If recent negative signals indicate that the economic slowdown is likely to continue, the concern has not yet spread to the head of the National Bank.
Posted at 7:28 a.m.
Updated at 4:45 p.m.
“We have to keep an eye on what is happening, but now is not the time to panic,” said Laurent Ferreira in an interview on the sidelines of the presentation, Wednesday, of the institution’s end-of-year performance. financial.
Several large Quebec companies (BRP, Lion, Lightspeed) have recently announced massive layoffs, sales of new condos are in sharp decline, and more consumers are having difficulty meeting their obligations.
Laurent Ferreira actually notes a marked slowdown in the condo market.
“The projects we finance are multi-residential across the country. There is an imbalance in the needs of society. Especially in housing. Maybe we have too many condos in general in the country at the moment,” he says.
“We are in an economic slowdown. It will be the same thing to start 2025. We remain in a situation where interest rates are restrictive. It affects the consumer, businesses and capital investments. »
Monetary policy continues to be restrictive despite recent decisions by the Bank of Canada.
“We have not yet seen the benefits of recent rate cuts. We still have a good six to 12 months to go before we start to see the impacts of a less restrictive monetary policy,” maintains Laurent Ferreira.
PHOTO ROBERT SKINNER, LA PRESSE ARCHIVES
Laurent Ferreira, CEO of the National Bank
He believes that the economy is currently experiencing the effects of the tightening of monetary policy that began in 2022 and which continues to have consequences on the economy today.
The CEO of the National Bank says he is observing more delinquency in the mortgage repayments of certain clients.
“This is normal after interest rates rise,” he said. Holders of auto loans and consumer loans have become more vulnerable. “We definitely see credit deterioration. And there are geographical differences,” says Laurent Ferreira.
Quebec performs better than Ontario because there is less leverage in general in the Quebec economy. House prices are half those observed in Ontario. Consumers and businesses in Quebec are a little more conservative than in Ontario.
Laurent Ferreira, CEO of the National Bank
The National Bank said on Wednesday that it had again increased its provisions for credit losses, that is to say the funds set aside to cover loans likely not to be repaid. The Quebec lender set aside provisions for credit losses of $162 million during the last quarter of its 2024 financial year.
This amount is up compared to 115 million at the same period last year, and compared to 149 million three months ago.
The financial institution nevertheless significantly increased its profits to 955 million during the months of August, September and October, the equivalent of an increase of 27% over one year.
Adjusted for certain items, earnings per share for the quarter reached $2.58, in line with analysts’ expectations.
Possible sale of a portion of ABA?
Laurent Ferreira also suggested on Wednesday that the bank could consider selling a stake in its Cambodian subsidiary Advanced Bank of Asia (ABA).
“We may one day see an opportunity to monetize the value of this platform. It is possible that ABA will eventually expand outside of Cambodia and if that is something we would ever consider, we would do it with a local strategic partner with a very strong track record who could help us there. »
At the start of the year, the National Bank rejected rumors of a sale surrounding ABA. Speculation even led management to say in March that it was not engaged in a process or negotiation for the sale of ABA Bank, and that it had not hired an advisor for this purpose.
Acquisition project
The disclosure of the most recent quarterly results comes as National Bank shares hit a historic high on the stock market this week. The stock is up nearly 40% since the 1is January.
The second portion of the stock market surge recorded this year was achieved after the unveiling in June of an agreement surrounding the purchase of the Canadian Western Bank. This is the largest acquisition project – valued at $5 billion – in the history of the National Bank.
The transaction was approved in early September by the shareholders of Canadian Western Bank before obtaining the green light from the Competition Bureau a few weeks later.
To come to fruition, the proposed transaction must now be supported by the Canadian banking regulator – that is to say the Office of the Superintendent of Financial Institutions – which must provide a recommendation to the Canadian Minister of Finance, Chrystia Freeland.
If the arrangement obtains all necessary approvals, the National Bank can hope to conclude this transaction in 2025.
