National Bank of Canada (TSE:NA) Chief Executive Officer Laurent Ferreira told investors that Canada’s macroeconomic backdrop is marked by uncertainty in 2025, while outlining how the bank expects to reach its return-on-equity targets through a combination of capital actions, integration benefits from Canadian Western Bank (CWB), and organic growth initiatives.
Macro view: uncertainty, but “betting on Canada”
Ferreira said the 2025 environment has been shaped by uncertainty tied to a trade war, fragile labor markets, and weaker consumer confidence. He identified paused business investment as his biggest concern, describing a broad hesitation to invest in Canada.
On interprovincial trade barriers, Ferreira said Canada “needs to do more,” adding that momentum from prior discussions has faded and needs renewed effort. He also said Canada needs a quick agreement with its “greatest ally” to resolve trade issues.
ROE targets: 15% in 2026, “17 plus” in 2027
Ferreira reiterated the bank’s ROE objectives, stating the target is approximately 15% for 2026 and “17 plus” for 2027. He described the path to the 2027 target as roughly “half-half” between denominator effects (capital deployment and management) and numerator effects (earnings growth).
On capital-related drivers, Ferreira cited several items:
- Expected AIRB conversion related to CWB in 2026, which he said is coming “this year.”
- A Laurentian Bank portfolio transaction that he said will cost 25 basis points.
- Share buybacks, which he described as part of the solution but not something the bank is “dogmatic” about, with a preference for organic growth and “strategic tuck-ins” that are accretive.
Ferreira said the bank’s capital generation is generally greater than its capital consumption and that National Bank has been active in its current normal course issuer bid (NCIB), buying back about 50% of an eight million share program. He said there is a “very high probability” the bank will renew and increase the NCIB before year-end 2026, while stressing flexibility depending on opportunities.
Earnings drivers: CWB synergies and domestic growth, not big PCL relief
Asked whether lower provisions for credit losses (PCLs) are central to the ROE improvement, Ferreira said the bank’s PCL guidance for 2026 is the same as 2025 and that the ROE targets are not based on PCLs being “much lower.” He noted that returning impaired losses to the bank’s prior 2025 range could lower impaireds by roughly five to eight basis points, but he framed the improvement as modest.
Instead, he pointed to CWB integration and growth initiatives, including:
- CAD 270 million of cost and funding synergies from CWB expected to be at target in 2027.
- Revenue synergies expected to be about CAD 50 million in 2026, with 2027 described as “a big year.”
- Organic growth opportunities in wealth and capital markets, and contributions from personal and commercial banking beyond CWB synergies.
- An acceleration of growth outside Quebec starting in the second half of 2026 and into 2027.
Ferreira said 2026 revenue synergies are expected to come mainly from fees with commercial clients, with expanded product offerings such as cash management, deposits, swaps, foreign exchange, and advisory. He said 2027 and 2028 would feature more net interest income (NII) and balance sheet growth. He also provided a breakdown for 2028, saying about two-thirds of the benefit would come from commercial clients and about two-thirds from NII, with one-third from fees (including commercial fees, wealth growth, and retail).
ABA (Cambodia): slower growth and a conservative credit stance
Ferreira said the bank is shifting its focus to grow more in Canada while also acknowledging a credit cycle and economic slowdown in Cambodia. He cited a 2026 growth perspective of around 4% and a long-term growth outlook of roughly 7%, adding that deposit growth has been stronger in Cambodia over the past three years.
He expressed confidence in Cambodia’s government and described it as pro-business and execution-focused, referencing the country’s approach to negotiating with Washington and saying tariffs are among the lowest in the region at 19%. He also referenced reports about scam centers and said authorities took the matter seriously, including sanctions.
On ABA’s credit posture, Ferreira said the bank has been as prudent as possible, increasing stage three allowances to 20% coverage for gross impaired loans. He said about 60% of past resolutions have been resolved at zero losses and that net charge-offs remain very low. He said the resolution process has picked up over the past two quarters but remains early, and he expects gross impaired loans to remain elevated as the bank stays conservative. He added that lower rates would help and indicated potential for lower rates is driven largely by U.S. monetary policy.
Capital markets outlook and private credit caution
Ferreira called 2025 an exceptional year for capital markets, citing CAD 2.2 billion in pre-tax pre-provision profit (PTPP), up 58% from 2024, and said the bank benefited from a major market dislocation in the second quarter. For 2026, he provided a base-case PTPP range of CAD 1.8 billion to CAD 2.0 billion, below 2025, while still describing the market backdrop as constructive with opportunities in trading and investment banking. He cited active credit debt capital markets, a strong pipeline, and buoyant activity in mining and metals.
Geographically, he reiterated the bank’s focus on a Canadian platform with niche U.S. activities, including U.S. infrastructure, structured products, and securities lending. On managing volatility, Ferreira said outcomes depend on daily decisions around positioning and execution, adding that the bank aims to do well in good markets and to take advantage of liquidity crunches and volatility when they occur. He confirmed that the bank is positioned defensively going into 2026.
In private credit, Ferreira said conditions in the U.S. are “too hot” to deploy capital profitably, citing mispricing and weakened due diligence expectations. He said the bank will remain disciplined and expects opportunities to emerge if markets experience a squeeze and dislocation.
In closing remarks, Ferreira said 2025 was a “very big year” for execution, highlighting the CWB closing date of February 3 and noting that by November all CWB branches had become National Bank branches and the IT conversion was complete. He also said the bank was “very happy” with the Laurentian transaction and described it as complex given the involvement of three parties. He told investors 2026 would be another “very big year” focused on consolidation, client engagement, and delivering synergies, and he thanked employees and shareholders for their support.
About National Bank of Canada (TSE:NA)
National Bank of Canada is the sixth-largest Canadian bank. The bank offers integrated financial services, primarily in the province of Quebec as well as the city of Toronto. Operational segments include personal and commercial banking, wealth management, and a financial markets group.
