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01/11 03:31
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals raised revenue guidance for key products, with expectations of 14%-17% growth in net product revenues and a focus on operating margin expansion. The company plans over 10 product launches by 2030, indicating strong future growth potential. Positive developments in product pipelines and strategic capital allocation further support a positive outlook. The Q&A section highlighted robust strategies and growth drivers, with management addressing concerns effectively. Overall, the combination of strong guidance, strategic priorities, and effective management responses suggests a positive stock price movement.
Earnings Per Share (EPS) $2.82 for Q4 2025 and $11.28 for the year, reflecting a 9% growth year-over-year. This growth was supported by resilient credit performance and strong capital levels amid a complex macro backdrop.
Return on Equity (ROE) 15.3% for 2025, meeting medium-term financial objectives. This was supported by strong earnings power and disciplined capital deployment.
Dividend Payout Ratio 40.7% for 2025, supporting a 7% increase in the common share dividend. This reflects strong financial performance and capital levels.
Net Income (P&C Banking) $336 million in Q4 2025, impacted by a $62 million pretax impairment charge on intangible assets and higher impaired credit losses on the CWB portfolio. Excluding CWB, Q4 P&C revenues were up 5% year-over-year.
Personal Mortgages Grew 8% year-over-year in 2025, driven by continued momentum in originations.
Commercial Loan Book Grew 12% year-over-year in 2025, reflecting broad-based growth across industries and opportunities in insured residential real estate.
Net Income (Wealth Management) Grew 18% in Q4 2025 and 17% for the year, driven by strong organic growth and rising equity markets.
Assets Under Administration (AUA) Totaled close to $875 billion in 2025, reflecting strong client acquisition.
Net Income (Capital Markets) $1.7 billion for 2025, up 34% year-over-year, driven by strong corporate activity and exceptional market conditions.
Net Income (Credigy) $42 million in Q4 2025, with average assets up 8% year-over-year and 5% average asset growth for 2025.
Net Income (ABA Bank) Increased 8% year-over-year in Q4 2025, driven by balance sheet growth and a build in performing PCLs. Revenues were up 16%, with deposits up 19% and loans up 9%.
Revenues Grew 25% in 2025, with a 28% year-over-year increase in Q4. Excluding CWB, revenues increased 17% for the year and 18% in Q4.
Pre-Tax Pre-Provision (PTPP) Increased 32% in 2025 and 33% year-over-year in Q4. Excluding CWB, PTPP was up 23% for the year and 21% in Q4.
Net Interest Income (NII) Grew 3% sequentially in Q4 2025, driven by solid growth on both sides of the balance sheet.
Net Interest Margin (NIM) All-bank NIM (excluding trading) was 2.19% in Q4 2025, down 3 basis points from the prior quarter due to business mix.
Total Loans Reached $303 billion in Q4 2025, up 3% sequentially.
Total Deposits Totaled $318 billion in Q4 2025, up $15 billion or 5% sequentially, driven by higher demand deposits in wealth management and ABA as well as strong momentum in commercial banking deposits.
CET1 Ratio Ended 2025 at 13.75%, supported by capital generation of 35 basis points and solid RWA growth.
Provisions for Credit Losses (PCLs) Total PCLs were $244 million or 33 basis points in Q4 2025, up 5 basis points from the prior quarter. Impaired PCLs were 28 basis points for the full year, in line with guidance.
Acquisition of Canadian Western Bank (CWB): Completed the largest acquisition in the bank's history, integrating over 65,000 clients and rebranding all branches. Revenue synergies of $200-$250 million expected over the next 3 years.
Laurentian Bank Portfolio Acquisition: Acquired Laurentian Bank's retail, SME banking, and syndicated loan portfolios, aligning with growth and capital deployment strategies.
National Expansion: Increased national presence through acquisitions, aiming to grow and deploy capital to support Canada's economy.
Capital Markets Growth: Strong performance with $877 million in quarterly revenues and a record $1.7 billion in annual net income.
Operational Efficiencies: Realized cost and funding synergies of $116 million from CWB acquisition, expecting to achieve $270 million by fiscal 2026, a year ahead of schedule.
Technology and Compensation Costs: Higher expenses driven by technology and compensation, including a $62 million impairment of intangible assets.
Capital Deployment: Maintained a CET1 ratio of 13.75%, targeting EPS growth of 5%-10% and ROE of 15%-20% in the medium term.
Dividend and Share Buybacks: Increased quarterly dividend by 5% and continued share buybacks, repurchasing 2.1 million shares since September.
Geopolitical and geoeconomic situation: Trade tensions with the U.S. are causing job losses in certain sectors and a slowdown in the labor market. Inflation remains sticky, and the path of monetary policy and interest rates is uncertain.
CWB portfolio credit losses: Higher impaired credit losses were recorded on the CWB portfolio, impacting the P&C Banking segment.
Economic growth and unemployment: The Canadian economy is expected to grow slowly with elevated unemployment rates, which could impact consumer spending and the housing market.
ABA Bank credit performance: Impaired provisions increased due to new formations and model calibration, reflecting challenges in the local economy.
Integration of acquisitions: The integration of Canadian Western Bank and Laurentian Bank portfolios involves risks related to operational execution, client migration, and achieving targeted synergies.
Interest rate environment: Lower interest rates are expected to support consumer spending and the housing market, but uncertainties remain regarding their impact on net interest margins and profitability.
Commercial banking provisions: Provisions increased due to specific files, indicating potential risks in the commercial banking portfolio.
Global market normalization: Normalized trading contributions and fewer market dislocations in 2026 may reduce revenue growth in Global Markets.
Performing allowances for credit losses: The bank has been building allowances for 14 quarters, but further increases in delinquencies in retail and wholesale books are anticipated.
Economic and Market Outlook for 2026: The geopolitical and geoeconomic situation will continue to shape business confidence and investments. Trade tensions with the U.S. are causing job losses and a slowdown in the labor market. Inflation remains sticky, and the path of monetary policy and interest rates is uncertain. However, government measures such as tax cuts, investment in housing and infrastructure, and business investment incentives are expected to support consumer consumption and resilience.
Revenue Synergies from Canadian Western Bank (CWB) Acquisition: The bank expects to realize $200 million to $250 million in revenue synergies over the next three years. Cost and funding synergies are being realized ahead of schedule, with the full $270 million target expected to be achieved by the end of fiscal 2026, more than a year ahead of the initial plan.
Capital Deployment and CET1 Ratio: The bank plans to convert approximately two-thirds of the CWB loan book to the advanced method in late 2026, adding 50 to 75 basis points to the CET1 ratio. A CET1 ratio of around 13% is targeted by the end of 2027, representing an optimal capital level.
Earnings and ROE Targets for 2026 and 2027: For 2026, the bank is targeting EPS growth within the medium-term objective of 5% to 10% and an ROE of approximately 15%. By 2027, the bank aims for an ROE of 17% or higher, driven by synergies from the CWB acquisition, growth across all sectors, efficiency improvements, and capital returns to shareholders.
Loan Growth Projections for 2026: Personal mortgages are expected to grow in the mid-single-digit range, and commercial loans are projected to grow in the high single-digit range, with a gradual ramp-up in the CWB portfolio starting in the second half of the year.
Wealth Management and Capital Markets Outlook for 2026: Wealth Management will focus on client acquisition, with AUA currently at $875 billion. Capital Markets expects continued growth in Corporate and Investment Banking and steady opportunities in rates and credit business, equity structured products, and securities finance.
ABA Bank Loan Growth for 2026: Loan growth at ABA Bank is anticipated to remain at similar levels as 2025, with deposits up 19% and loans up 9% year-over-year.
Laurentian Bank Acquisition Impact: The acquisition of Laurentian Bank's retail and SME banking portfolios is expected to be accretive to adjusted EPS by 1.5% to 2% in the first year following closing. The transaction will reduce the CET1 ratio by 25 to 30 basis points but aligns with the bank's growth and capital deployment strategies.
Impaired PCLs and Credit Outlook for 2026: Impaired PCLs are expected to remain within the range of 25 to 35 basis points for the full year 2026. The bank anticipates slow but positive economic growth, steady unemployment rates, and support for consumer spending and the housing market from lower interest rates.
Dividend Payout Ratio: 40.7% in 2025
Dividend Increase: 7% increase in common share dividend in 2025
Quarterly Dividend Increase: 5% increase effective Q1 2026
Share Buybacks: Started in September 2025, repurchased 2.1 million shares, approximately 27% of the current program
Future Share Buybacks: Plan to continue repurchasing shares with flexibility to increase the size of the program
The earnings call reveals raised revenue guidance for key products, with expectations of 14%-17% growth in net product revenues and a focus on operating margin expansion. The company plans over 10 product launches by 2030, indicating strong future growth potential. Positive developments in product pipelines and strategic capital allocation further support a positive outlook. The Q&A section highlighted robust strategies and growth drivers, with management addressing concerns effectively. Overall, the combination of strong guidance, strategic priorities, and effective management responses suggests a positive stock price movement.
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