Nichola Sainather

TORONTO, (Reuters) – The second quarter of the Canadian National Bank of Canada ended on Friday with a solid performance. It reported a stronger profit than expected on lower-than-expected provision for credit losses (PCL). That was due to continued growth in fees income and lending. However, higher expenses offset subdued margins.

In the three-months ended April 30, net income, excluding one-off items, was C$893million ($700.61million), or C$2.55, as compared to C$801million or C$2.25, one year ago. Analysts were expecting C$2.25 per Share.

All Canadian banks, except for one, posted higher-than-expected profits during the quarter. This was due to the fact that they reduced the allowances for loan loss set aside earlier in the pandemic.

The banks generally believe delinquencies and loan growth will continue despite acknowledging some declines in economic conditions. This is despite having a much more optimistic view than analysts and economists.

National Bank purchased C$3,000,000 of PCLs. Although this is down from last year, it was still a significant increase over releases for the three previous quarters. Analysts expected C$44 millions.

However, its strength in lending, especially 18% annual growth in business borrowing, enabled it to lift earnings by 11%, even after excluding tax and provisions.

This allowed revenues to grow 9.2% faster than expenses, which increased 7.8%. All banks have seen their costs rise, driven by increasing inflation and tight labor markets.

Wealth management earnings pre-tax and post-provisions rose 2% over a year prior, while financial markets increased 5% because of higher trading revenues. A decline in investment bank income was offset by record quarterly revenue a year back.

($1 = 1.2746 Canadian dollars)