National Bank of Canada at National Bank Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : I'll jump ahead to one of my questions that I was going to ask later, but it's kind of touching upon kind of the lay of the land you're presenting here. So National has got near the upper end of the industry in terms of core Tier 1 ratio, industry high at liquidity coverage ratio. And you've been one expression, I guess, of conservatism on capital as you're not buying back stock, so you're retaining capital. Are there any other type of risk management overlays that you're applying in the business, whether it's the balance sheet or just your risk appetite, anything like that?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Flipping the script a little bit with more of a growthy mindset, if we do get the rate cuts and, let's say, just in Canada and we get a few of them this year, how do you expect your different businesses to respond, like the early movers where maybe it's capital markets because there's pent-up capitalization demands that the businesses haven't taken yet because they're worried about the macro or whatever, wealth management, how do you see the different businesses responding?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. And then I guess, the credit cycle is always top of mind. I've heard, or at least the impression I get from some banks, is they expect the peak losses to take place in Q4 and start to temper in 2025, which seems kind of optimistic to me because the timing between when the rates are cut and the transmission of the benefit, there's always a lag in both directions, so I'm just wondering how you view the credit cycle over the next 2 years.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. As mentioned earlier, we will have the regulator sitting here at lunch, or not here, in a different room. Well, I just have one regulatory question. And I always say unintended consequences. When regulation gets tighter and tighter and tighter, you have unexpected outcomes. I think about the nonregulated lending space, if there's growth there that can't be supervised. And I also think about consumers and choice being restricted. I mean it's still fairly small in terms of activity, but one of your peers exited auto lending last year in Canada and the U.S. So not a huge player in history, but it's restricting choice.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : And I guess that's very relevant to National as well. Maybe it wasn't OSFI, it was the Feds and changes to the tax code. And you were pretty adamant that you're not changing anything in terms of what you're doing in the trading business. Has the adjustment been made as far as pricing and structure?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : I'll pause now my questions and see if there's anything from the crowd. There we go. Unidentified Analyst Maybe just taking on the regulation, right? I think that [Basel's been implemented and OSFI hang on to that increase] against the stability buffer. But how do you make sure you're able to compete globally when you talk about premium ROEs? [If you have cash, I'm sure you'll have as much cash, how do you balance both of these]?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Any other from the crowd? I'll switch to the wealth business. When you assumed your CEO role, I remember on list of priorities, one of the businesses that you were singling out for future growth and whatnot was the wealth business. I know a couple of years ago, the commercial banking and wealth distribution were combined. I'm wondering what other sort of changes have taken place in that business that you believe are going to happen? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 26, 2024 / 12:25PM, NA.TO - National Bank of Canada at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Is there a geographic angle to it as well? Because if I overlaid your commercial lending business in a pie graph versus your wealth AUM, it's probably much more Western Canada than commercial. So there's got to be some...

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Let's switch to ABA. You get asked about ABA a lot, I guess. And it was in the news recently. We can touch upon that, if you like. But I just think it's been a smashing success of an investment, growing from 0 to 10% of the bank's earnings in a pretty short time frame. How does this bank look in 5 years from now, if we can look out that far ahead?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : And the loan origination strategy hasn't really changed.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : And you talked about the China slowdown earlier after the first question. That's still holding back a bit at the growth, I guess.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Yes. I'm going to ask you one of these tired-old questions, and it's probably been a couple of years since I've asked this. It has nothing to do with ABA, it's the opposite. Canada growth opportunities are more limited. So you got to expand in the U.S., and that's a problem for National Bank. Those aren't my words. But how do you respond to that?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Well, Credigy certainly falls into that umbrella. Last year, I believe you exceeded your loan growth targets. And this year, you're expecting the same? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 26, 2024 / 12:25PM, NA.TO - National Bank of Canada at National Bank Financial Services Conference

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. The consolidation thing.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Now the financial markets business, you're picking your spots outside of Canada, clearly. Do you still have a lot of runway there without having to think about any changes to the efficiency ratio? It is one of the hallmarks of the bank's success over the years is a really nice efficiency ratio.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Which would probably be a relief for people here. I mentioned efficiency ratio, but the broader expense management theme, the bank had positive operating leverage in Q1. And I guess, simplification is one of the buzzwords around your expense management strategy at the moment. Can you delve into that a bit?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Any particular areas of the bank getting extra attention.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Yes. Okay. Any questions from the crowd as we get the 2-minute warning ahead of us here. Yes. Let's see if I got something else here. ABA, we already asked about that. The expense management, I'll stick with that, I guess. When I go back to 2015, 2016, every bank took a couple of restructuring charges. And then we had a little wave of that in the latter part of 2023. Should we be anticipating another round in 2024? I know National didn't really take a big restructuring charge, it did a few little things, but not to the same degree as others, not really on the...

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Yes. I'd agree with that. And I think that's it for our first presentation.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : You bet.