National Bank delivered stronger-than-expected fourth-quarter earnings and raised its dividend as Canadian banks continue to report results. The lender’s geographic focus on Quebec has helped limit its exposure to housing-market stress and consumer renewal risks, though tariff sensitivity remains an area to watch.
BNN Bloomberg spoke with Ernest Wong, head of research at Baskin Wealth Management, who said the bank’s capital markets and wealth management strength mirrors broader sector trends. He highlighted key areas analysts are monitoring, including integration progress and capital allocation plans.
Key Takeaways
- National Bank’s Quebec-focused footprint has limited exposure to housing renewal risks but increased sensitivity to tariff-related pressures.
- Capital markets and wealth management strength continue to offset sluggish consumer and commercial banking results.
- Analysts are watching integration progress at Canadian Western Bank, with major capital synergies expected next year.
- The Laurentian Bank portfolio deal is expected to be revenue accretive, offering scale and cross-selling opportunities.
- Canadian banks overall show resilient performance as strong markets and cost initiatives, including AI adoption, help balance economic softness.
Read the full transcript below:
ROGER: It’s pretty much bank week here in Canada. We’re getting more earnings results, with RBC and National reporting today. National topped earnings expectations in its fourth quarter and hiked its dividend. Let’s get more now from Ernest Wong, head of research at Baskin Wealth Management. Ernest, thanks as always for joining us.
ERNEST: Happy to be here.
ROGER: Let’s talk about some of the numbers. What did you see that you liked?
ERNEST: Going into the year for National Bank, compared to the other big Canadian banks, they’re more focused on Quebec. So they had a little bit less worry about the housing market and some of the renewal risks borrowers might be facing. But on the flip side, the concern for National is that Quebec’s economy is a little bit more focused on manufacturing, steel manufacturing and those kinds of things. So they would be a little bit more impacted by tariff-related risks to Canada. I think what we’re seeing in National’s earnings is similar to the rest of the Canadian banking sector. Capital markets and wealth management results are really driving the strong performance because of the increase in the stock markets this year, while the consumer and commercial banking segments are a little bit more sluggish but being offset by strength in other parts of the business.
ROGER: And how sluggish? Concerning or not?
ERNEST: I think things are fairly resilient. Despite the headlines you might be seeing about the Canadian economy, loan growth is still growing. The impact of lower interest rates is really helping consumers and helping prevent loan losses. I think the bigger story here is that in this weaker economy, consumers are flocking to larger banks with scale, such as National, which is one of the reasons I think they were able to do the acquisition of Laurentian that they announced yesterday.
ROGER: Are we getting any more details on that buyout?
ERNEST: I think it’s going to work out very well for National. Laurentian lacked the scale to fully service its customers. National will be able to come in, and they’re gaining a great deposit base. They’ll be able to upsell these customers to wealth management services that Laurentian was not able to provide. They expect it to be a very revenue-accretive deal for them.
ROGER: And with Canadian Western, how is that working out? What kind of results are we seeing from that?
ERNEST: The integration is ongoing. Last quarter there was a little bit of concern that as they were completing the integration process, they might lose some of the commercial customers they had. But it seems like there are no issues on that front. The bulk of the capital synergies, in terms of migrating the balance sheet to National’s methodology, will come next year. National is going to get a capital benefit from that, which gave them the confidence to raise their dividend by five per cent and commit to more dividend increases through 2027.
ROGER: Where does this leave National compared to the other big banks?
ERNEST: We’ve always liked National. It’s our largest banking position at Baskin Wealth. We think it’s a very well-run bank that has continually found ways to compete and grow its business without competing directly against the other banks, as they’ve done with Canadian Western Bank and with the Laurentian portfolio acquisition. We think they’ll continue to do this going forward.
ROGER: And where do you see the next way they might try to grow the bank? There don’t seem to be many other banks around that can be bought up at this point. What’s next for them?
ERNEST: Most of it is going to be organic growth. It’s about completing the portfolio they’ve added with Canadian Western Bank and building out the wealth management services and footprint in Western Canada.
ROGER: Overall, we’ve now seen the results from National, Royal Bank and Scotiabank. How is the big picture looking to you?
ERNEST: Loan losses across the sector are a little bit higher due to the weaker outlook for the Canadian economy. Offsetting that is the strong wealth management and capital markets performance. That really highlights the strength of the Canadian bank business model, where even if one side is weak, it’s offset by strength elsewhere. On the consumer side, we’ll likely continue to see fairly sluggish loan growth as housing prices remain under pressure, offset by lower rates hopefully reducing loan losses going forward.
ROGER: With everything we’ve seen and what we might see in 2026, is this enough to satisfy investors?
ERNEST: For the Canadian banks overall?
ROGER: Yes.
ERNEST: I think so. One thing about the Canadian banks is that they all have extremely strong balance sheets. Given their cautious outlook and maybe less reinvestment potential in the business going forward, we’re seeing large share repurchases and dividend increases. Another aspect we didn’t talk about is the potential for banks to use AI to lower their cost structure and improve margins.
ROGER: We’ll steal 30 seconds. Can you talk about that? Your thoughts on AI within the banks?
ERNEST: TD has talked about this and other banks have as well. There’s a lot of potential for using AI to improve efficiency and lower costs within their business, as well as updating the technical stack they have. For many Canadian banks, the technology platforms they were built on are quite old, so using AI to upgrade and make the business more efficient is a big opportunity.
ROGER: We’ll have to leave it there. Ernest, thanks as always for joining us.
ERNEST: Thank you.
ROGER: Ernest Wong is head of research at Baskin Wealth Management.
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This BNN Bloomberg summary and transcript of the Dec. 3, 2025 interview with Ernest Wong are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
