Réal Raymond reviews the National Bank's solid performance in fiscal 2002 at the annual meeting of shareholders
Montreal, 12 March 2003 -
National Bank of Canada today held its annual meeting of shareholders, the first such meeting for Réal Raymond in his capacity as President and Chief Executive Officer. Mr. Raymond began his address by recalling the Bank's strong performance in 2002 despite sluggish financial markets. He also underscored the excellent results posted by the Bank in the first quarter of the current fiscal year, which began on November 1, 2002.
For the first quarter, the Bank turned in its best performance ever with record net income of $166 million. This represented a year-over-year increase of 14% compared to the first quarter of fiscal 2002. Earnings per share for the first quarter were $0.88, up 21% from the first quarter of 2002. For the year ended October 31, 2002, operating income1 amounted to $555 million, or $2.86 per share, while return on shareholders' equity was 14.7%. This return exceeded that of several of the other major banks and was reflected in the value of National Bank shares.
"In 2002, the value of National Bank shares appreciated more than that of any other bank shares," Mr. Raymond pointed out, adding that "total shareholder return, including dividend payout, was 25%, compared to 4% for the industry's benchmark index and - 8% for the TSX composite."
The challenges facing the National Bank
One challenge which the Bank's President and CEO singled out with respect to the quarters ahead is that of growing revenues. It is in fact a challenge faced by the entire Canadian banking industry. However, the Bank has the means to take up this challenge, mainly by acting on opportunities that arise in the Canadian market.
Other challenges described by Mr. Raymond dealt in particular with adapting to changes in demand for financial services, improving productivity, human resources and bank mergers.
The first of these – the need to seize opportunities arising from changes in demand – is based on the simple fact that, as the population ages, growth will be generated by demand for investment products rather than credit products.
The second of these challenges, that of productivity, is an ongoing one. The Bank's goal in this regard is to be as profitable as its competitors, if not more so, taking into account the Bank's specific characteristics.
The human resources challenge, for its part, involves the need to retain employees by offering them the advantages of a dynamic organization that listens to its employees and fosters their development.
Yet another crucial challenge facing the Bank is that of bank mergers. Mr. Raymond noted that the Bank had made numerous representations on this matter. In particular, it had submitted to government authorities that, in the event of a merger, the public interest would be best served through competition. The Bank had also stressed the importance with any future merger proposal of ensuring strong competition and true freedom of choice for individuals and companies alike. This could benefit the Bank and translate into business opportunities in markets where it is not currently represented.
Highlights of fiscal 2002
The annual meeting also gave the Bank's senior management an opportunity to review the high points of the past fiscal year. Mr. Raymond first expressed his satisfaction with the strategic orientation pursued in 2002. "Our strategy," he stated, "is adapted to what we are: a super-regional bank which, while operating from a position of strength in Quebec, expands beyond this market in certain carefully selected niches."
One niche of choice targeted by the National Bank is wealth management which will allow it to generate considerable business volume and create value for its shareholders. The Bank took a major step towards expanding its network and expertise in this market in 2002 when it acquired Altamira Investment Services, a leading brand name, which has some 130,000 customers, most of whom are based outside Quebec. With this transaction, the Bank in fact doubled its assets under management to more than $10 billion.
The Bank also signed a major agreement with Investors Group, Great-West Life and London Life, three Power Financial Corporation subsidiaries, thereby giving it access to one of the largest networks of financial advisors in Canada, with 7,000 specialists serving over 3.2 million customers. This agreement consolidates the Bank's position and reputation as a manufacturer of financial products.
After redefining its positioning in the United States, the Bank concluded an important transaction by acquiring Putnam Lovell, a U.S. investment bank specialized in merger and acquisition advisory services, thereby expanding National Bank Financial's service offering. During the past fiscal year, the Bank also concentrated its efforts on offering state-of-the-art Internet services to its business and retail customers. As a result, the Bank's website was given a brand new look.
In order to continue offering customers superior quality service and further develop its advisory role, the Bank also substantially extended business hours at 60 of its branches in Quebec.
Lastly, Mr. Raymond noted that, with credit quality constantly improving, the National Bank had by far the best impaired loans ratio in the industry for a fifth consecutive quarter. The Bank's capital ratios were also the best in the industry owing to the Bank's active and prudent management, combined with strong profitability which had built up its capital base.
The National Bank strengthens its corporate governance
Determined to uphold its reputation as a responsible organization, the National Bank reiterated its commitment to sound and rigorous corporate governance. For example, the Bank had amended certain provisions of its stock option plan. In future, stock options would be expensed by the Bank so that the dilution caused by such options would be reflected in earnings per share. In addition, the 11 members of the Bank's Executive Committee were now required to keep the shares they received after exercising their options for a minimum of one year.
Mr. Raymond also spoke of several other initiatives which would improve corporate governance. But, as he pointed out, "the best guarantee of shareholder protection is to have people of integrity on the board of directors and on the management team; people who are well informed, available and experienced, and who are actively involved in defining orientations and overseeing operations and the risks to which the organization is exposed; people who fully espouse shareholders' interests."
1 (See Table 1B on page 55 of the 2002 Annual Report for the reconciliation of operating income to income before goodwill charges.)
About National Bank of Canada
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 retail, corporate and investment banking. 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 about $75 billion and, together with its subsidiaries, employs over 17,000 people. The Bank's securities are listed on the Toronto Stock Exchange (NA:TSX). For more information, visit the Bank's website at www.nbc.ca.
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Information (the following telephone number and e-mail address are intended solely for the use of journalists and other media representatives):
Director of Public Relations
National Bank of Canada
Tel.: (514) 394-8644