May 26, 2018

The National Bank of Canada (NA)

The National Bank of Canada (NA) is the “little brother” of the “Big Six” Canadian banks.  Some analysts refuse to lump the bank into the same category as Toronto-Dominion Bank (TD), Royal Bank (RY), Bank of Montreal (BMO), the Bank of Nova Scotia (BNS) and the Canadian Imperial Bank of Commerce (CM).  While the National Bank does do substantial business within Canada, and has many of the hallmarks that the other Canadian banks have – such as a strong commitment to responsible, stable growth – it does standout from the other give banking giants in the Great White North.

 

The National Bank Financial Group (NA) was established in 1859 Montreal, Quebec (then known as Lower Canada), by several influential businessman who wanted to control their own finances.  Its head office remains in Montreal to this day.  The National Bank controls over 145 billion in assets, which is obviously considerable, but a decisive 6th largest when compared with the five international conglomerates mentioned above.  The Bank has over 18,000 employees, almost exclusively in Canada.  National Bank (NA) is the leading bank in Quebec, and has branches in almost every Canadian province.  While it does have an international influence, it is not very extensive.  This Canadian-centric focus differs sharply from the international expansion plans we have seen from the other major banks.

 

National Bank (NA) offers services in the fields of securities, insurance, wealth management, mutual funds, pension funds, and personal banking.  Their corporate organization consists of three primary business segments: Personal & Commercial, Wealth Management, and Financial Markets.  Overall, it is a very similar structure to the other banks.

 

The most recent large-scale news for the bank has been the large acquisition of the private Wellington West investment firm.  The new subsidiary had over $10-billion in assets under their umbrella and was focused primarily in the sectors of agriculture, mining and energy.  The firm employed 223 advisors at 50 branches across the country, and serviced 68,000 individual investors.  Since 2005, the company had an impressive record with an annual growth rate of 12% during some tough economic times.  National Bank (NA) purchased Wellington at a valuation of $333 million.  This acquisition fits in neatly with the company’s corporate profile of concentrating on its operations in Canada.  This is in stark contrast to the American acquisition of its competitors.

 

There some experts out there who feel that National Bank (NA) is actually the best bet out of the Canadian banks despite its relatively small market capitalization (nearly 13 billion).  A recent study by the Globe and Mail showed that National Bank has produced the largest dividend growth over the last 10 years at 11%.  This is an impressive record when one considers the economic turmoil of the past decade.  National Bank (NA) has a Price-to-Earnings ratio of 11.84 and is trading near its 52-week high at around $80-per share.  Its annual dividend of $2.84 represents a 3.60% yield.  While this is substantial, it is not as large as that of some of the other bank stocks out there.  How you feel about National Bank’s prospects relative to the other banks probably depends on if you believe the aggressive international expansions pursued by the other “Big Six” brethren will pay off, or cut into their existing profit margins.

 TSE:NA

 

NA Dividend Metrics

Ticker Name Dividend Yield Payout Ratio DEBT_TO_MKT_CAP Dividend Growth 5 years Dividend Growth 1 years
NA National Bank of Canada 3.33% 41.40% 3.01 6.82% 3.22%

 

 

 

Trackbacks

  1. […] founded in 1817 and now has over 11 million clients.  It is the smallest of the Big 5 (excluding National Bank).Divisions of the company include personal banking, commercial banking, wealth management, and […]

  2. […] of Canadian banks (CIBC, Royal Bank, Scotia Bank, Bank of Montreal, Toronto-Dominion Bank, and the National Bank of Canada) did not make this elite list due to the fact that they had to freeze their dividends during the […]

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