Annual meeting of shareholders

Montreal, 13 March 2002 - 

"I love this Bank with a passion. I have devoted 45 years of my life, my efforts and my energy to it."

André Bérard
Chairman of the Board


"André Bérard's legacy to us is a company with a strong balance sheet and a bank that is the best capitalized of all the major Canadian banks."
Réal Raymond
President and Chief Executive Officer

At the Annual Meeting of Shareholders of National Bank of Canada, Réal Raymond succeeded André Bérard as Chief Executive Officer and presented his vision of the future of the Bank. He also paid tribute to his predecessor who had held the position for 13 years and who remains as Chairman of the Board.

More specifically, Mr. Raymond pointed out that under Mr. Bérard's direction the Bank's revenues had grown by 8% a year and net income, by 28.1% a year. Similarly, return on common shareholders' equity had risen from 0.4% in 1989 to 16% in 2001 while total assets had climbed an average of 8% a year. "For shareholders, all this has resulted in a highly respectable annual return of 11.5% on their shares, and stock market capitalization which has increased from $1.6 billion to $6 billion," he concluded.

Mr. Raymond recalled that the National Bank's performance in 2001 was its strongest ever as its profitability, balance sheet and capitalization had all improved considerably, with the result that it was now poised to pursue rapid profit growth. He added that his target for growth in earnings per share was between 4% and 6% in 2002 and 10% a year thereafter. The new President and Chief Executive Officer also stated that the business model of the Bank – a super-regional bank that dominates its market – was considered to be highly profitable in the United States, where super-regional banks are as successful as the largest banks, if not more so.

Mr. Raymond identified the six factors that will ensure growth for the Bank: focus, service and product quality, market knowledge, economies of scope, capital and alliances.

Value-creating operations

The first success factor involves the Bank focusing on operations that create value for shareholders and clients. This approach, adopted a few years ago, led the Bank to divest itself of under-performing lines of business while making acquisitions in profitable growth markets. The sale of its U.S. asset-based lending operations and its MasterCard merchant operations enabled the Bank to record substantial gains on operations that had become marginally profitable. The financial resources thus freed up enabled the Bank to invest in priority areas such as wealth management, a market that is growing by 10% a year. The National Bank is the leader in wealth management in Quebec, through its network of branches, its ability to develop innovative products and the dominant position of National Bank Financial. The Bank intends to increase its profitability substantially in this market by investing in technological tools and personnel training.

Moreover, the National Bank plans to expand its wealth management activities in other parts of Canada by increasing the number of advisors working for National Bank Financial outside Quebec by 50% over the next three years. It also wants to be an active participant in the consolidation of the fund management market in Canada by way of acquisitions. "We are also focusing on specific niches such as energy financing in Western Canada and retail and SME banking in Atlantic Canada and Ontario," Mr. Raymond explained. He went on to say that, through branch consolidation, the Bank had established a network that was a creator of value in Ontario. As for the Bank's role on capital markets, Mr. Raymond added that "we have succeeded in making a name for ourselves in hedge funds, volume trading, equity derivatives and fixed-income securities. The mandate awarded to National Bank Financial as part of the privatization of Hydro One clearly shows that we can compete with the big firms on their own playing field."

Quality of service

For the new CEO of the National Bank, the second factor for success lies in being totally committed to quality of service. A number of measures have already been taken in this regard. Each business unit has implemented an action plan to achieve quantifiable improvement in customer service. The credit process has been re-examined with a view to making it more efficient and transparent, investments in technology are prioritized according to projects that have a noticeable impact on our clientele and a substantial portion of bonuses is tied to the improvement in customer satisfaction.

To increase access to personalized service in branches, the Bank has announced that it will extend business hours in 59 branches in Quebec, to the benefit of 30% of target customers.

Market knowledge

Mr. Raymond then mentioned that the third factor ensuring success for the National Bank was its knowledge of the market which translates into an ability to price products so as to obtain the desired return on equity and substantially reduce risk. As a result, the Bank now has the best ratio in the industry for impaired loans.

It is also market knowledge that has enabled the Bank to increase the profitability of personal and mortgage loans. "Many of our main banking competitors have pulled out of regional markets while we have not abandoned a single one," he added.

Economies of scope

The fourth success factor for the Bank lies in the economies of scope which arise from the Bank's capacity to concentrate on offering an extensive product line. In this regard, there is an important difference between the National Bank and American super-regional banks as their capital market and retail brokerage operations are much more limited. The National Bank intends to exploit its position as lender to medium-sized businesses to develop its wealth management business and to promote its payment and e-commerce solutions.

The best capitalized bank

The fifth factor for success, Mr. Raymond stressed, is the fact that the National Bank is the best capitalized bank in the Canadian banking industry with a Tier 1 capital ratio of 11% in the first quarter, or 2.2% higher than the average for the five major banks. This gives it the resources it needs to move quickly if opportunities for growth arise. It has also enabled the National Bank to introduce a share buyback program that will still leave sufficient resources to ensure internal growth and make sizeable acquisitions.

Alliances and efficiency

According to Mr. Raymond, the sixth and final factor for ensuring the Bank's success is its ability to conclude alliances that allow it to become more efficient and to generate additional income. By outsourcing services to IBM, Bell and Cognicase, the Bank reduced its operating costs in 2001 even though its operations and revenues continued to grow. As a result, its efficiency ratio improved from 65.8% to 62.7%, its lowest level since 1997. The goal is to bring this ratio down to 61% by the end of 2003.

André Bérard pays tribute to entrepreneurs

In his address, Mr. Bérard thanked all Bank personnel, "the men and women who are its lifeblood and who make it grow and prosper through their hard work and loyalty." The Chairman of the Board also paid tribute to customers, who are the Bank's raison d'être, and to shareholders, who placed their trust in him even when the Bank was going through difficult times.

When talking about the loyalty of management and his close colleagues, Mr. Bérard described Jean Turmel as a person "who comes from the same stock as our great leaders." He also singled out the key role that his successor, Réal Raymond, had played in the Bank's success.

Mr. Bérard spoke of the immense satisfaction he had derived, throughout his career, from supporting Quebec businesses, many of which in just one generation had gone on to expand into foreign markets, thereby contributing to Quebec's present economic success and the advancement of Quebec society. He also touched upon fundamental values such as the importance of being transparent and protecting the interests of investors, shareholders and the public in general, of taking part in collective debates, and of encouraging young people by offering them a society with a human face.

National Bank of Canada is an integrated group which provides comprehensive financial services to consumers, small and medium-sized enterprises and large corporations in its core market, while offering specialized services to its clients elsewhere in the world. The National Bank offers a full array of banking services, including all the investment banking services required by large corporations. It is an active player on international capital markets and, through its subsidiaries, is involved in securities brokerage, insurance and wealth management as well as mutual fund and retirement plan management. The National Bank has assets of over $75 billion and, together with its subsidiaries, it employs some 17,000 people. The Bank's shares are listed on the Toronto Stock Exchange.


For more information:

Carole Gagné
Senior Manager
Public Relations Department
National Bank of Canada
Tel.: (514) 394-6991

* The telephone number and e-mail address are for the exclusive use of journalists and other media representatives.