Press Releases

National Bank announces net income of $207 million for the third quarter of 2005, up 24% from $167 million for the same period of 2004

Montreal, 25 August 2005 -

·  Earnings per share up 26% to $1.20 for the quarter
·  Return on common shareholders’ equity of 19.6%
·  Dividend of 44 cents per common share

(millions of dollars)

For the quarter
   ended July 31

 

Net income

2005

2004

%

Personal and Commercial

119

96

+ 24

Wealth Management

30

22

+ 36

Financial Markets

59

50

+ 18

Other

(1)

           (1)

     

Total

207

        167

+ 24

Earnings per share

$1.20

$0.95

+ 26

Return on common shareholders’ equity

19.6%

17.2%

 

 

(millions of dollars)

For the nine months
ended July 31

 

Net income

2005

2004

%

Personal and Commercial

  341

294

+ 16

Wealth Management

88

77

+ 14

Financial Markets

200

182

+ 10

Other

19

(20)

 

Total

648

533

+ 22

Earnings per share

$3.76

$2.99

+ 26

Return on common shareholders’ equity

21.1%

18.4%

 

MONTREAL, August 25, 2005 – National Bank reported net income of $207 million for the third quarter ended July 31, 2005, compared to $167 million for the corresponding quarter of 2004, for an increase of 24%. Earnings per share for the quarter totalled $1.20, up 26% from $0.95 per share for the third quarter of 2004. Return on common shareholders’ equity was 19.6% for the quarter versus 17.2% for the same period a year earlier.

All segments posted substantial increases in net income for the third quarter. Higher volumes of personal and business loans as well as retail brokerage and private investment management activities contributed to the growth in revenues. Moreover, credit quality held steady which enabled the provision for credit losses to be cut by half, especially in the Financial Markets segment.

“Our third-quarter results confirm that the Bank is capable of delivering consistently solid growth,” declared Réal Raymond, President and Chief Executive Officer.

“Once again, we capitalized on our strategy to enhance our core business through various initiatives aimed at improving customer satisfaction while continuing to invest in the Bank’s internal growth and keeping a tight rein on operating expenses.”

For the nine months ended July 31, 2005, the Bank recorded net income of $648 million as against $533 million for the corresponding period of 2004, for growth of 22%. At $3.76, earnings per share for the first nine months of fiscal 2005 were up 26% from $2.99 for the year-earlier period. Return on common shareholders’ equity was 21.1% for the period compared to 18.4% for the first nine months of 2004.

Total revenues for the quarter amounted to $889 million in comparison to $858 million for the third quarter of 2004, with much of the increase generated by the Personal and Commercial and Wealth Management segments.

Operating expenses for the quarter were $616 million versus $586 million for the corresponding quarter of 2004. The $30 million increase was primarily attributable to variable compensation. Two of the three operating segments improved their efficiency ratio. Personal and Commercial recorded a ratio of 61.0% for the third quarter of 2005 compared to 63.3% for the yearearlier period. At Wealth Management, the efficiency ratio improved from 79.1% for the third quarter of 2004 to 74.6%, as this segment benefits from leverage when revenues increase. Lastly, the efficiency ratio for the Financial Markets segment was 60.7% as against 57.9% for the corresponding quarter of 2004 owing to a change in revenue mix.

The provision for credit losses amounted to $15 million for the quarter versus $31 million for the third quarter of 2004. The decline was mainly due to the Financial Markets segment.

The Personal and Commercial segment generated net income of $119 million for the quarter, up 24% from $96 million for the same period one year earlier. This gain resulted from a 7% increase in revenues versus just 3% growth in expenses, combined with an almost 20% reduction in the provision for credit losses, particularly business loans. The jump in revenues was due to growth of more than 10% in personal loans and close to 5% in business loans.

Net income for the Wealth Management segment reached $30 million for the third quarter of 2005 for an increase of 36% compared to $22 million for the corresponding quarter a year earlier. Revenues rose by 17%, fuelled by brokerage activities and private investment management which continued to progress versus the third quarter of 2004. Operating expenses, for their part, rose more slowly, increasing 10%.

Net income for the Financial Markets segment increased to $59 million for the third quarter of 2005 from $50 million for the same period of 2004, or 18%, mainly due to lower credit losses.

As at July 31, 2005, gross impaired loans amounted to $261 million, down $127 million or 33% from the beginning of the fiscal year. All business loan portfolios contributed to the decrease. The ratio of gross impaired loans to total adjusted capital and allowances was a mere 7.0%. Specific and general allowances exceeded gross impaired loans by $219 million as at July 31, 2005, compared to $190 million as at October 31, 2004. The general allowance stood at $333 million, compared to $350 million as at October 31, 2004.

Tier 1 and total capital ratios were 9.2% and 12.1%, respectively, as at July 31, 2005 versus 9.6% and 13.0% as at October 31, 2004. During the first quarter of 2005, the Bank issued $350 million of subordinated debentures and subsequently redeemed the same amount of debentures in the third quarter. During the second quarter, the Bank issued $200 million of First Preferred Shares Series 16. The Bank also ceased to take into account First Preferred Shares Series 13 totalling $175 million for capital ratio purposes. These two items had a negligible impact on capital ratios.

As at July 31, 2005, the Bank had repurchased 4.2 million common shares under its normal course issuer bid to repurchase up to 8.4 million shares commenced on January 13, 2005. In addition, risk-weighted assets rose by close to $5 billion or 12%, chiefly because of higher loan volumes.

“I would like to thank the Bank’s employees for having contributed to these excellent results,” stated Mr. Raymond. “We will continue in this direction with a view to building solid and lasting foundations from which to pursue our growth.”

 

Objectives

Results
Q3 2005

Results
Nine months
2005

Growth in earnings per share    

5% - 10%

26%

26%

Return on common shareholders’ equity

16% - 18%

19.6%

21.1%

Tier 1 capital ratio

More than 8.5%

9.2%

9.2%

Dividend payout ratio

35% - 45%

34%

34%

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS

August 25, 2005 – The following text presents Management’s discussion and analysis of the Bank’s financial condition and operating results. This analysis was prepared in accordance with the requirements set out in Regulation 51-102 respecting Continuous Disclosure Obligations of the Canadian Securities Administrators and is based on the unaudited interim consolidated financial statements for the third quarter and the nine-month period ended July 31, 2005. Additional information about National Bank of Canada, including the Annual Information Form, can be obtained from the SEDAR website at www.sedar.com and the Bank’s website at www.nbc.ca.

Critical Accounting Estimates

A summary of the significant accounting policies used by the Bank is presented in Note 1 and Note 2 to the audited consolidated financial statements as at October 31, 2004 on pages 90 to 97 of the 2004 Annual Report.

Page 56 of the 2004 Annual Report presents explanations of certain accounting policies that are considered critical because they are important to the presentation of the Bank’s financial condition and operating results, and require difficult, subjective and complex judgments and estimates because they relate to matters that are inherently uncertain. We invite the reader to refer to the Annual Report for these explanations.

Changes in Accounting Policies

On November 1, 2004, the Bank adopted the following accounting standards:

Variable Interest Entities
On November 1, 2004, the Bank adopted Accounting Guideline No.15 “Consolidation of Variable Interest Entities” (AcG-15) issued by the Canadian Institute of Chartered Accountants (CICA). This Guideline is similar to new FASB Interpretation No. 46 (FIN 46R) of the same name and provides guidance on the application of the standards set out in CICA Handbook Section 1590 “Subsidiaries” for certain entities defined as variable interest entities (“VIEs”).

VIEs are entities in which equity investors do not have controlling financial interest or the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties. AcG-15 requires the consolidation of a VIE by its primary beneficiary, i.e., the party that receives the majority of the expected residual returns and/or absorbs the majority of the entity’s expected losses. The application of the provisions of AcG-15 on November 1, 2004 resulted in the consolidation of certain mutual funds in which the Bank had a significant investment and the consolidation of the VIE that leases the Bank’s head office building. The impact of this standard as at November 1, 2004 was an increase in “Premises and equipment” of $84 million, “Securities” of $54 million, “Other assets” of $3 million, “Other liabilities” of $90 million, “Non-controlling interest” of $45 million and “Retained earnings” of $6 million. Prior-period consolidated financial statements have not been restated for this change.

Investment Companies
On November 1, 2004, the Bank adopted Accounting Guideline No. 18 “Investment Companies” published in January 2004 by the CICA. Under this Guideline, investment companies are required to account for all investments at fair value, including investments that would otherwise be consolidated or accounted for using the equity method. The Guideline sets out the criteria for determining whether a company is an investment company and also provides guidance on the circumstances in which the parent company of, or equity method investor in, an investment company should account for the investment company’s investments at fair value. The impact of this new Guideline on the consolidated financial statements for the nine-month period ended July 31, 2005 is negligible.

Future Changes in Accounting Policies

Financial Instruments – Recognition and Measurement, Hedges and Comprehensive Income
In January 2005, the CICA issued three new accounting standards: “Financial Instruments – Recognition and Measurement,” “Hedges” and “Comprehensive Income.” These standards provide guidance on the recognition and measurement of financial assets, financial liabilities and non-financial derivatives. They also provide guidance on the classification of financial instruments and standards on hedge accounting (see Note 3 to the unaudited interim consolidated financial statements).

These new standards will apply to the Bank effective November 1, 2006. The impact of implementing these new standards on the Bank’s consolidated financial statements cannot yet be determined as it is dependent on the Bank's unsettled positions and hedging strategies and on market volatility at the time of transition.

Analysis of Results

Operating Results
National Bank reported net income of $207 million for the third quarter ended July 31, 2005, compared to $167 million for the corresponding quarter of 2004, for an increase of 24%. Earnings per share for the quarter totalled $1.20, up 26% from $0.95 per share for the third quarter of 2004. Return on common shareholders’ equity was 19.6% for the quarter versus 17.2% for the same period a year earlier.

For the nine months ended July 31, 2005, the Bank recorded net income of $648 million as against $533 million for the corresponding period of 2004, for growth of 22%. At $3.76, earnings per share for the first nine months of fiscal 2005 were up 26% from $2.99 for the year-earlier period. Return on common shareholders’ equity was 21.1% for the period compared to 18.4% for the first nine months of 2004.

Results by Segment

Personal and Commercial
Net income for the Personal and Commercial segment totaled $119 million for the third quarter of 2005, up $23 million or 24% from the corresponding quarter of 2004. This performance was due to strong growth in personal and business loan volumes as well as insurance, foreign exchange and credit card revenues, while credit losses declined, especially in the Commercial subsegment.

Net interest income for the quarter was $330 million, up 5% from the $314 million recorded for the same period in 2004. The increase in net interest income was chiefly attributable to greater volumes of personal and business loans, which expanded by $3.7 billion or 9%. However, this increase in volume was offset by the narrowing of the spread by 11 basis points in the third quarter of 2005, compared to the corresponding quarter of 2004. The spread narrowed because of growth in less risky loans, for which the interest spread is narrower.

Other income for the quarter totalled $196 million, up $17 million or 9% from the third quarter of 2004. Insurance revenues increased by $4 million, foreign exchange revenues by $3 million, and credit card revenues by $2 million.

Operating expenses were $321 million for the quarter, compared to $312 million for the same period of 2004, an increase of $9 million or 3%. Investments to improve the technological infrastructure accounted for most of the increase. Nevertheless, the efficiency ratio improved to 61.0% for the third quarter of 2005, compared to 63.3% for the same period in 2004.

For the first nine months of fiscal 2005, net income for the Personal and Commercial segment was $341 million, a 16% increase over the $294 million recorded for the corresponding period of 2004. Revenues for the period rose by 5% due to increased volumes with both retail and commercial clients, higher commissions on business loans, and insurance, foreign exchange and credit card revenues. Although operating expenses rose 3%, the increase was kept below that of revenues. Credit losses were down by almost 20% to $79 million for the first nine months of fiscal 2005.

Wealth Management
Net income for the Wealth Management segment amounted to $30 million for the third quarter of 2005, up 36% from the $22 million posted for the corresponding quarter of 2004.

Total revenues for the segment were $201 million for the quarter, up 17% from the third quarter of 2004. As in previous quarters, this growth was generated by brokerage and private investment management activities.

Operating expenses were $150 million for the quarter, compared to $136 million for the year-earlier period, for an increase of 10%, two thirds of which were due to variable compensation. The efficiency ratio improved to 74.6% for the quarter from 79.1% for the third quarter of 2004.

For the first nine months of 2005, net income for the Wealth Management segment amounted to $88 million, compared to $77 million for the same period of 2004, an increase of 14%. Revenues were up 7% to $601 million, while the efficiency ratio improved to 76.5% for the period, compared to 78.2% for the nine months ended July 31, 2004.

Financial Markets
Net income for the Financial Markets segment totalled $59 million for the third quarter of 2005, an increase of 18% over the corresponding period in 2004. The improvement was attributable to the absence of a provision for credit losses this quarter, while a provision of $12 million had been recorded for the corresponding period a year earlier.

Total revenues for the segment amounted to $229 million for the third quarter of 2005, compared to $221 million for the year-earlier period. Corporate and Investment Banking revenues, which had been high in the third quarter of 2004, and the unfavourable variance due to credit derivatives being recorded at fair market value, were offset by trading revenues in the third quarter of 2005.

Trading Revenues
(millions of dollars)

Q3
2005

Q3
2004

Nine months
2005

Nine months
2004

Financial Markets

 

 

 

 

Interest rate

11

12

41

46

Equities

86

  31

200

131

Commodities and foreign exchange

10

9

19

22

 

107

52

260

199

Other segments

(1)

1

3

5

Total

106

53

263

204

Breakdown by Income Statement line item

 

 

 

 

Net interest income

(26)

40

30

(23)

Other income

94

2

180

211

Taxable equivalent(1)

38

11

53

16

Total

106

53

263

204

(1) Taxable equivalent basis is a calculation method that consists in grossing up certain tax-exempt income by the amount of income tax that otherwise would have been payable.  The use of the taxable equivalent basis is not in accordance with generally accepted accounting principles (GAAP).  Securities regulators require that companies caution readers that measures adjusted on a basis other than GAAP do not have standardized meanings under GAAP and may not be comparable to similar measures used by other companies.  Please refer to Note 10 to the unaudited interim consolidated financial statements for particulars on the taxable equivalent adjustment to segment results.

Operating expenses for the Financial Markets segment were $139 million for the quarter, compared to $128 million for the third quarter of 2004. Higher variable compensation accounted for most of the total increase in operating expenses.

For the first nine months of 2005, net income for the segment was $200 million, a 10% increase over the same period of 2004, because of substantially lower credit losses.

Other
The net loss for the “Other” heading of segment results was $1 million for the third quarter of 2005, or the same level as the corresponding period of 2004. For the first nine months of fiscal 2005, net income for the “Other” heading of segment results was $19 million as against a net loss of $20 million for the year-earlier period. The variance was chiefly attributable to the gain on the disposal of investments in financial institutions in South America.

Consolidated Results

Total Revenues
Total revenues for the third quarter of 2005 amounted to $889 million, up 4% compared to the $858 million recorded in the corresponding quarter of 2004.

Net interest income was $306 million for the quarter as against $384 million posted in the third quarter of 2004. The decrease was attributable to the $78 million decline in net interest income for the Financial Markets segment, which must be analyzed in conjunction with the trading revenues recorded in other income. Net interest income for Personal and Commercial rose $16 million or 5% to $330 million for the third quarter of 2005, because of higher volumes of personal and business loans, which were partially offset by a narrowing of the spread.

Other income for the third quarter totalled $583 million as against $474 million for the corresponding quarter of 2004. The increase, stemming primarily from trading activities, must be analyzed by taking into consideration the decrease in net interest income for the Financial Markets segment.

The portion of trading revenues recorded as other income rose $92 million from the third quarter of 2004. However, if net interest income related to trading activities is included, total trading revenues for the quarter were up $53 million.

For the quarter, the Bank recorded a $7 million loss under investment account securities compared to a $12 million gain for the year-earlier period. The mark-to-market of credit default swaps accounted for the loss.

Financial market fees totalled $158 million for the quarter, up $6 million over the corresponding period of 2004. Although fees from retail brokerage and institutional brokerage activities rose by $14 million and $11 million respectively, they were offset by a $20 million decline in fees at Corporate and Investment Banking, which had been especially active in the third quarter of 2004.

Credit operations contributed to the solid growth in other income, specifically, the $4 million or 31% increase in credit card revenues to $17 million for the third quarter of 2005, and growth of $6 million, or 8%, in lending fees and revenues from acceptances and letters of credit and guarantee to $82 million.

Trust service and mutual fund fees for the quarter grew $12 million or 19% to $74 million, attributable to private investment management and the National Bank Financial correspondent network.

For the nine-month period ended July 31, 2005, total revenues amounted to $2,772 million, for an increase of $119 million or 4.5% compared to the $2,653 million recorded for the year-earlier period. More than 55% of the increase was attributable to Personal and Commercial, while Wealth Management accounted for onethird of this growth.

Operating Expenses
Operating expenses for the third quarter of 2005 were $616 million compared to $586 million for the corresponding period of 2004, an increase of 5%. The increase stemmed chiefly from salaries and staff benefits, which rose $30 million to $355 million, representing 58% of operating expenses. Two-thirds of the increase were attributable to variable compensation for retail brokerage activities and financial market trading.

For the first nine months of fiscal 2005, operating expenses were $1,853 million, up 5% versus $1,765 million for the corresponding period of 2004. More than 70% of the increase was attributable to compensation, chiefly variable compensation and staff benefits, with the remainder owing primarily to information technology.

Income Taxes
Income taxes for the third quarter of 2005 totalled $46 million, representing an effective tax rate of 17.8%, compared to $68 million and an effective tax rate of 28.2% for the year-earlier period, due to income tax reductions in certain jurisdictions and changes of geographic mix of revenues from financial market activities.

The effective tax rate for the nine-month period ended July 31, 2005 was 24.7% as against 30.4% for the corresponding period of 2004.

Cash Flows

Due to the nature of the Bank’s business, most of its revenues and expenses are cash items. Moreover, significant cash flow movement can be observed, especially in trading activities, which impacts several assets and liabilities such as trading account securities, securities sold short or securities sold under repurchase agreements.

For the third quarter of 2005, cash and cash equivalents rose $2.7 billion compared to a decrease of $2.5 billion for the third quarter of 2004. As at July 31, 2005, cash and cash equivalents totalled $12.0 billion versus $7.0 billion a year earlier.

Operating activities required cash of $1.6 billion principally because of the increase in trading account securities. For the corresponding quarter of 2004, operating activities required $1.5 billion.

Financing activities generated cash flows of $8.2 billion due to an increase in securities sold short and securities sold under repurchase agreements. For the third quarter of 2004, cash flows from financing activities were negligible.

Lastly, investing activities in the third quarter of 2005 required $3.8 billion in cash owing to the $2.3 billion increase in loans and the $1.4 billion increase in securities purchased under reverse repurchase agreements. For the corresponding period of 2004, investing activities required $1.2 billion mainly because of higher loan volumes.

Risk Management

Credit Risk
The Bank recorded a $15 million provision for credit losses for the third quarter compared to $31 million for the corresponding quarter of 2004. Three-quarters of the reduction were attributable to corporate financing activities in the Financial Markets segment.

Credit losses in the first nine months of fiscal 2005 amounted to $33 million as against $94 million for the same period a year earlier. The drop stemmed from commercial and corporate lending activities.

As at July 31, 2005, the allowance for credit losses exceeded impaired loans by $219 million, compared to $190 million as at October 31, 2004. The $29 million improvement was attributable to all segments that offer business loans. The general allowance for credit losses stood at $333 million at the end of the quarter versus $350 million as at October 31, 2004.

The ratio of gross private impaired loans to total adjusted capital and allowances was excellent at 7.0% as at July 31, 2005 versus 10.9% as at October 31, 2004.

Market Risk – Trading Activities
The Value-at-Risk (VaR) simulation model is one of the main tools used to manage market risk in trading activities. The VaR measure is based on a 99% confidence level, which is an estimate of the maximum potential trading loss in 99 out of 100 days, which means that actual losses will probably exceed VaR on only one day out of 100. The computerized VaR calculation model is based on two years of historical data. Market risk management is discussed in more detail on page 63 of the 2004 Annual Report.

The table below entitled “Trading Activities” illustrates the allocation of market risk by type of risk: interest rate, foreign exchange, equity price and commodity.

Trading Activities (1)
(millions of dollars)

Global VaR by risk category

For the quarter ended
July 31, 2005

For the quarter ended
April 30, 2005

 

Period end

High

Average

Low

Period end

High

Average

Low

Interest rate

(6.1)

(6.7)

(4.7)

(2.8)

(3.9)

(4.1)

(2.9)

(1.8)

Foreign exchange

(1.7)

(2.2)

(1.3)

(0.5)

(1.2)

(2.6)

(1.1)

(0.4)

Equity

(3.8)

(4.7)

(3.5)

(2.4)

(2.6)

(4.8)

(3.1)

(2.3)

Commodity

(0.8)

(0.9)

(0.7)

(0.6)

(0.8)

(0.9)

(0.6)

(0.4)

Correlation effect (2)

5.5

6.5

4.4

2.3

4.8

6.1

3.6

2.0

Global VaR

(6.9)

(8.0)

(5.8)

(4.0)

(3.7)

(6.3)

(4.1)

(2.9)

(1) Amounts are presented on a pre-tax basis and represent one-day VaR.
(2) The correlation effect is the result of the diversification of types of risk.

Balance Sheet

As at July 31, 2005, the Bank’s assets stood at $110.6 billion compared to $88.7 billion as at October 31, 2004. Loans and acceptances were up $4.1 billion. Moreover, cash resources, securities and securities purchased under reverse repurchase agreements rose $16.7 billion. The following table presents the main portfolios.

Average monthly volumes
(millions of dollars)

July
2005

October
2004

July
2004

Loans and acceptances*

 

 

 

Residential mortgages

20,419

19,554

19,228

Consumer loans

7,832

6,491

6,119

Credit card receivables

1,680

1,589

1,543

SME loans

15,169

14,354

14,372

Corporate loans

2,892

2,922

3,238

 

47,992

44,910

44,500

Deposits

 

 

 

Personal (balance)

25,476

24,008

24,252

Off-balance sheet personal savings (balance)

63,776

57,207

56,994

Business

11,250

10,668

10,825

*including securitized assets

As at July 31, 2005, residential mortgage loans amounted to $20.4 billion, up $865 million from October 31, 2004 and $1.2 billion or 6% higher compared to July 31, 2004. At $7.8 billion, the volume of consumer loans has increased 21% since the beginning of the fiscal year. Consumer loans were up $1.7 billion or 28% from July 31, 2004, with approximately 40% of this strong growth attributable to volumes from partnerships. Credit card receivables increased 9% year-over-year to reach $1.7 billion as at July 31, 2005. SME loans and acceptances were $15.2 billion at the end of the third quarter as compared to $14.4 billion at the end of fiscal 2004, an increase of close to 6%. Corporate loans have remained relatively stable since the start of the fiscal year.

Personal deposits stood at $25.5 billion as at July 31, 2005, up 1.5 billion from $24.0 billion as at October 31, 2004. The increase stems from deposits distributed by Altamira. Off-balance sheet personal savings administered by the Bank as at July 31, 2005 totalled $63.8 billion, an increase of $6.6 billion or 11% since the end of the previous fiscal year. The increase was primarily attributable to savings administered by the brokerage subsidiaries.

Capital
Tier 1 and total capital ratios, according to the rules of the Bank for International Settlements, were 9.2% and 12.1%, respectively, as at July 31, 2005, compared to 9.6% and 13.0% as at October 31, 2004.

During the first quarter, the Bank issued $350 million of subordinated debentures and subsequently redeemed the same amount in the third quarter of 2005.

On March 15, 2005, the Bank issued 8,000,000 Non-Cumulative Fixed Rate First Preferred Shares Series 16 to take advantage of the current market conditions which allowed the Bank to issue the shares at a rate considerably lower than the 6.15% fixed rate that would likely have been the rate at which dividends would have been paid on the 7,000,000 Non-Cumulative First Preferred Shares Series 13 after August 15, 2005. The Bank ceased to take into account the Non-Cumulative First Preferred Shares Series 13 as Tier 1 capital for Capital Adequacy purpose effective March 15, 2005, date at which the Non-Cumulative Fixed Rate First Preferred Shares Series 16 have been issued. The Bank has received approval to redeem the Non-Cumulative First Preferred Shares Series 13 on August 15, 2005.

During the third quarter of fiscal 2005, the Bank repurchased 1.4 million common shares for a total of $75 million, as part of a normal course issuer bid to repurchase up to 8.4 million shares commenced on January 13, 2005. Since the start of fiscal 2005, the Bank has repurchased 4.2 million common shares for a total of $224 million.

In addition, risk-weighted assets rose by close to $5 billion or 12%, chiefly because of higher loan volumes.

Dividends
At its meeting on August 25, 2005, the Board of Directors declared regular dividends on the various classes and series of preferred shares as well as a dividend of 44 cents per common share payable on November 1, 2005 to shareholders of record on September 22, 2005.                                                  

Caution regarding forward-looking statements
From time to time, National Bank of Canada makes written and oral forward-looking statements, included in this quarterly report, in other filings with Canadian regulators or the U.S. Securities and Exchange Commission, in reports to shareholders, in press releases and in other communications.  All such statements are made pursuant to the “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements with respect to the economy, market changes, the achievement of strategic objectives, certain risks as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. These forward-looking statements are typically identified by the words “may,” “could,” “should,” “would,” “suspect,” “outlook,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and words and expressions of similar import.

By their very nature, such forward-looking statements require us to make assumptions and involve inherent risks and uncertainties, both general and specific. There is significant risk that express or implied projections contained in such statements will not materialize or will not be accurate. A number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.  Such differences may be caused by factors, many of which are beyond the Bank’s control, which include, but are not limited to, changes in Canadian and/or global economic and financial conditions (particularly fluctuations in interest rates, currencies and other financial instruments), liquidity, market trends, regulatory developments and competition in geographic areas where the Bank operates, technological changes, consolidation in the Canadian financial services sector, the possible impact on our businesses of international conflicts and other developments including those relating to the war on terrorism and the Bank’s anticipation of and success in managing the risks implied by the foregoing.

The Bank cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on the Bank's forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. The Bank therefore cautions readers not to place undue reliance on these forward-looking statements. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Bank.

Information for Shareholders and Investors

Investor Relations
Financial analysts and investors who want to obtain financial information on the Bank are asked to contact the Investor Relations Department.
600 de La Gauchetière West, 7th Floor
Montreal, Quebec  H3B 4L2
Telephone: (514) 394-0296
Fax: (514) 394-6196
E-mail: investorrelations@nbc.ca
Website: www.nbc.ca/investorrelations

Public Relations
600 de La Gauchetière West, 10th Floor
Montreal, Quebec  H3B 4L2
Telephone: (514) 394-8644
Fax: (514) 394-6258

Website: www.nbc.ca
General information: telnat@nbc.ca

Next quarterly report publication date for fiscal 2004-2005
Fourth quarter         December 8, 2005

DISCLOSURE OF 3rd QUARTER 2005 RESULTS

Conference Call:
·  A conference call for analysts and institutional investors will be held on August 25, 2005 at 1:30 EDT.
·  Access by telephone in listen only mode is: (416) 340-2216 or 1-866-898-9626
·  A recording of the conference call can be heard until September 1, 2005 by calling (416) 695-5800 or 1-800-408-3053.  The access code is 3159782.

Webcast:
·  The conference call will be webcast live at www.nbc.ca/investorrelations.
·  A recording of the webcast will also be available on the Internet after the call.

Financial Documents
·  The quarterly financial statements are available at all times on National Bank’s website at www.nbc.ca/investorrelations.
·  The Report to Shareholders, Supplementary Financial Information and a slide presentation will be available on the Investor Relations page of National Bank’s website shortly before the start of the conference call.

Transfer Agent and Registrar
For information about stock transfers, address changes, dividends, lost stock certificates, tax forms and estate transfers, shareholders are requested to contact the Transfer Agent, National Bank Trust Inc., at the address and telephone numbers below.

National Bank Trust Inc.
Share Ownership Management
1100 University, 9th Floor
Montreal, Quebec  H3B 2G7
Telephone: (514) 871-7171
1-800-341-1419
Fax: (514) 871-7442
E-mail: clientele@tbn.bnc.ca

Direct Deposit Service for Dividends
Shareholders may have their dividend payments deposited directly via electronic funds transfer to an account at any financial institution that is a member of the Canadian Payments Association. To do so, simply contact the Transfer Agent, National Bank Trust Inc., in writing.

Dividend Reinvestment Plan
National Bank offers holders of its common or preferred shares a Dividend Reinvestment and Share Purchase Plan through which they can invest in shares without paying any commissions or administration fees. Participants may reinvest all cash dividends paid on their shares held or make optional cash payments of at least $500 per payment, to a maximum of $5,000 per quarter, to purchase shares. For more information, please contact the Registrar, National Bank Trust Inc., at 1-800-341-1419 or (514) 871-7171.

About the 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 close to $110 billion in assets and, together with its subsidiaries, employs 17,049 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.

For information:

Pierre Fitzgibbon
Senior Vice-President
Finance, Technology and Corporate Affairs
(514) 394-8610

Denis Dubé
Director, Public Relations
(514) 394-8644

Third Quarter 2005

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