TORONTO - Lower income in financial markets helped lead to an overall drop in income for National Bank of Canada in the fourth quarter, even as other segments gained.

The 14 per cent decline in financial markets income to $205 million for the quarter compared with last year came about in part because of substantial trading revenue loss on Sept. 26 amid the chaotic markets created by a U.K. budget proposal that led to the downfall of then prime minister Liz Truss.

"The dislocation of the market that day affected us specifically for that. But it's very unusual for us to see that type of transaction," said Denis Girouard, co-head of financial markets at National Bank on an analyst call.

"There was quite a lot of action that day, and it was very dislocated. And for us, it affected us."

The loss in financial markets helped lead to earnings of $738 million, or $2.08 per diluted share for the quarter ended Oct. 31, down from $769 million or $2.17 per diluted share in the same quarter last year.

Provisions for credit losses totalled $87 million in the fourth quarter compared with a recovery of $41 million a year ago.

Bank chief executive Laurent Ferreira said that overall the bank was taking a cautious approach to capital moving forward.

"In the context of macroeconomic uncertainty, we are maintaining a defensive positioning with a prudent approach to capital, risk and cost management," he said on the earnings call.

National Bank's personal and commercial banking business saw net income rise 13 per cent, while wealth management income was up 24 per cent and the bank's U.S. specialty finance and international operations saw earnings climb 19 per cent.

The bank however reported a 16 per cent drop in its Credigy division as it ramped up discount rates due to rising interest rates, and in its other category the bank reported earnings were down 62 per cent.

Overall, National Bank said it earned $2.08 per diluted share on an adjusted basis in its latest quarter, down from an adjusted profit of $2.19 per diluted share in the same quarter last year.

Analysts on average had expected a profit of $2.24 per share, according to estimates compiled by financial markets data firm Refinitiv.

Barclays' analyst John Aiken said in a note that the miss came from lower trading revenues, while the poor performance of Credigy, which invests in consumer-related assets, also weighed.

"Despite reasonably solid results in its operating segments, National’s earnings missed expectations because of losses in its ‘Other’ segment. This is rarely well received by the market and we believe that this will be the focus despite a strong performance in its retail operations."

For its full year ended Oct. 31, National Bank said its overall profit amounted to $3.38 billion or $9.61 per diluted share on $9.65 billion in revenue compared with a profit of $3.14 billion or $8.85 per diluted share on $8.93 billion in revenue during the same period a year earlier.

National Bank of Canada also raised its dividend, saying it will up its quarterly payment to shareholders by five cents to 97 cents per share.

This report by The Canadian Press was first published Nov. 30, 2022.

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