The head of National Bank of Canada has a rosy outlook on his company's future as COVID-19 begins to subside, but chief executive Louis Vachon is still worried about variants that may emerge and the possibility of an overheating economy.
"The economy is reopening faster than expected, so we expect to see a good rebound in the discretionary economy later in 2021 and in 2022," he said told a conference call to discuss the bank's latest results.
However, Vachon said a new mutation of the virus could put a damper on his optimism and the economy and he also has an eye on a scenario where inflationary pressures start developing more in the economy.
If assets like cryptocurrencies heat up, Vachon said he's not worried because they aren't tied to the banking system, but if a wider spectrum of assets with links to the system are involved the bank would need to be a lot more careful because it creates a "greater concern."
Vachon made the comments as Montreal-based National Bank continued a trend set by the country's other big banks earlier this week and beat expectations as it reported a second-quarter profit of $801 million, more than double compared with a year ago at the start of the pandemic.
The profit amounted to $2.25 per diluted share for the quarter ended April 30, up from a profit of $379 million or $1.01 per share in the same quarter last year.
Vachon said he is seeing bright spots in the economy more than a year into the pandemic, which caused financial institutions to heap money into reserves to guard against customers defaulting on loans.
Provisions for credit losses — money the bank puts aside to account for bad loans — in the quarter fell to $5 million compared with $504 million in the same quarter last year, when the pandemic hit.
Revenue totalled nearly $2.2 billion, up from $2.0 billion in the same quarter a year ago.
Analysts on average had expected a profit of $2.00 per share, according to financial data firm Refinitiv.
Despite beating expectations, National Bank shares lost $2.73 or 2.8 per cent at $94.24 in afternoon trading on the Toronto Stock Exchange.
Bank of Nova Scotia will cap off the big bank earnings next week, when it reports its earnings on Tuesday.
This report by The Canadian Press was first published May 28, 2021.
Companies in this story: (TSX:NA)
Tara Deschamps, The Canadian Press
