UPDATE 2-Nat'l Bank of Canada profit jumps, helped by financial markets

Wed Aug 27, 2014 10:25am EDT

(Adds analyst comment, stock reaction, further detail)

By Jeffrey Hodgson

TORONTO Aug 27 (Reuters) - National Bank of Canada, the country's sixth-largest lender, reported a stronger-than-expected profit on Wednesday, helped by a sharp jump in earnings at its wealth management and financial markets arms.

The Montreal-based bank said its net income rose to C$441 million ($404.59 million), or C$1.24 per share, in the third quarter ended July 31 from C$402 million, or C$1.16 a share, a year earlier.

Excluding special items, earnings were C$1.20 a share. Analysts had expected C$1.11.

The lender's shares rose 2.4 percent to C$50.57 in early trade on the Toronto Stock Exchange, making it the strongest performing stock among Canada's largest banks.

National said net income at its financial markets arm rose 21 percent to C$187 million, as revenue jumped 17 percent on increases in trading activity, financial market fees and banking services.

"The quarter was actually quite strong. Not surprisingly, after what we saw from Royal (Bank of Canada), capital markets did beat original expectations (with) very strong trading revenues across the board," said John Aiken, an analyst with Barclays Capital.

"Also, National participated in the good advisory quarter. We saw a lift in M&A (merger and acquisition) activity and issuance, and National benefited."

Royal Bank of Canada also reported stronger-than-expected earnings last week, driven by strong results from its wealth management and capital markets divisions.

The investment dealer arms of the Canadian banks have benefited as Canadian and U.S. equity markets hit record highs this year, spurring more financing and trading activity.

As with several of its Canadian banking peers, Aiken rates National's stock "equal weight." He said this reflects a broader concern about the potential for slowing domestic lending growth.

National said profit from personal and commercial banking, its biggest division, rose to C$190 million, up 6 percent from a year earlier. The bank said personal lending rose 7 percent, with the strongest increases coming from consumer loans and mortgages.

Net income at its wealth management arm rose 31 percent to C$64 million, helped by the bank's acquisition of TD's institutional services business.

(1 US dollar = 1.0900 Canadian dollar) (Editing by Chizu Nomiyama and Jonathan Oatis)

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