The National Bank of Canada is a leading financial institution and one of the six largest commercial banks in Canada. The National Bank offers a wide range of banking and financial services, including corporate and investment banking, securities brokerage, insurance, asset management and retirement planning.

Geographically, Quebec is the largest market, accounting for more than 60% of total sales. The bank also has an international presence, which accounts for 15% of total sales, and other Canadian provinces account for nearly 25% of total sales.

The National Bank’s business can be broken down into – private and commercial banks, which account for nearly 40% of the National Bank’s revenue, followed by financial markets (25%), asset management (24%), and US specialty finance and international (11%). At the end of April, the company had total assets of over $ 350 billion. The National Bank’s 160 years of experience and its customer-oriented, integrated range of financial services have made it the preferred choice of customers.

It has offices in almost every province in Canada. It is one of Canada’s largest integrated financial services providers with convenient self-banking channels, 401 branches, 929 ATMs across Canada and a large-scale digital presence. In addition, the company has 94 wealth management services across Canada.

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Plant data

Sales growth & market presence

The National Bank is a Canadian superregional bank with a leading Quebec franchise. The bank is aimed at private customers, small and medium-sized companies and large corporations. It also offers specialized services in international markets.

The National Bank is the preferred financial service provider for its customers, especially SMEs. The bank continues to invest heavily in its platforms to deepen customer relationships, combining advisory services and technology to create a more personalized approach.

The National Bank is well positioned to benefit from its leadership in Quebec and its growing market presence across Canada. The retail and corporate banking business is well represented in the country’s central and other markets, covering the financial needs of nearly 2.6 million individuals and more than 141,000 companies.

The National Bank’s expertise in specialized markets should help it expand in the growing commercial markets. The digital transformation of the bank is also bearing fruit. The wealth management business is well established in Canada, benefiting from favorable markets and net inflows. The US specialty finance and international business complement the growth of its domestic activities.

The National Bank’s investments aim to stimulate organic growth in its core markets, improve the customer experience and achieve positive operational leverage. The US specialty lending and international business of the bank, Credigy (USA) and ABA Bank (Cambodia), continue to offer attractive growth potential with performance above expectations.

The bank had a strong performance in the second quarter of 2021 in an improving economic environment. The National Bank also recorded growth in the volume of loans and deposits as well as an increase in non-interest income. Both AUA and AUM were up 28% year over year.

Dividends

The National Bank has recorded dividend growth of 8.6% CAGR over the past ten years. It has a very reasonable payout ratio of 38% and a current dividend yield of over 3%.

The National Bank is a dividend aristocrat with a proven history of attractive dividend yields and constant annual dividend growth. It last increased its dividend by more than 9% in 2019.

The SNB has set itself the medium-term goal of achieving growth in EPS of 5-10% and maintaining a payout ratio of 40% -50%. Credit quality also remains strong.

The National Bank reported a hard core capital ratio of 12.2% and an efficiency rate of ~ 53%, giving it the flexibility to invest in its businesses and return capital to shareholders. The bank has successfully increased its earnings and earnings per share by 6% + CAGR each over the past decade.

The National Bank is concentrating on driving growth organically and increasing customer satisfaction in all of its segments. The bank is well positioned to benefit from its balanced business mix and diversified earnings base.

The National Bank’s Wealth Management segment is Quebec’s premier franchise with a strong presence across Canada, while the financial markets business provides a diversified source of income. The Quebec market should pick up on improved economic fundamentals and affordable property prices.

The National Bank’s International segment is also expected to achieve double-digit profit growth in the 2021 financial year. The bank is aiming for PTPP growth in the mid to high single digits over the course of the year.

National Bank (NA) Historical return
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competition

Canada’s private and commercial banking segments are highly competitive. The National Bank is the sixth largest bank and competes with other leading Canadian banks such as TD Bank, Royal Bank, Scotiabank, CIBC and Bank of Montreal.

Bank of Montreal is the eighth largest bank in North America by assets, while CIBC serves 11 million retail, small business, commercial, corporate and institutional clients in Canada, the US and around the world.

Scotiabank is a leading international financial services company with a rich history spanning 185 years, and the Bank of Montreal is the eighth largest bank in North America by assets.

Bottom line

Resilient business and diversified sources of income supported the National Bank’s performance over the past year.

Given its reputation as a “nationwide Canadian bank,” the National Bank should continue to benefit from Quebec’s resilient economy. The growing focus on international markets should further strengthen the business mix.

The National Bank should also increase dividend payouts as the central bank is expected to lift capital return restrictions on banks.

A diversified and flexible line of business, a strong equity base and prudent risk provisioning for loan losses position the bank well to take advantage of growth opportunities in a recovering economy.

National Bank (NA) Historical PE
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