Sunday, August 31, 2008

National Bank shares jump on profit surprise

National Bank shares jump on profit surpriseNational Bank three-month chart

National Bank of Canada saw its share price jump almost six per cent Thursday after it reported a record third-quarter profit even after taking another hit, $37 million this time, on its ill-fated foray into asset-backed commercial paper.

On the plus side, it had an $88 million gain on the takeover of the Montreal Exchange by TSX Group, owner of the Toronto Stock Exchange. National owned more than 10 per cent of the MX before it went public last year. Shareholders got cash and TSX stock in the takeover.

The Montreal-based bank, Canada's six-largest, reported Thursday that its profit for the three months to July 31 was $286 million or $1.73 a share on revenue of $1.06 billion. That compares with a profit of $243 million or $1.48 a share on revenue of $1.01 billion a year earlier.

Excluding the ABCP loss ($24 million after tax) and the gain on the MX-TSX deal ($57 million after tax), the latest profit was $253 million or $1.52 a share, more than most analysts expected.

"The bank turned in a solid performance this quarter, driven in particular by a strong contribution from the financial markets segment and good growth in business volumes at personal and commercial," CEO Louis Vachon said in a statement.

On the TSX, National's share price closed at $50.43 for a gain of $1.93 or four per cent after moving as high as $51.35.

Paralysis in the asset-backed commercial paper market has left National with large holdings of hard-to-value paper once marketed as a haven for risk-averse investors.

The business involved pools of assets such as mortgages, car loans or credit-card receivables financed with short-term debt. Buying dried up as a U.S. credit crisis sent jitters through the market.

National has bought up large amounts of ABCP from its sponsored mutual funds, pooled funds and retail clients. It has taken a series of hits relating to the problem, including a $575-million charge late last year.



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