National Bank Q4 2008 pre announcement
Q4 2008 earnings per share should reach $1.36, excluding charges described below of approximately $158M after tax.
Reported Q4 2008 earnings per share are estimated at $0.37
Tier 1 capital ratio remains solid at 9.44%
National Bank of Canada (“National Bank”) announces today that it expects to report charges of approximately $158M after tax ($237M before tax) for the fourth quarter ending October 31, 2008. This amount includes a charge of $78M after tax ($117M before tax) related to asset-backed commercial paper (ABCP), a restructuring charge of $44M after tax ($66M before tax) related to the transformation plan announced in September and $36M after tax ($54M before tax) for a write-down of tangible assets.
For the fourth quarter of fiscal year 2008, reported earnings are expected to reach $70M or $0.37 per share. On an adjusted basis, earnings should be $1.36 per share or $228M, up 5% from the fourth quarter of 2007. For the fiscal year 2008, reported earnings are expected at $776M or $4.67 per share, a 45% increase from 2007. Adjusted earnings for the fiscal year 2008 are estimated at $947M or $5.75 per share, up $14M or $0.10 per share from the same period last year.
“Despite exceptionally difficult financial conditions on a global basis, we delivered better results in 2008” says Mr. Louis Vachon, President and CEO of National Bank. “The contribution from the Personal and Commercial business segment increased, the Wealth Management results remained stable and the performance of Financial Markets was very good given the difficult environment.”
The fourth quarter ABCP charge includes valuation adjustment, financial costs, hedging gain and professional fees. To date, write-downs related to ABCP represent a 32% valuation adjustment to the total notional position held by National Bank.
As of August 1st 2008, the Bank reclassified the ABCP of a carrying value of $119 million that was classified in Held for trading securities to Available for sale securities on the balance sheet. That reclassification had no impact in the fourth quarter of 2008. No other portfolios were reclassified in Available for sale securities.
In September, the Bank announced the implementation of an important transformation plan to align operations with client needs across all sectors, streamline processes, and improve efficiencies. “We simplified our organizational structure and that has affected our fourth quarter results. However, this initiative will enable us to reallocate resources to better serve our customers” adds Mr. Vachon.
The tangible assets write-down is mainly due to the decision of the Canadian Payment Association not to proceed further with the Truncation and Electronic Presentement Project. In addition, the Bank has decided to realign resources in order to optimize IT initiatives in line with the Group's global strategy.
National Bank Financial Group is currently preparing its fourth quarter and year-end results. The information provided is based on current estimates and is subject to change. Additional disclosures on the fourth quarter and year-end results will be provided on December 4, 2008.
Note on forward looking statement
From time to time, National Bank of Canada (the “Bank”) makes written and oral forward-looking statements in publications, in filings with Canadian regulators or the United States Securities and Exchange Commission, in annual reports, in press releases and in other communications. Such statements are made pursuant to Canadian securities regulators and the 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 (in particular, the Canadian and U.S. economies), market changes, the achievement of strategic priorities and objectives, future strategies and actions, the price of Bank shares, certain risks as well as statements with respect to our beliefs, plans, expectations, 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. In determining its expectation for economic growth, both broadly and in the financial services sector, the Bank primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies. Tax laws in the countries in which the Bank operates, primarily Canada and the United States, are material factors it considers when establishing its sustainable effective tax rate. 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, the management of credit, market and liquidity risks; the strength of the Canadian and United States economies and the economies of other countries in which the Bank conducts business; the impact of the movement of the Canadian dollar relative to other currencies, particularly the U.S. dollar; the effects of changes in monetary policy, including changes in interest rate policies of the Bank of Canada; the effects of competition in the markets in which the Bank operates; the impact of changes in the laws and regulations regulating financial services and enforcement thereof (including banking, insurance and securities); judicial judgments and legal proceedings; developments with respect to the restructuring proposal relating to asset-backed commercial paper (ABCP), liquidity in the ABCP market, credit spreads and rating of the restructured notes; the Bank’s ability to obtain accurate and complete information from or on behalf of its clients or counterparties; the Bank’s ability to successfully realign its organization, resources and processes; its ability to complete strategic acquisitions and integrate them successfully; changes in the accounting policies and methods the Bank uses to report its financial condition, including uncertainties associated with critical accounting assumptions and estimates; operational and infrastructure risks; other factors that may affect future results, including changes in trade policies, timely development of new products and services, changes in estimates relating to reserves, changes in tax laws, technological changes, unexpected changes in consumer spending and saving habits; natural disasters; the possible impact on the business from public health emergencies, conflicts, other international events and other developments, including those relating to the war on terrorism; and the Bank’s success in anticipating and managing the foregoing risks.
Additional information about these factors can be found under “Risk Management” and “Factors That Could Affect Future Results” in the 2007 Annual Report.
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 also cautions readers not to place undue reliance on these forward-looking statements. Moreover, these forward-looking statements may not be suitable for establishing strategic priorities and objectives, future strategies or actions, financial objectives and projections other than those mentioned above.
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. National Bank has close to $122 billion in assets and, together with its subsidiaries, employs 16,683 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.
Information (The telephone number provided below is for the exclusive use of journalists and other media representatives.):
Senior Manager – Public Relations
National Bank Financial Group