National Bank of Canada (NA) September 16, 2026 Conference Transcript

Okay, great. Thanks. Welcome back, everyone. This is our last presentation for today. Joining us is National Bank of Canada. From National Bank of Canada, we have Judith Menard, Head of Commercial and Private Banking. Judith, welcome, and thank you for joining us.

Thank you for inviting me. We're very excited to be here.

It's been almost two years since you took on responsibility for commercial banking and private banking 1859, following the announced acquisition of Canadian Western Bank. Can you give us an overview of these businesses, explain how they fit into National Bank's broader strategy, and discuss how your experience prepared you for this role?

So, actually, it's a year and a half now that I'm in the new role. Just to give you a little bit of my background, so 20 years at the bank, actually 28 years, but 20 years in the risk functions. So, I used to be head of compliance for wealth management, capital market, and retail and commercial banking, which I know the bank really well. So, I think this is the part that really, really helped. So just before having that position, I was leading private banking and commercial banking outside of Quebec. So basically the mandate was, like, how do we grow our bank outside of Quebec? And that really drove it through commercial and private banking with wealth management and cap-farm market. So that really prepared me, you know, just before the acquisition. I had a pretty good sense of what was working, what was not working, and how do we adjust our strategy when you actually are not the main player, which we are, as you know, in Quebec. So that experience, I think, really led us to understand more and to really think about it, even in the light of the integration. So when I started a year and a half ago with the integration of CWB, I think all these experiences, understanding really deeply the bank, but also understanding the reality of Western Canada and Ontario and how we grow in these markets were, I think, really priceless.

Excellent. The integration of Canadian Western Bank appears to be on track with both revenue expense synergies running at or above target. Could you provide more detail in the integration process and discuss potential opportunities beyond the current targets of approximately 300 million expense synergies and 2 to 250 million in revenue synergies?

So if I just take a step back on the integration, like how it's been. So we took a very bold decision at the beginning to really use our processes, our platform, and change the branding. Like right away, that decision was made. And it actually allowed us to convert clients faster in the timeline. So by the end of 2025, like a lot of things really were rolling. So in the last six months, I would say the integration really started. So conversion of data was a big piece, and the integration started. So we've been really, really working hard onboarding employees, onboarding clients in our cash management platform, and that was the grind, like the grind of starting the integration and making it happen with people, for people. And I insist on that because employees are a big, big part of it. The connectivity with client, of course, was the employee, so we really wanted to get it right. And where we are now, and if I look at what we've said to the market, that it will come from the fee income, all the synergy revenue, that's exactly what's happening right now. That's what we've seen. So we kind of added a toolbox to the Canadian Western Bank employees for them to go to market and bring more to the client? Is it extending our balance sheet? Is it bringing some more products to the client? And that's what we've been really seeing in the last few months. So where we are right now in September, the pipeline is really robust. We're at a very different place than we were six months ago. And when I look forward and I look at what's in front of us, So there's two things happening. So, again, on the lending side, you've seen it was sladish last quarter. We're already seeing early signs of growing the book, which is very encouraging. But also all the deposit and the cash management, also there's also some space where we can continue growing on that space. So it's on both sides. So the revenues are going to come both on the lending and on the cash management side and the deposit side.

Excellent. And kind of excluding the impact of CWB, we've seen commercial loan growth as very strong in the third quarter. Can you talk about what's driving that growth and how sustainable do you believe that trend is?

So if you look at our track record in terms of loan growth, we've always been like number one, number two. So our franchise in Quebec, again, is very, very strong. And from that, like the muscle of lending is very good inside the bank. and also kind of a credit risk as well. I would say that even in terms of PCL, we have a very disciplined approach in terms of risk, and it materializes when you look at the numbers. So it really comes from everywhere. It comes from our specialty business. It comes from mid-market, from National Chi Group, a larger corporation. So it's all the businesses that are performing on the Heritage NBC book. And, yes, I can see that it's continuing growing. That's really the part that we have, I think, the right expertise, but we also have a right deal team around. So that means that we're kind of bringing the full bank in front of clients, and they actually really like that.

Let me think about the other side of the balance sheet. Deposit growth in the commercial segment has been very strong. Can you also talk about the trends that are driving that growth and how sustainable they are as well?

So on the deposit growth, I would say that there's kind of two things. Like if the last quarter, it was really driven by governmental deposit, the taxes are being paid, and it was especially like higher kind of growth on that segment. We're still growing on the commercial kind of diversified business, which we want. We want these cash management accounts being open, but also the deposit that comes with the operational deposit with the business, so we're seeing that. But we're still growing faster on the ABGSP, like government deposit, than on the commercial deposit side. So where we are with that, we've been investing in the last few years in our cash management platform. We've actually transferred or onboarded 99% of our client in our new platform. This is an ongoing process. This is something that we will continue investing. It's a tech business, a cash management business, and we will continue investing in that, that we see it very clearly. And on the CWB side, we really, really did a lot of new onboarding. We have some specialty business that the clients were waiting for cash management, and we're executing on that as we speak.

Okay, great. And then let's talk about how does the ROE profile and efficiency of commercial banking compare with the rest of the National Bank? And as these businesses continue to scale, where do you see opportunities for further gains?

So next quarter, as you know, we are going to split retail and commercial banking. On the ROE side, we're going to shoot numbers in the next quarter. On the efficiency ratio, this is a business that was actually well managed in terms of efficiency ratio. We are really in a good spot, I would say, where we are with the efficiency ratio. We see a lot of growth in commercial banking. And for us, this acquisition is really central of, it's the biggest acquisition of National Bank. So we know now we have the platform across Canada. So the growth trajectory in terms of grabbing market share, organic growth in every market in Canada, it is a very big accelerator for us. And that's really how we're positioning commercial banking inside the bank. I would say that commercial banking and the proximity with capital market is also very tight. So we're doing a lot of things together. We're using all the risk management solution capabilities to accelerate. We have an M&A private company team that's helping us with the business transfer. We know there's a big opportunity in terms of business transfer. So all this is also an accelerator in our trajectory. And the fact that we're working really well as a team, no silo, clients see the deal team in front of them. So in the bigger picture, to answer your question, we think commercial banking is a big lever of growth in the next few years.

Let me ask on the private banking side. What sets Private Banking 1859 apart from other wealth management competitors?

So private banking is a gem inside the bank, I find. So in terms of NPS, very, very high NPS, 78, this is a business that is really kind of a bank inside the bank. So when we made the decision to merge private banking and commercial banking, That's a different strategy than any other Canadian bank. So we really truly integrated all the employees inside the bank. And the reason for it was we knew that we didn't want to bring the complexity of our bank in front of clients. We knew that most of the entrepreneur clients had a private banker. We knew that. So once we go out as a deal team in front of clients, the private banker is there, the commercial banker is there. it actually takes out a lot of complexity for a client. The play, and we know that there's going to be tons of wealth transfer in the next few years. We say 1.3 trillion, 60% of the entrepreneurs are going to want to sell or buy a new company, but mostly sell their company. So if you think about the opportunity in terms of being there at the table way in advance of the transaction, way in advance of the liquidity event, I think it's actually a very big accelerator on both sides. When I look at these two businesses, like over the last few years, 2,500 more common client. So we're really kind of bringing both sides, some commercial banking client, and we're not private banking client, but also on the other side. So this is a focus. This is part of a pillar that we look at, you know, how do we kind of cross-sell the bank on both sides, and it's the same team. So it's a lot easier to kind of make people work together, having the same objectives, the same goals. So I'm very pleased with this strategy. And it took us like a couple of years to get there because these are two different cultures, para banking and commercial banking. We had to work at it. But where we are, it's a very big play. And for CWB, they didn't have a private bank. So when we talk about the toolbox, this was like an addition to the toolbox. So they were very, very excited to get to see the products, the card, like the whole kind of white-gloaf experience.

Okay, excellent. You know, one thing that's been in the news recently is the OSFI recently lowered the domestic stability buffer by 50 basis points. Kind of given the resulting reduction in capital requirements, Do you see this as an opportunity to deploy incremental capital in the commercial segment?

So the way we manage capital in the bank, we're very conservative in deploying capital. So we have a real openness with the Rebuild Canada to use our balance sheet for commercial banking, and actually the strategy is the same. We're kind of following, like the rules have changed, but we're following the same strategy. We like organic growth. We want to push for more organic growth across all segments, but more particularly commercial banking.

Okay, great. Also in the news, there was a sense of optimism following the resolution of the USMCA in July, but trade policy concerns have resurfaced in recent weeks. How is that uncertainty affecting your commercial and private banking clients, and how are they preparing for the potential impact? Yeah.

So I would say that there's kind of two things. There's other issues that are affecting entrepreneurs in Canada, not just the tariff. Immigration is one of them. So if we take a step back, and I've been meeting clients in the recent weeks, there's a sense of tiredness, I would say, of, again, we have to kind of readjust. So for some entrepreneurs that were maybe not ready to sell their business, it's kind of pushing that discussion forward and saying, am I ready again to reinvent myself and all of that? We know entrepreneurs are very resilient. A lot of them had a plan A, B, and C. I've already started kind of diversifying their clients, their supply chain. So this kind of discussion has happened, I would say, a year ago. So it was a surprise, to be very clear. So people were, wow, we thought it was done. And so that kind of a little bit of uncertainty, Taran, it is a real thing. Like, people are talking about it. When I look at it from a bank perspective, it's less than 1% of our portfolio. We're, like, very, very affected by this kind of last round of tariffs. So it's small, I would say. The insecurity around how we have to adjust is real. But on the other side, there's also a lot of kind of positivity around Canada and rebuild Canada this week in Toronto. There's a whole week everybody is there to how do we kind of grab the opportunity also to get some external investors to reinvest in Canada. So the reinvest Canada is also bringing some good vibes in Canada, I would say.

Excellent. And then maybe beyond the impact of higher tariffs, are you seeing any stress anywhere else in the portfolio or any areas of concern from a credit quality perspective? So we've said it on the calls repeatedly.

So we are, I think, on a very conservative way, how we are provisioned, you know, we're provisioned for recession, 17 quarters of performing provision that we've been building. So this is something that is really kind of part of a DNA. And when I look at the portfolio, there's been lumpiness. The reality, there's been lumpiness on the NBC side, on the CWB side, not more one or the others. At the beginning, we took a big provision with the CWB portfolio, so I think that was the right thing to do. So where I see right now, it's not a specific industry. Of course, manufacturing in Quebec will be a little bit more impacted. We're very heavy in Quebec, as you know. So these are pockets where we look at it more closely. On the other side, this is the moment to support clients also. This is the moment where there's a bit of fragility into the system, and this is where banks have to really be creative and to be there close to client, and we really intend to do so. all right you know artificial intelligence is top of mind for many investors how are you using ai today and how do you expect it to affect the business over the longer term yeah so um ai at the bank is not a strategy so it's actually part of what people do right now so we we we uh we really have decided to put ai and like in every business like the way we structure technology is It's like really closer to the business, the way our structure is organized. So AI is on our day-to-day. Like I use AI every day. I think all our employees are restarting to use AI every day. So if I look at it, there's kind of two buckets. There's the bucket of front employees and the bucket of like back office or like in the middle. So front office people. So I think about the relationship manager and the credit underwriter. Their life is changing rapidly right now. So the way you prepare for a meeting, the way you go to market, the way you actually decide which industry, and that has kind of on the productivity side has been expanding like at a really faster pace. And it's every week I'm seeing that. Their job is changing. The credit on the writer, like right now to write a board sheet, what it took them one week to do is not taking one week to be done now. So how do we integrate the financial statements into the board sheet and how we are doing the ratio, all of that. All the banks are working on that. We are working on that to make sure that we become more efficient in the way we're doing it. So the play is really to kind of accelerate our growth through AI with more productivity and actually coming from the employees. So a lot of employees actually have better ideas than someone from the top and say, you should do this. So we really have that kind of bottom-up approach through AI, and we're seeing it. Have we quantified it? But in every business, I think there's kind of empowerment of using AI to be more productive. So that's more the front office side. If I think about the back office side, all the KYC, all the AML, all the call centers, so now we have an agent that is answering questions from the employees, from the clients. So this is just an acceleration, having less people in the call center, less people in the internal call center that supports our employees. All of that is being actually launched as we speak. So the productivity and the way we kind of serve clients also in the back end has also a lot of impact, like AI is really helping us. So I would say that on both sides I see productivity going really up, and I see a lot of enthusiasts also and people trying things and sharing. So we've built kind of a community also inside of the commercial bank at how do you share ideas. And it's much more powerful when it comes from employees, I find. Oh, definitely, yeah.

You know, one thing I said, a recent national bank survey found that nearly half of Western Canadian mid-market business owners plan to retire within the next decade. Maybe could you provide more detail on the size and characteristics of this market Explain how National Bank is positioned to help facilitate this transition.

So I spoke a little bit about it on the toolbox. There's kind of a team, and we have a strategy about business transfer. So private banking is really key around that, having the private banker at the beginning. Because the entrepreneur doesn't split their life between their business and their personal life. It's the same. So usually they're cash poor for many, many years, and when they are going to sell their business. So I think the integration between the commercial and the private bank is one of the big buckets of our strategy where I think we can differentiate ourselves. So that's the first part. The second part is we've built five years ago when I was in my former role an M&A private company. So we know the investment bankers are going to be focused on the bigger transaction. So we actually decided to build a team inside the capital market team, just focus on helping the entrepreneur on the private company side buy or sell that company. This team is completely integrated with the commercial bank. And we also have a business transfer team for the smaller ticket that is also across Canada that is helping for the lending side, for the advisory side. So these three themes are working really closely together to capture all the opportunities. And it is really kind of an advisory play, I would say, with the entrepreneur. There's a lot of emotion in that moment. And there's a moment of, you know, I don't want to talk about it because, you know, I'm not going to get the amount I want at the end. So we really have to be close to the entrepreneur and follow the story. and I think half of it as this is psychology in that process and many bankers are saying that also. So there's a big part of the proximity we have with our client to be there when the moment of truth is happening. It's not a product play. It is an expertise play but also it's a psychology play that I find we're playing pretty well. So we're doing that a lot again in Quebec and we're actually doubling down on that expertise. We just hired a new team in Western Canada with M&A experts for the bigger transaction. And the proximity of our investment bankers in this moment of truth where they have the expertise is very important. So you're, I don't know, a specialized team, a specialized business in transportation, but we bring our investment bankers that have that expertise. So that really helps them think about it, and that's part of the service we're offering. So it is bringing for me, again, it's bringing the full bank in front of client. It's powerful.

Judith, you know, we've covered a lot of ground. I'm just asking, is there any kind of areas of messages that you want us to take away with today or things that we haven't covered? I like that question.

I think I will just finish with the ambition because I think ambition is really important. So we have a very big ambition on the commercial banking side, inside the bank. We want to be the destination of choice for entrepreneurs in Canada. And we want to be seen as the place to be because of our proximity, because of our speed, and because we're building the full bank in front of clients. So these are three things that if we do really, really well, I think we can really continue growing. And it's not because we're the smallest bank that it actually matters. In that, we are actually very meaningful, and when you look at PNC and all the space commercial banking is taking inside the bank, it's a very meaningful business, but it's also a business that we have a lot of opportunities to grow, and our DNA is the DNA of an entrepreneur. That's how we were built, and CWB was also built with an entrepreneur DNA, so the mix of that and bringing kind of that whole bank together, keeping the regional mindset is really a lot of opportunities in front of us. So I'm very positive.

Well, great. Thank you very much, Judith. With that, please join me in thanking Judith for her presentation today.