(Adds comments from executives on conference call, stock reaction)
By Jeffrey Hodgson
TORONTO, Feb 25 (Reuters) - National Bank of Canada, the country’s sixth-largest lender, reported a stronger-than-expected profit on Wednesday, helped by gains at its financial markets division.
The Montreal-based lender said net income rose to C$415 million ($334 million), or C$1.16 per share, in the first quarter ended Jan. 31 from C$405 million, or C$1.15 per share, a year earlier.
The bank said diluted earnings per share excluding some items were C$1.14. Analysts, on average, had expected C$1.12, according to Thomson Reuters I/B/E/S. National shares gained 2.75 percent to C$48.19.
National also said it would sell more than 9 million of its shares in Fiera Capital Corp, reducing its stake in the investment manager to about 22 percent.
National executives said they expected to keep their Fiera stake above 20 percent, and the sale was prompted by regulations that changed the impact of the Fiera stake on National’s capital ratios.
The bank is in the process of seeking regulatory approval to renew its share buy back program. But it isn’t considering buying back shares until its common equity tier 1 ratio, a measure of financial strength, reaches at least 9.5 percent. It stood at 9.3 percent in the most recent quarter.
Chief Executive Louis Vachon said on conference call the priority for capital is to finance organic growth and acquisitions, but the bank should be in position in the next quarter or two to buy back stock if the economic outlook is stable.
“If our stock is trading again at what we consider accretive levels for us to buy it back, we’d like to be in a position to do that sooner as opposed to later,” he said. “Below 10 times earnings we feel that it is significantly accretive for us to buy back our shares.”
Higher trading activity and banking services helped net income in the National Bank’s financial markets business rise 23 percent to C$178 million.
“We still see many short-term and long-term trends which remain very favorable to our wholesale banking segment,” Vachon said.
Net income from personal and commercial banking, rose 5 percent to C$175 million. Net income from wealth management rose 12 percent to C$76 million.
Royal Bank of Canada, the country’s biggest lender, also reported strong-than-expected results on Wednesday.
$1 = C$1.2410 With additonal reporting By Shubhankar Chakravorty in Bengaluru; Editing by Savio D'Souza and Chizu Nomiyama