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Summary
- National Bank of Canada’s total revenue up 7 per cent year-over-year for fiscal 2020.
- The lender’s acquisition of consumer finance investment company Credigy has improved its diluted earnings per share by C$0.07.
- The Royal Bank of Canada’s capital markets division recorded a net income of C$840 million in Q4 FY20, a surge of 44 per cent YoY.
It’s the fourth-quarter earnings season for the big banks of Canada. A day after the Bank of Montreal (TSX:BMO) and the Bank of Nova Scotia’s (TSX:BNS) announced their financial earnings, the National Bank of Canada (TSX:NA) and the Royal Bank of Canada (TSX:RY) are out with their earnings reports on Wednesday.
Reeling from the pandemic impact and massive credit loss provisions, Montreal-based National Bank said its fourth-quarter profit slid to C$ 492 million, down 19 per cent from year-over-year. Canada’s largest bank RBC, on the other hand, posted one per cent YoY increase in Q4 income.
While the earnings beat most estimates, both the stocks plunged during early trade on Wednesday. At the time of filing this story (10:51 AM ET), the Royal Bank of Canada stocks were trading 0.67 per cent lower while National Bank of Canada stocks were down 1.144 per cent.
National Bank of Canada (TSX:NA)
Current Stock Price: C$ 72.59
In the fourth quarter of fiscal 2020, the National Bank of Canada registered a net income of C$492 million, as compared to C$604 million in Q4 FY19. The bank’s fourth-quarter diluted earnings-per-share is C$1.36, as compared to C$1.67 in Q4 FY19. The bank has expanded its provisions for credit losses amid coronavirus outbreaks to C$ 110 million in Q4 2020, up 24 per cent YoY.
However, the lender stated that its total revenues surged 7 per cent for fiscal 2020.
The bank announced a quarterly cash dividend of C$0.71 per stock for the ongoing quarter. The bluechip stock holds a current dividend yield of 3.868 per cent.
National Bank of Canada’s YTD chart (Source: EODHD/Others, Thomson Reuters)
National Bank of Canada recently acquired US-based consumer finance investment company Credigy Ltd. The firm operates in the acquisition and servicing of distressed assets and has completed more than 320 deals worth over US$ 16 billion since its inception in 2001.
The bank was a stakeholder in Credigy since 2006 and gradually increased its stake to 80 per cent. Following the 100 per cent stake acquisition, the bank's diluted earnings-per-share boosted by C$0.07.
National Bank of Canada President and CEO Louis Vachon stated that the bank is delighted with Credigy's performance since its initial investment and is expecting further growth after the acquisition.
The bluechip stock has mostly been trading flat this year, with a marginal 2 per cent year-to-date (YTD) growth. The scrips have increased by almost 14 per cent in the last six months.
Royal Bank of Canada (TSX:RY)
Current Stock Price: C$ 106.54
The Royal Bank of Canada reported a net income of C$11,437 million for the fiscal year 2020 (ending October 31, 2020), down 11 per cent year-over-year. The diluted earnings per share were C$7.82 for its fiscal year 2020.
However, net earnings in Q4 FY20 went up by one per cent to C$ 3.24 billion. The bank posted a net income of C$840 million from its Capital Markets division in Q4 FY20, a rise of 44 per cent year-over-year, led by higher revenue in global markets.
Royal Bank of Canada’s YTD Chart (Source: EODHD/Others, Thomson Reuters)
Royal Bank of Canada distributed quarterly cash dividend of C$1.08 in the latest quarter and currently yields 4.036 per cent.
Royal Bank’s stocks gained by nearly 4 per cent year-to-date. The lender stocks have increased by nearly 13 per cent in the last six months.
The company’s current market cap is approximately C$ 152.41 billion, and the debt-to-equity ratio is 0.13. Its price-to-earnings ratio is 18.70, and the price-to-book (P/B) ratio is 1.931, as per the TMX website.
Total provision for credit loss was C$ 427 million in Q4 FY20, down 37 per cent from the last quarter.
