National Bank of Canada Q4 2025 Earnings Call Transcript

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

Question: Stephen Boland - Raymond James Holdings (Canada) Inc - Analyst : The first one on ABA. And I'm just wondering if these two things are related. You talked about model calibration relating to impaired, but also that when I look at the LTV in that portfolio, it's gone from in the 40s into the 50s LTV and I'm just wondering if it's related. It seems like a big move or maybe it's 5 basis points or 10 basis points, but it just seems on the LTV, it seems like a big move for one quarter.

Question: Stephen Boland - Raymond James Holdings (Canada) Inc - Analyst : Okay. That's great. Just in your P&C segment, I believe I think about 8 basis points of the PCLs came from the Canadian Western portfolio. I'm just wondering what portfolios or can you give any description on that. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 4:00PM, NA.TO - Q4 2025 National Bank of Canada Earnings Call

Question: Doug Young - Desjardins Securities Inc - Analyst : Maybe sticking with the P&C segment. I know there's a $62 million intangible impairment. But if you -- even if you back that out, it seems like expenses were a little bit higher than normal this quarter. And then I think, Laurent, you talked a bit about efficiency improvements coming particularly from Canadian P&C banking. So I'm hoping you can address what happened in the quarter, if there's anything to call out? And then we're -- like how do you foresee outside of CWB, where else do efficiency improvements come in the banking side.

Question: Doug Young - Desjardins Securities Inc - Analyst : And maybe -- so just maybe to kind of simplify this, like if I take the P&C banking expenses take up to $62 million, is that a reasonable run rate from which to expect expenses to grow next year? Or was there something abnormal and we should see a bit of a normalization?

Question: Doug Young - Desjardins Securities Inc - Analyst : Okay. And then second question, I think, Laurent, when you talked about uses of capital, you you talked about an acceleration of operational efficiencies. Can you dig into what that means? Is there systems that could be written off? Or maybe you can just kind of flush that out.

Question: Doug Young - Desjardins Securities Inc - Analyst : So it doesn't sound like there's a big charge as with use of capital. This seems more strategic oriented. Is that --

Question: Doug Young - Desjardins Securities Inc - Analyst : And then if I could sneak one just last clarification on the Laurentian Bank portfolio acquisition. The way that we should think about this, you are just absorbing the loans and the deposits, the zero cost and the cost to you in terms of the CET1 impact is simply the amount of capital you have to do this. So this is a portfolio acquisition that basically comes to 0 cost. Is that the right way to think about it? Marie Gingras Yeah, Doug. That's absolutely it.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Maybe you can drill down into the PCL guidance a little bit of 25% to 35%. So effectively suggesting no change versus '25. But if I look at your economic projections for Canada and specifically, it does suggest some improvement versus '25. So are there particular areas that you're concerned about are trending the wrong way? Or are you just being conservative in your guidance?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. So it was noticeably absent from your answer was any reference to ABA and Cambodia and any reference to the elevated losses in the CWB book. And I'm assuming that's intentional, no particular concerns on those two areas beyond what you've already discussed for the quarter.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. Okay. That's helpful. Second question, maybe for Laurent. Just wondering how you think National Bank is positioned to benefit from the federal budget and particularly thinking about the planned infrastructure build-out. And one of the concerns around that is it's going to take time for these things to actually manifest. But if you have any thoughts around when you might potentially benefit as well? Like could this be a 2027 story? Is it built into your 2027 ROE expectation and capital deployment in any way? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 4:00PM, NA.TO - Q4 2025 National Bank of Canada Earnings Call

Question: Mario Mendonca - Cowen and Company LLC - Analyst : Could we go back to CWB and ABA, I mean these are clearly issues that are top of mind for investors this morning. First, on CWB. So you report that there's 63 million in impaired PCL 69 basis points there. That obviously stands out. Can you talk to what particular segments are showing the stress of why your content to suggest that this is not a trend.

Question: Mario Mendonca - Cowen and Company LLC - Analyst : That's helpful. And then on ABA. So the gross impaired loans now have essentially hit $1 billion. It's up from maybe $200 million just a couple of years ago. And you're -- I think you're clear with us that the LTVs are moving higher. I'm going with this is, although the LTVs have gone higher, they're still really low at 50% or, call it, 55%, let's say, why are there write-offs? Like the $15 million we saw this quarter means elevated levels, why are they increasing if the LTVs are that low? Why would there be losses at all? Like I guess what I'm getting at is when you recover the property out of foreclosure, what are you learning about the LTVs when you get them back?

Question: Mario Mendonca - Cowen and Company LLC - Analyst : And in any given quarter, this quarter, for example, can you speak to how many properties were recovered where you've actually got access to the property again and how to look at it? Is it like a single-digit number, like 5? Or has it been more like 60?

Question: Mario Mendonca - Cowen and Company LLC - Analyst : And when you say significantly more, I think you met significantly more than 5. Is that right?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Maybe just a clarification. First, on the benefits of converting CWB's portfolio to ARB, why such a wide range?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Okay. Maybe I'll follow up with you later on that. Another question with respect to cap is when I look at Slide -- what slide number my eyes are terrible. Slide 14. One of the things that stands out for me is the high level of consumption of capital, let's call it, organically, the 40 basis points of RWA growth. That is higher than what you're generating. And given your outlook for loan growth into 2026, is it fair to say that that's kind of like the quarterly sort of assumption is that you will deploy organically capital over and above what you generate in any given quarter for the next foreseeable four quarters? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 4:00PM, NA.TO - Q4 2025 National Bank of Canada Earnings Call

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Okay. So if it's really well diversified and not too far out of the norm, is it still correct to think that in '26, you will deploy more capital than you generate? Is that what you're budgeting for?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Okay. And maybe just one last question, if I may. Your discussion on the exposure to private credit, you were quick to point out, excluding Credigy. I just want to understand why did you exclude Credigy, does Credigy play in private credit?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Okay. And where does the other 2% come from then? Because my understanding was the private credit market is essentially in the US. You didn't think your cap markets business really reach far into the US, but maybe Jean, you can speak to how you have that exposure.

Question: Jill Shea - UBS AG - Analyst : Marie Chantal, you mentioned the P&C margin would trend upward in 2026. And then you mentioned also that the all bank NIM would go slightly higher in the second half of '26. Could you just tease that out for us, what's the expectation of the all bank NIM in the first half? And just any dynamics there? And then just a second piece to the question would be on CWB growth ramping in 2026 or the Laurentian loans and deposits that you acquired, will either of those be impactful to the NIM path as we think about 2026?

Question: Jill Shea - UBS AG - Analyst : Very helpful. And maybe just switching to the Laurentia bank loans that you acquired. You mentioned that it is coming over on a standardized approach. Just a quick clarification. Could you potentially shift those over to advanced approaches and less in that 25 to 35 -- or 25, 30 basis points you outlined on CET1.

Question: Sohrab Movahedi - Bank of Montreal - Analyst : I don't know if it's for Marie Chantal or Laurent, but I wanted to get a little bit more detail beyond just the words that you have on Slide 9 as to how you arrive at the 17%. So for starters, are you assuming a 13% CET1 ratio? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 4:00PM, NA.TO - Q4 2025 National Bank of Canada Earnings Call

Question: Sohrab Movahedi - Bank of Montreal - Analyst : Yeah. Marie Chantal, what sort of PCL ratio would you need to have to be able to give that 17% on 13% CET1?

Question: Sohrab Movahedi - Bank of Montreal - Analyst : So within -- I mean, if your PCLs aren't improving, is this improvement in CET1 in ROE simply because of your CET1 coming down?

Question: Sohrab Movahedi - Bank of Montreal - Analyst : Okay. I don't quite -- where do you think your dividend payout ratio is going to be for that 17% ROE?

Question: Sohrab Movahedi - Bank of Montreal - Analyst : I mean, Laurent, I think for you, Marie Chantal, I think it would be helpful if you gave us a bit more numeric examples as to how you get to that 17%. I appreciate the concept, but I think -- use for -- or I'm having a bit of a difficult time trying to triangulate to that 17%. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 03, 2025 / 4:00PM, NA.TO - Q4 2025 National Bank of Canada Earnings Call

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : I just had a follow-up question around your outlook for loan growth and the messaging on credit. Correct me if I'm wrong, I think you expect commercial loan growth, high single digits next year. My understanding is the government actions may not really play a role next year. So how should we think about that level of loan growth what are the drivers relative to -- I think you laid out a relatively cautious outlook on credit, unemployment for the first half of next year.

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Understood. And then I guess, just a separate question on Canadian Western you've done with the integration, the synergies on the cost side have been running ahead of schedule. Just talk about opportunities to invest and double up on that franchise now that you have the distribution. Like what are the plans in terms of investing and hiring there, which I assume would probably feed into operational efficiency growth as we think about the ROE.

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. I was just wondering in terms of are you going to ramp up hiring of bankers now that this is behind you within Western Canada, like any additional franchise investments kind of monetize the acquisition beyond the revenue synergies you laid out?

Question: Mike Rizvanovic - Scotiabank GBM - Analyst : I want to go back to Laurent on your 17% ROE target and I understand you'll give us more color, I guess, at some point in the near term on how you get there. But can you splice it out for us a little bit, give us a little bit of context on where you see that added earnings power across your segments? Is it going to be largely financial markets driven, wealth management, P&C banking or sort of evenly split, but where should we see that torque materialize?

Question: Mike Rizvanovic - Scotiabank GBM - Analyst : Okay. That's helpful. And then in terms of the buyback program, I think you referred to it as complementary, is there a possibility that, that could become a bigger complement to your earnings? Are you going to maybe consider a higher share buyback? If in fact, you can't draw your capital down towards that 13% target and maybe some of the tuck-in M&A that you're expecting could come up, it doesn't come up. Would you consider a bigger NCIB?