June 1, 2016 / 7:32 PM / 3 years ago

National Bank of Canada says no plans for capital raise

TORONTO (Reuters) - National Bank of Canada (NA.TO) said on Wednesday it had no plans to raise capital from shareholders after its second-quarter profit nearly halved as clients in the oil and gas industry struggled to repay loans.

Canada’s sixth-biggest lender raised C$300 million through a share offering last October after its core tier 1 ratio, a key measure of financial strength, fell to the 9.5 percent minimum required by the country’s financial regulator.

That capital raise helped it improve the ratio to 9.8 percent at the end of April.

The bank warned last month that it needed to set aside C$250 million, or C$183 million after tax, to cover bad loans to oil and gas firms, again raising questions about its capital strength.

Chief Executive Louis Vachon said on Wednesday the bank had set a target for its core tier 1 ratio to hit 10 percent by the end of 2017 at the latest but was not planning to tap shareholders again to achieve that goal.

“At this stage we do not plan (an equity issue),” he told analysts on a conference call. “We think we can do that organically without having to do an equity issue and the equity issue I can assure you would be the very, very last option that we would look at.”

National Bank said net income fell to C$210 million ($161 million) from C$404 million a year earlier, while earnings per share fell to C$0.52 from C$1.13.

Canada’s biggest banks, including Royal Bank of Canada (RY.TO) and Toronto-Dominion Bank (TD.TO), have reported increased bad loan provisions in the second quarter to April 30 as the decline in oil prices hit clients in the energy sector.

Excluding one-off items, National Bank’s earnings per share fell 48 percent to C$0.60, which analysts said was just under the C$0.61 consensus forecast.

Smaller rival Laurentian Bank (LB.TO), which has no direct exposure to the oil and gas industry, said its net income before one-off items rose 10 percent to C$46.7 million in the second quarter.

“We delivered strong earnings this quarter, as we took advantage of better capital market conditions and continued to benefit from the sustained credit quality of our loan portfolio,” Laurentian Chief Executive Francois Desjardins said.

Reporting by Matt Scuffham; Editing by Meredith Mazzilli

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