strong at 154%.
And we are introducing our net people something ratio at 124% and.
In addition, our total of kept of ratio remained stable at 16% at the end of the first quarter.
In conclusion, the bank had a strong start to the year with solid organic growth high capital levels and industry leading.
With a strong balance sheet significant reserves and diversified revenue growth levers are of a franchise is well positioned to continue generating attractive growth through fiscal 'twenty 'twenty, one and with that I'll turn the call back to the operator for the Q&A.
Thank you.
And we'll now take questions from the telephone lines. If you have a question and you are using a speakerphone. Please lift your handset before making euthenics and if you have a question. Please press star one on your devices keypad.
You may cancel your question at any time by pressing star two.
Please press star one at this time, it's kind of a question there will be a brief pause small participants, but just a couple of questions. We thank you for your patience.
My first question is from Sohrab <unk> from BMO capital markets. Please go ahead.
Thank you.
Laura and congratulations on your appointment and Louis question for you.
And over the recent quarters check me pre pandemic and and throughout the pandemic and thank you.
You have told us.
And that you have been incredibly selective and growth pre pandemic and I think.
As recently as the last couple of quarters.
You'd indicated that you are aggressively.
And pursuit of top line growth.
And I guess, what I'm trying to get a feel for is.
If you had to.
And on a scale of one to 10 and give us a feel for how much of your aspired growth is actually.
And realized right now as far as still on day come.
And that would be helpful and let me know if that actually makes sense. The question I'm, just trying to get a sense for whether or not.
What we're seeing here this quarter is as good as it gets or do you expect that.
This is just the beginning.
Thanks for the questions, Rob yet and it.
The question didn't make sense.
A couple of things one yet and I have discussed that in the past. So I think we've been selective.
And ER.
And the areas, where we want to growth.
This is not 2009 this is not 2010.
When we had a risk on strategy and almost every single business line and then every single asset classes.
You need and 2021 and 2022, I think you will need to be much more selective.
In terms of risk allocation than we were and and.
And 2090 2010 because.
The financial crisis of a wait and created a lot of forced liquidations.
And that resulted in very attractive risk returns.
Charities right across the different business lines.
The massive amount of quantitative easing.
And government supports a shell debt I think the markets from <unk>.
Some of the same level of force liquidation that we saw on their way to and I.
And it's not just and capital markets. It's the same thing also on the lending market. So we are seeing opportunities.
And we're taking advantage of those opportunities, but we remain still pretty we knew we need to be retained to remain selective and and this market. So why do we say we can.
We see growth for opportunity for opportunities for growth, we do see that.
And I think it's I don't think it's the end of of the cycle I think.
A good scenario, which is I think right now a probable scenario so rob is that as.
As I mentioned in my opening remarks, we could see a period of time, where.
Because of very active and very expansionary monetary and fiscal policy.
We could see financial activity, namely of activity related to financial markets wealth management.
And real estate remain quite active.
For a period of time and at the same time eventually.
The economy will make you know the GDP level, whether it's completely recovered from the Covid crisis, and then we will see a real pick up and economic activity, which should benefit our credit cards and small business loans and other type of activity and if we have that sweet spot of high level of finance.
And so activity combined with an economic recovery.
It should be of very good environment to generate revenue growth that bank said as I said, there are some distortions writing off and the market caused by quantitative easing.
And Theres also some pockets of irrational exuberance.
And so you do need to navigate from a risk management perspective, I think bill and his team and the business lines, we remain very very busy.
So.
And short I think this is not I don't think that Q1 was a fluke I certainly hope not I don't think so I think we are quite clear and our opening remarks debt all of their favorite broad trends.
We observed in Q1 are still present with us at Q2.
And.
So for us going forward I think we'll there'll be.
We will continue to work to grow the business, but we'll we'll keep an eye open on non risk management that's for sure.
Good day.
Did I answer your questions.
I think you did and just for Crystal clarity.
What you did and in this quarter of what you were talking about for example for the balance of year. When she's line is talking about mid single digit pretax pre provision growth and day like this is all still within the context of being prudent on the businesses that you're pursuing or basically.
As you put it not being in a risk on environment like in other words, once we get into a bit of pretty risk on environment.
And we'd be I guess additional people is that the right way to think about it.
I think it's prudent as you.
No when we give guidance, we'd like to be prudent.
And I think the way we manage risk also historically has been prudent so I think your and your assessment is of correctly.
And I just hope one of these days and really when you have results like this you don't say you're satisfied you say you like static.
Yeah, we're bankers so rabbits.
Ecstasy, it's not a it's a.
We need to be careful about that.
And we thank you.
Thank you.
The following question is from many Goldman from Scotia Bank. Please go ahead.
Hi, good afternoon, and I'll start off also by congratulating Laurel.
Question is I think for Bill you talked about the timeline on the evolution of impairments being delayed and just wondering.
I'm wondering if you could go into more detail of what's driving that a delay in your mind.
Thanks for the question. Many yeah I think the comments I made where we're just giving you indications that are what's changed from last quarter to this quarter and I think last quarter, we spoke about our expectations for and parents to gradually grow through the year and probably Q3 Q4.
And we'd see a peak.
Certainly the performance this quarter is in and many of the of the portfolios were better than last quarter and you saw impairments down you saw and we werent surprised by the performing allowances being down but just given the the slower start to the increase.
It's natural thinking that it could be delayed and we also made a comment that is less certain about the size. So the handoff as Louis mentioned from financial activity economic activity.
And nothing is certain and this world and during a pandemic cause uncertainties are higher but it looks like the b. There is a chance that the overall cumulative losses may end up being lower and this cycle than we would've thought three or six months ago and answer your question Manny.
Yeah, and I mean, I think that that's what I was getting at in terms of you know when we see that the delay that we're seeing now I guess of prudent way to look at and just to say, okay, let's let's be careful and and think its still coming but the question is really could we just have been totally wrong and this front and given all of the government support and and all of them.
All of the things that we're seeing on the ground could it just be that the kind of impairments that are that basically we will not see the kind of impairments that we thought we would see him to just.
And I'm curious on that.
Hum idea that this could just be the kind of allowances that you have just could be significantly over and above of what will actually be needed when all of a sudden and done.
Well of the I think on your last point and say that we're very very comfortable with our performing allowances on the first point I think that's what we mean when we say there are uncertainties. It's hard we haven't been through this I certainly I havent been through a global pandemic before and to see what the other side of it looks like.
So.
We call it uncertainty and I would agree it's it's you know the.
And what it'll end up.
At is likely to be different than what we would've thought of three six months ago.
And just on that point in terms of.
And it's focused on the vaccination rates, how and how big of a risk factors that in your mind and the fact that Canada seems to be behind the curve relative to the U S. Especially of is this just a matter of timing and where could it be a more significant risk and as we move through the year.
And I think that the if if we put ourselves back a couple of quarters that we didn't know with a vaccine would come and we didn't know whether it would be effective certainly theres been lots of of good news on that and what we know now.
It was obvious from the beginning that it's a pretty massive exercise to source and to distribute the.
And the vaccine so they're always going to be there are a range of.
Certainty around that.
That it's what we've seen so far has been positive in terms of.
The ability to.
Combat this part of the virus and the optimism of that there isn't and and.
And to the top of light at the end of the tunnel and then.
And then Louis of any other comments.
Thanks Penni.
Thank you.
Our following question some of them.
Olson from CIBC. Please go ahead.
Thank you good afternoon, so moving on our last conference call you highlighted a number of reasons why we should be positive on on commercial loan growth and it looks like sure enough you delivered some pretty good commercial loan growth this quarter. So.
One can you comment on some of the drivers behind the loan growth within the quarter, and then maybe and updated view for for fiscal 'twenty and 'twenty, one as well.
All of all that my colleague.
Stephane and that Shah of answer and also we had a little bit of difficulty hearing you Paul so.
And that's why we heard of your question, but that's the.
The volume was a little low.
Stefan So Paulo, though and the the growth was quite diversified over the last quarter and F. If you look at the sub pack, you'll see that you know there's been growth and utilities are obviously real estate, we took opportunities and biller and and we have mentioned it and there are and Theres speeches, we took opportunity of the the residential market.
And the insured portion of our of our book has grown substantially but also on the education and health care. Our specialties are doing well. So if we look at what we call national accounts family on large businesses.
Wait a bit of of activity there good growth and we launch of new initiative last year, and Toronto, which is doing really well as well.
Specialties outside of Quebec, and important part of the growth was actually outside of the of the province. So that's looking good and if we project ourselves and the future. You know, we we expect growth and volumes to continue a rising up and by the end of the year of probably revert back to a more historical never levels, but we still.
Have plenty of opportunities.
The way of our working capital utilization, which has minimal right now and in corporates around the country and businesses. So he lines of credits will be fully used Oh returned back to their historical levels, which is more of around 36, 37% of utilization of lines of credit right now we spend between 29% and 30% so plenty.
Of of our growth coming from there, we expect but obviously that will depend on the progression of the risk.
Resumption of the business the business cycles.
That's helpful. Thanks for that.
Thank you.
Our following question is from Nigel D'souza from Veritas investment Research. Please go ahead.
Thank you good afternoon, I wanted to touch on trading net interest income and I noticed that still.
Out of fairly healthy level for you and I was wondering if you could touch on.
How the recent.
Volatility, we're seeing and yields.
Might impact trading NII going forward, and where you see that moving and the short term.
It's law. Thank you for your question Hum.
Obviously, we've seen elevated volumes.
Volumes of.
Transactions over the quarter.
And Youre right volatility was I would say at a healthy level.
But obviously nothing like of loss Q2 of last year.
And we expect actually for this year volatility to remain at a healthy level.
So overall.
Of course, we benefited from from higher volumes in Q1 of trend that we saw in Q4.
Of 2020, and and continued throughout Q1.
So you know, we don't control of volumes and volatility of.
But.
And I feel very confident and our ability to adjust quickly to shifting market conditions.
I think we've proven in the past that the franchise is very agile.
So yeah, you could see revenue and trading revenues go down, but it's not of concern.
And that's really helpful and I had another quick question on and.
Please and Canadian banking I noticed and this quarter of day, there was a marginal decline there quarter over quarter. I was wondering if you could speak to what drove that decline and a full time employees and if you think that's going to stabilize here or do you do you see yourself hiring more people.
The economy reopens.
We're a natural Sui we remain as I said, we remained very disciplined in terms of cost management and head count management.
Especially we were certainly very prudent and Q1 because we.
There were more uncertainty in terms of vaccination and the path of recovery and and the old Senator <unk> situation.
And overtime.
Overtime and I think we'll remain disciplined but I think you should expect that number to grow backups slowly.
As we move.
Back into economic activity.
You should expect that we will need of.
More people.
And that's really helpful. Thanks for the color.
Thank you. The following question is from Doug Young from Desjardins Capital markets. Please go ahead.
Yes.
Good afternoon hard starting just with all bank Nims and if I exclude trading.
For National It was up about two basis points year over year based on my numbers. That's I mean, it's the only bank this quarter that we've seen so far is where there's been an increase and so just curious if you could talk a bit about what might've drip and not I would assume is it the expansion and the growth and credit G and a b a and then if you can talk a bit maybe if you can provide and.
Any color in terms of and I would look for that that would be helpful.
And do you want to give it a try a giant shuffling through papers.
Yeah.
Okay, well, yes, you had been and what you just slight decline Ah.
Sequentially for PNC to only one basis point, but you had also improvement due to volume and into our wealth management and a lot more also and in financial markets or the margin is better and financial markets and it was in Q4.
Which we see also in AAV.
So improved margin and a financial market and more revenue and net interest income in our wealth management.
And any outlook or maybe you can talk about it looks for nims within like in Canada, you know it looks like its been stable sequentially no and if there was an outlook for nims within U S. S F&I and any color and within wealth manager and if that would be helpful and it's more difficult.
You see it and it was kind of business, we do expect of what one to two basis points lower NIM in P&C banking, but for diverse it is more volatile and that's why we follow mainly P&C banking nims.
Okay, Doug assuming credit is a bit volatile because of the structure of portfolios.
And to try and stuff for EBITDA remained very positive.
At all level of NIM and volume.
Okay, and then just a clarification like the the 26 million gain that came through non interest income I assume and that's an after tax of 26 million and after tax number 26 million net pre tax it is and the other income of <unk>, two which you have and some variable compensation of about $4 million, so far and net of.
<unk> 22, and net of tax, it's $18 million or five cents per share.
Okay, and then just last bill.
Non performing loan PCL was $6 million I assume the S. L I and prove that and a chance to go through it all but that's how I would have improved the outlook seems to have improved can you talk about what the offsets were and was this more of a weighting towards your pessimistic scenario like what offset.
And the amount that would've otherwise been released and Louis has to go and I think last quarter. You said that the goal was not to necessarily released them you'd want to grow into them is that still the kind of viewpoint.
Thanks, Doug I'll start off so in terms of offsets certainly loan growth is one that generates the performing PCL as you'll notice that in the in the appendix and the disclosures on our macro scenarios the baseline did improve and.
Somewhat and a few of the factors.
But the pessimistic the shape of the pessimistic, what's a little different you'll see that and are on the slide of tobacco the deck and that had a had and impact as well on the debt.
Performing PCL.
Yeah. I mean, we are I think you saw we had a nice increase in and risk weighted assets I think that's where we are.
We were hoping for and that's somewhat I think indicating for but and.
And as Phil indicated the situation and economic situation, if it continues to improve and vaccination and accelerates.
I think we'll be facing the possibility of releases faster and then we thought kind of a review with each quarter.
Okay, great. Thank you very much.
Thank you. Following question is from Scott Chan from Canaccord Genuity. Please go ahead.
Good afternoon, and if I go to slide 19 on on wealth management and the thing that jumped out to me was trends and and.
And others on the revenue line up 35% quarter over quarter.
Maybe just if you could help me.
Or maybe if you can just elaborate on a on the sequential increase and if theres anything and that other that that kind of drove it.
And she got and you all will answer that question.
Thank you.
To ask a question about the wealth management the of the transaction increase comes a 50 50 from direct brokerage as well as N V. I and so there is an element to it that is related to the frenzy that everybody. So, but theres also and element coming from portfolio managers at and.
And B I and so.
That's why we like the profile, we like the profile of that we have and especially at and DDB direct brokerage and.
It's not only coming from Gamestop trading. It's a you know we've gained a number of accounts are we're number two according to the Investor economics for a number of transaction revenue growth as well as new accounts. So it's pretty solid now in terms of.
Other revenues a lot of it of it is FX revenues and and I would say that the only change and investor behavior that we've seen is a big increase and the number of U S shares that are transacted versus a Canadian shares and that brings our FX revenue.
Got it and and maybe just last thing on on international with a P. A and terms of the loan book up 7% quarter over quarter of 36% year over year during the pandemic you know what.
What point do we see this loan book kind of mature or is there a runway for several years, where you can.
And kind of post these exceptional kind of growth rates on this book.
And that's kind of it's Louis I think we've we've posted these types of numbers now for five years at least.
And.
There's still some runway I think our market share is obviously growing but it's still a I think we see room for for growth there we.
We continue to gain market share and both deposits and loans and what's encouraging is that theres been.
There's been no lockdown and Cambodia so.
It's difficult to get and you have to be the Australia and rules. So you have to be two weeks and and alltel, if you're coming outside of the tourist industry is extremely slow, but the other parts of the economy and manufacturing.
Construction and agriculture are doing extremely well.
So what's encouraging is that three of the four engines are running and then at some point tourists and we'll come back so from a strict macroeconomic standpoint.
That performance was not done.
The Cambodian economy at peak performance.
It's really done out of that three fourth of performance. So that's why I think there's still some runway here for at least a couple of years.
Understood. Thank you very much.
Thank you our following.
Following question is from Mario Mendonca from TD Securities. Please go ahead.
Good afternoon, and this question might be appropriate for Sandoz Nate.
And you referred to the.
And the shift into wealth and financial markets.
And as an explanation for why the margin would have been strong and I to observe that the all bank margin was very strong sequentially.
Was there any change in the balance sheet.
Structure of the balance sheet, either duration or risk that might account for the abrupt improvement and in the all bank margin.
The only big change and the balance sheet as increase and liquidity at Central Bank. So disaffected treasury doesn't affect the business line other than that and there was no other shifts to four day business lines, but that wouldn't have contributed to and a higher margin with it.
No no and do you do you did and didn't get the increase in equity tier of almost neutral.
Okay.
Louie.
I don't you know, we're looking around the table here no I don't think there was anything spec.
Special and balance sheet or anything else that occurred it was just.
As you saw I think good volume growth and all business lines and on both sides of the balance sheet.
And just if there was nothing unusual and.
And more than anything else like that.
That's helpful I when I disaggregate the margin.
For National and I see how and how well it performed relative to your peers.
Yeah. It sounds it looks it does look to me like the beginning of the business and Cambodia and credit G and I guess wealth as well those are making a meaningful contribution to national has better margin performance. So I wanted to just sort of square that circle and make sure I wasn't missing something on the balance sheet.
If I could just go Louie and more of a philosophical question you've been around.
Of while you've seen a lot of cycles and I think you'd agree that.
No one would have predicted that national bank, but put up over $2 a share of a record quarter.
13 months into it and I go 12 months and Japan downtick. So it's clear that at least from my perspective that that central banks and governments around the world.
Have you maybe not intentionally but they've created a very very good environment for that but.
<unk> low credit losses, and a great opportunity to make money and financial markets. So.
At some point.
Central banks aren't going to be there and central governments aren't going to be there to create the perfect environment for banks and the punch Bowl of gets taken away and your many years.
Running financial markets and running this bank.
Happens and that environment and and how is national are you are you preparing for the day that the punch Bowl gets taken away because it seems at least from my seat, but that's what we've seen we've seen and central governments and central banks create a perfect environment for banks to make money.
They certainly are.
And then vary and you.
You were around in all seven of weight side, you know on a comparative basis.
This was even larger in terms of intervention.
By governments, both of the fiscal and monetary side. So yes. So there was massive intervention.
No I think you know it's a good question on the on the Punch Bowl and the fact is I think before we get there I think we need to get back to full employment and I.
I think it's not just GDP recovery and the G. Seven countries and looking at you're looking at full recovery in terms of the job market.
So I think before we get too and we're moving to punch Bowl and tours of the physical.
Stimulus and monetary and fiscal stimulus I think we will we will have a nice period of economic rebound, which I think we will benefit from and as I said earlier I was mentioning of scenario.
You know, maybe it's more of a wishful thinking, but we have both positive financial activity and economic activity kind of taken on the same place now removal of avid and off scars and my body on my face, so I've gone through periods, where central banks and removed.
Quiddity nine.
And 94 was one 2000 was another one and you know a little bit and 15 of 16.
I think what happens and that particular.
<unk> positioning as you need to be very good at managing volatility and.
Financial markets and especially now.
And if theres any kind of a whiff of inflation, which again I think it's you know it's probably a couple of years down the road at the earliest I would think but once that occur I think of volatility is kind of be you know it could be quite high and I think so far and I'm knocking on wood and we're all looking on wood as a team I think we showed that we're pretty damn good.
Good at managing volatility and financial markets.
So that's why capital markets remains I think and actually you know within of Universal banking.
And this model and very attractive, Idaho, and because of the correlation versus the other business lines.
And not making sense here of Mario.
And if I could just one final thing.
When the music stopped in 2008 2009, several banks, mostly in the U S. We're exposed pretty pretty <unk> and.
And start terms, we saw the banks that made a lot of mistakes are there any excesses that you can see being built up and the system today that will be exposed down the road.
Not now and.
And I think our financial system of Aneel Mario is quite different.
And particularly the regulated part of the financial system, namely the banks.
Our oh quite different Beast and they were in 2006.
So.
There are a lot of new players a lot of new structures and.
And then the markets are.
And I don't see right now of major weaknesses within the regulatory irregular.
Our regulated regulatory part of the system for the rest I did allude and my opening remarks that we are seeing pockets of irrational exuberance and.
And markets.
You know you can you can figure out which one of those.
And I think given the level of stimulus.
They are likely to be at to be more and that's why I think risk management remains a strong risk management culture is not a nice to have even in a period of strong economic recovery. It is especially important in a period of strong economic recovery because thats, usually as you know that's where the big mistakes are being made.
So that's why you know.
And we're trying to be balanced between our what we're generating in terms of revenues of being fully cognizant that we have to be very very prudent in terms of risk management.
Couple of thank you.
Thank you. Our following question is some of the Mark Purcell from Cormack Securities. Please go ahead.
Thanks, and just wanted to circle back on earnings and wealth management. It sounds like there was some transaction volume that may not repeat and well see the power of that segment.
Run rate business and closer to the lets say $130 million of quarter range, because when I look back of your sub pack and it looks like there was quite stable growth of that level of earnings or are should we be thinking about it as more of the $160 million as a being a representative run rate for a while.
Well thank you.
And look it's a tough question did and.
And our revenue mix. This is the portion that is.
The most volatile but recently, we're we're experiencing really really strong numbers even in February.
In March of last year was a record and we're trending right about those level of <unk>, if not higher these days and.
And it's coming from direct brokerage as I said, but not only debt recently it was between N V I N and our direct brokerage and now we're seeing new issues are coming to full service brokerage, which is something we haven't seen and a long time. So all of this to say that so.
So far for the coming months Oh, you know what you've seen in Q1 is our what we're seeing and what the trend continues.
Okay. So there's not like one times like maybe a large performance fee or anything in there. That's that's like one time in nature.
Oh, absolutely nuts, we have no performance fees are at all in and and all of our revenue. So that's not a question.
And as I said, the only thing debt is a little bit different is the behavior of the investors as day trade more of U S stocks than before so more ethics revenue could disappear, but it doesn't explain the bulk of our results for sure.
Alright, thank you.
Thank you.
Boeing question is from Gabriel <unk>.
From the National Bank. Please go ahead.
Good afternoon, a question for Louis to start you had mentioned in your opening remarks about the once the restrictions are lifted.
Back to of raising dividends and buying back stock I assume you mean.
And to do both.
And if that's the case and we'd be looking at 11%.
And you know minimum target level for tier one.
Yeah, I think we would look to.
If it was a confusion and I think we should be and are positioned to hopefully to do both priority on an increasing dividend I would say it because.
If you do a quick math I think you'll see that's where the risk of being below our 40% payout minimum payout ratio in terms of dividends for 2021, if there's no adjustments on the on.
Or you don't.
Adjusted and upwards of a way for.
For the.
And the regulators to get the signal, but I think debt that would be one thing.
And then yeah, I think 11 11, and a half I think is a comfortable level.
Post pandemic.
You know, what we'll sell debt goes but.
We'll see how things evolve.
Okay.
And then my other question of who are sort of level.
And also congrats on the new job.
Great quarter and financial market, but we're staring at the bank.
Merrill of.
Really tough comps over the next three quarters.
How does that you know and <unk>.
And I guess your outlook for <unk>.
Pretax pre provision profit growth.
Where do you expect financial markets and up ease of use.
And at the high single digits, All bank target and then in terms of I think you will live with the trading maybe slowing down is that the.
And with the off that's going to be a solid pipeline of investment banking fees are coming.
Yeah.
Thank you Oh, yeah.
So in the first quarter, what we've seen lots of capital raised from our corporate clients.
I mentioned before elevated volumes healthy vol, and all asset classes.
The other trend that we've seen is a significant rise and investor appetite for four of products. So.
And that trend and in retail and <unk>.
Institutional.
So I think it's fair to say the conditions right now for for capital markets activities are very very good.
Now looking forward.
Louis mentioned it earlier, we've made investments and our franchise and they are bearing fruit.
We're well position okay. So we're very comfortable there.
At this point and time, we remain positive on our trading businesses.
And we're seeing a very strong pipeline on M&A.
Financing activities from our clients.
So I think.
Market conditions persist and they remain favorable.
Look we're in a really good position to generate a positive revenue growth versus our 2020 of which was a record year.
And maybe not a big drop off of.
And I think anyway.
Okay. Thank you.
Good growth of a week.
Thank you thank.
Thank you once again, please press star one at this time for any questions or comments.
Our next question is from Darko <unk> from RBC.
RBC capital markets. Please go ahead.
Hi, there. Thank you I just have two questions. The first one is really simple.
Forgetting credit card balances for a moment I'm just curious if you can tell me.
Do you have more credit cards.
And circulation today than you did a year ago.
I missed the part of the question and answer.
And then nothing.
And the number of active.
And accounts the number of active accounts is there I would say stable compared to a year ago I don't think they conditions and it's been a favor.
Favorable and discipline to increase and number of active accounts and what we've what we've done is work with our customer to stimulate spending where we could do some of the of the spending categories, but.
And this is what we see right now.
Okay. That's helpful. Thank you. So my second question is similar to Marios question, and I'm going to try it from a different angle, though Louie and I'll direct you to.
And to slide 29 in Europe and U S.
Presentation deck.
Yes.
And so.
My question revolves around.
The deposit growth and.
I've been watching banks for a long time, it's very rare.
And one year, probably deposit book that was slightly below your loan book to go suddenly significantly higher than your loan book.
And when I look at this chart, it's basically $32 billion of deposits more year over year and when I look at the shareholders' report 27 billion of that $32 billion has no fixed maturity.
So I guess the question is if we hit a real strong stride here and the economic recovery, it's totally possible and my mind that.
And we could have deposits run off pretty quickly.
And just the run up they could run back down and.
And don't Misconstrue. My question is one of about interest rate risk score and your liquidity coverage ratio of spine that stable, but what I'm really thinking about is the impact on your business in terms of.
Yeah.
And the margin in a situation, where you have asset growth with deposits running off.
And any other sort of.
Difficulties of might arise from that.
How are you preparing for a potential significant run down of deposits and what might be the impact.
If it my sort of vision comes true.
Thanks Darko.
And frankly right now.
I think we're more and I think our biggest challenges.
Is deploying the excess deposits that we have without doing anything stupid and on the balance sheet frankly.
We were not making mistakes we were not concern when a run off even if at some point.
The deposits base should come down and we certainly hope so darko because I think that would be a signal that the economy is finally picking up and people are starting to travel and spend and invest again and I think we have enough give.
Given to our Universal banking model.
We have enough other businesses that we would pick up the revenue from some of that investments either in wealth management and capital markets and commercial banking, our and something else. So I think I think in terms of funding and balance sheet I don't expect it to be so abrupt.
It's kind of cause a problem in terms of funding or liquidity.
And secondly, as I said.
And once that money, we can only hope that money gets deployed one day, because that means and what we're out of this.
Weird situation, we found ourselves for the last 12 months and.
I think it's going to be done progressively and again I think it will generate revenue opportunities for us right across right across our franchise.
And that's where we're at.
For the rest keep in mind that structurally.
It's been our policy and our strategy of ours and in fact and big priority too.
The decrease our funding coming from wholesale funding and increase the funding from core funding sources core P&C clients and so when you look at that.
And that trend over five years of debt certainly accelerated last year because of all of the.
Unusual circumstances, but also I think you had also reflects.
Our multiyear strategy to reduce our dependency on wholesale funding and I would certainly hope.
That would not be reversed and up.
Post pandemic world.
Does that answer your question Darko, yes, it helps and as I say I wasn't worried about the risk side of it I'm just wondering about the obviously you'd have excess liquidity come down and you would be deploying some of that but I just can't I can't picture of an environment, where your asset growth would.
Accelerate.
As fast as your deposit growth would come off so I'm just struggling with it a little bit of every time every time and look at the balance sheets of these days. It just boggles my mind too much especially of the business and government deposits I mean, those should be very fluid and liquid and and recovery.
And and I got to think Youre paying next to nothing.
And then I will think through it more Louie you're your answer is exactly as I thought it would be it.
It's just.
Darko.
Yep.
Stefan and I just wanted to mention actually you know on.
And the government side, we've actually let go of a governmental deposits that were going up for bids and auctions that were at.
At low margin because of these excess liquidity. So that's always one and one tap the area, we could tap back and if need be.
Okay, Yeah that makes sense.
Okay, I will struggle with a little more and thank you very much for the the insights I appreciate it.
Okay.
Thank you.
No further questions, but just sort of at this time I would now like to turn of meeting back over to Mr vessel.
So thank you everyone and we'll talk to you for the Q2 results and three months. Thank you again have a good day.
Thank you.
The conference has now ended.
Disconnect your lines at this time and we thank you for your participation.
[music].
Some of them, yes, we locked a silty duckenfield it'd be tough soup the level of pre owned of being of Hulu I had thought of it get it because that's the renewable and now.
Some of the best guilty.
[music].
And now some of them and we lapped a silty duckenfield it'd be tough soup the level of pre owned at the end of Hulu I had thought of it get it because that's the renewable and now some of the best guilty.
[music].
Our patience.
And now some of them, we walked a silty duckenfield they'd be touched soup the level of pre owned of being of Hulu I had thought of it get it because that's the renewable and now some of the best guilty.
[music].
Uh huh.
[music].
And now some of them and we lapped a silty jacana fields of the VITAS soup the level of pre owned at the end of Hulu I had thought of it get it because that's the renewable and now some of the best guilty.
[music].
Now some of them you have we lapped a silty jacana fields of the VITAS soup the level of pre owned of being of Hulu I had thought of it get it gives us the renewable and now some of the best loyalty.
[music].
And now some of them and we lapped a silty jacana fields of the VITAS soup the level of pre owned at the end of Hulu I had thought of it get it because that's the renewable and now some of the best guilty.
[music].
Hum.
[music].
And now some of them and we walked a silty duckenfield they'd be touched soup the level of pre owned of being of Hulu I had thought of it get it gives us the renewable and now some of the best loyalty.
[music].
Uh huh.
[music].
And now some of them and we lapped a silty jacana fields of the VITAS soup the level of pre owned at the end of Hulu I had thought of it get it because that's the renewable and now some of the best guilty.
[music].
Okay.
[music].
And now some of them and we lapped a silty jacana fields of the VITAS soup the level of pre owned of being of Hulu I had thought of it get it gives us the renewable and now some of the best loyalty.
[music].