National Bank of Canada Earnings: Capital Markets Business Segment Trailed Larger Peers Again

Key Morningstar Metrics for National Bank of Canada

• Fair Value Estimate
  : C$164.00
• Morningstar Rating
  : ★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Low

What We Thought of National Bank of Canada’s Earnings

National Bank of Canada NA reported slightly disappointing third-quarter results, with shares falling by around a mid-single-digit percentage after the earnings release. Adjusted earnings per share came in at C$3.39, up 26% year over year.

Why it matters: Like last quarter, the bank’s capital markets business segment disappointed the market, with segment revenue down 3% and earnings down 9% sequentially. Within the segment, global markets revenue fell 4% sequentially, particularly underwhelming compared with larger peers that have reported results.

• While the third quarter is usually seasonally weaker for trading results at Canadian banks, Scotiabank and Bank of Montreal saw sequential trading revenue growth of 21% and 1%, respectively, driven by strong equities trading results.
• We are not too surprised by the bank’s capital markets business performance, as management guided potential near-term softness in client activity last quarter. In addition, its capital markets franchise’s scale and product capabilities trail its larger Canadian peers.

The bottom line: Following third-quarter results, we plan to raise our C$164 per share fair value estimate for narrow-moat National Bank by a low-to-mid-single-digit percentage. We continue to view the stock as overvalued.

• The valuation increase will be primarily driven by increased near-term wealth management and underwriting fee income and partially offset by higher compensation expenses.

Between the lines: Similar to peers that have reported this cycle, the bank did not indicate changes to its fiscal 2026 credit guidance amid the latest tariff announcements between the US and Canada. Its prior guidance was an impaired provision for credit losses ratio of 25 to 35 basis points.

• Compared with its larger peers, National Bank has less exposure to uninsured mortgages and unsecured personal lending, which carry higher credit risk, within its domestic loan portfolio.