National Bank Financial Group
TSX : NA

National Bank Financial Group

December 03, 2009 07:34 ET

National Bank Releases its Fourth Quarter and Year-End 2009 Results

MONTREAL, QUEBEC--(Marketwire - Dec. 3, 2009) - National Bank Financial Group (TSX:NA)

This press release provides unaudited financial information and should be read in conjunction with the supplementary financial information and the analyst and investor presentation available on the Bank's website at www.nbc.ca. Additional information about National Bank of Canada, including the Annual Information Form, can be obtained from the SEDAR website at www.sedar.com and the Bank's website at www.nbc.ca.

HIGHLIGHTS:

- Net income of $241 million for the fourth quarter of 2009 compared to $70 million for the same quarter of 2008

- Diluted earnings per share of $1.39 for the fourth quarter compared to $0.37 for the same quarter of 2008

- Net income of $854 million for fiscal 2009, a 10% increase from the net income of $776 million in fiscal 2008

- Diluted earnings per share of $4.94 for fiscal 2009, a 6% increase from the $4.67 in diluted earnings per share in fiscal 2008

- A Tier 1 capital ratio of 10.7% as at October 31, 2009 compared to 9.4% as at October 31, 2008


HIGHLIGHTS EXCLUDING SPECIFIED ITEMS(1):

- Net income of $243 million for the fourth quarter of 2009, up 7% from the $228 million in net income for the same quarter of 2008

- Diluted earnings per share of $1.40 for the fourth quarter of 2009, an increase of 3% from the diluted earnings per share of $1.36 for the same quarter of 2008

- Record net income of $1,061 million for fiscal 2009, up 12% from the $947 million in net income for fiscal 2008

- Diluted earnings per share of $6.22 for fiscal 2009, up 8% from the diluted earnings per share of $5.75 for fiscal 2008

(1) The financial reporting method is explained in detail on page 2.

National Bank today announced net income of $241 million for the fourth quarter of fiscal 2009 compared to $70 million in net income in the fourth quarter of 2008. Diluted earnings per share for the quarter stood at $1.39 versus $0.37 for the same quarter of 2008. The results for this quarter include $2 million in after-tax costs related to holding asset-backed commercial paper (ABCP). In the fourth quarter of 2008, the Bank had recorded $78 million in after-tax ABCP-related charges, which included an ABCP impairment charge, a gain on economic hedge transactions, financing costs and professional fees. In addition, the Bank had recorded a $44 million after-tax loss as a result of a restructuring charge and a $36 million after-tax loss resulting from a write-off of premises and equipment. Excluding specified items, fourth quarter net income would have been $243 million compared to $228 million in the fourth quarter of 2008, for an increase of 7%. Diluted earnings per share would have been $1.40, up 3% from $1.36 in the same quarter of 2008.

For fiscal 2009, the Bank's net income totalled $854 million, up 10% from the $776 million reported in fiscal 2008. Excluding specified items, all related to the impact of ABCP in fiscal 2009, net income would have stood at $1,061 million compared to $947 million, a 12% increase from the same period of 2008 excluding a gain on the sale of the Bank's subsidiary in Nassau, a gain resulting from the merger between the Montreal exchange Inc. and TSX Group Inc., a restructuring charge, a write-off of premises and equipment, and the charges related to the impact of ABCP. Diluted earnings per share stood at $4.94 for fiscal 2009, up 6% from $4.67 for the same period of 2008. Excluding specified items, diluted earnings per share would have been $6.22, up $0.47 or 8% compared to fiscal 2008.

Return on common shareholders' equity was 16.7% in the fourth quarter of 2009 compared to 5.0% in the same quarter of 2008. Excluding specified items, return on common shareholders' equity would have been 16.3% in the fourth quarter of 2009 compared to 17.1% in the same quarter of 2008. For fiscal 2009, it stood at 15.6% compared to 16.4% for fiscal 2008. Excluding specified items, it would have been 19.0% in fiscal 2009.

"Despite the recession in 2009, National Bank turned in one of its finest financial performances in recent years. Net earnings per share were up, the credit portfolio maintained its excellent quality, and the Tier 1 capital ratio remained strong at 10.7%. In the fourth quarter, the Bank continued to make investments throughout its network, creating new customer service positions and, recently, finalizing a national partnership agreement with Sun Life Financial. We will carry this momentum into 2010, ensuring that our One client, one bank vision becomes a reality," said President and Chief Executive Officer, Louis Vachon.



Financial Indicators

Results
Results excluding
Fiscal specified
2009 items(1)
-------------------------------------------------------------------------
Growth in diluted earnings per share 6% 8%
Return on common shareholders' equity 15.6% 19.0%
Tier 1 capital ratio under Basel II 10.7% 10.7%
Dividend payout ratio 50% 40%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) See "Financial Reporting Method" on page 2.


Financial Reporting Method

The Bank uses certain measurements that do not comply with generally accepted accounting principles (GAAP) to assess results. Securities regulators require companies to caution readers that net income and any other measurements adjusted using non-GAAP criteria are not standard under GAAP and cannot be easily compared with similar measurements used by other companies.



Financial Information
(unaudited) (millions of dollars)

Notes Quarter ended
-------------------------------------------------------------------------
October 31, October 31, %
2009 2008
-------------------------------------------------------------------------

Personal and Commercial 112 122 (8)
Wealth Management 26 45 (42)
Financial Markets 140 68 106
Other (37) (165)
-------------------------------------------------------------------------
Net income 241 70
Plus: Charges related to
holding ABCP 1 2 75
Plus: Charge related to
commitments to extend credit
to clients holding ABCP 2 - 3
-------------------------------------------------------------------------
Net income excluding the
impact of ABCP 243 148 64
Less: Gain on
available-for-sale securities 3 - -
Less: Gain on the sale of the
Bank's subsidiary in Nassau 4 - -
Plus: Restructuring charges 5 - 44
Plus: Write-off of premises
and equipment 6 - 36
-------------------------------------------------------------------------
Net income excluding specified
items 243 228 7
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Diluted earnings per common
share $1.39 $0.37
Plus: Charges related to
holding ABCP 1 0.01 0.47
Plus: Charge related to
commitments to extend credit
to clients holding ABCP 2 - 0.02
-------------------------------------------------------------------------
Diluted earnings per common
share excluding the impact of ABCP $1.40 $0.86 63
Less: Gain on
available-for-sale securities 3 - -
Less: Gain on the sale of the
Bank's subsidiary in Nassau 4 - -
Plus: Restructuring charges 5 - 0.28
Plus: Write-off of premises
and equipment 6 - 0.22
-------------------------------------------------------------------------
Diluted earnings per common
share excluding specified
items $1.40 $1.36 3
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Return on common shareholders'
equity
Including specified items 16.7% 5.0%
Excluding specified items 16.3% 17.1%
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Financial Information
(unaudited) (millions of dollars)

Fiscal
year ended
-------------------------------------------------------------------------
October 31, October 31, %
2009 2008
-------------------------------------------------------------------------
Personal and Commercial 504 504 -
Wealth Management 115 153 (25)
Financial Markets 503 387 30
Other (268) (268)
-------------------------------------------------------------------------
Net income 854 776 10
Plus: Charges related to
holding ABCP 121 162
Plus: Charge related to
commitments to extend credit
to clients holding ABCP 86 18
-------------------------------------------------------------------------
Net income excluding the
impact of ABCP 1,061 956 11
Less: Gain on
available-for-sale securities - (57)
Less: Gain on the sale of the
Bank's subsidiary in Nassau - (32)
Plus: Restructuring charges - 44
Plus: Write-off of premises
and equipment - 36
-------------------------------------------------------------------------
Net income excluding specified
items 1,061 947 12
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Diluted earnings per common
share $4.94 $4.67 6
Plus: Charges related to
holding ABCP 0.74 1.03
Plus: Charge related to
commitments to extend credit
to clients holding ABCP 0.54 0.11
-------------------------------------------------------------------------
Diluted earnings per common
share excluding the impact
of ABCP $6.22 $5.81 7
Less: Gain on
available-for-sale securities - (0.36)
Less: Gain on the sale of the
Bank's subsidiary in Nassau - (0.20)
Plus: Restructuring charges - 0.28
Plus: Write-off of premises
and equipment - 0.22
-------------------------------------------------------------------------
Diluted earnings per common
share excluding specified items $6.22 $5.75 8
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Return on common shareholders'
equity
Including specified items 15.6% 16.4%
Excluding specified items 19.0% 19.7%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

All amounts below, except Note (4), are presented net of income taxes:

(1) During the quarter ended October 31, 2009, an ABCP financing cost of
$2 million was recorded. During the quarter ended October 31, 2008,
the following items were recorded with respect to ABCP: a $101 million
loss on available-for-sale securities, a $38 million gain on economic
hedge transactions, and $12 million in ABCP financing costs and
professional fees.
During the year ended October 31, 2009, the following items were
recorded related to the holding of ABCP: a $129 million loss on
available-for-sale securities related to ABCP (2008: $109 million),
$19 million in losses on economic hedge transactions (2008: $1
million), $41 million in interest received or receivable on ABCP held
(2008: nil), and ABCP financing costs and professional fees of $14
million (2008: $52 million).
(2) During the quarter ended October 31, 2008, a $3 million provision for
credit losses related to commitments to extend credit to clients
holding ABCP was recorded.
During the year ended October 31, 2009, an $86 million provision for
credit losses related to commitments to extend credit to clients
holding ABCP was recorded (2008: $18 million).
(3) During the year ended October 31, 2008, a $57 million gain on
available-for-sale securities was recorded as a result of the merger
between the Montreal exchange Inc. and TSX Group Inc.
(4) During the year ended October 31, 2008, a net gain of $32 million was
recorded on the sale of the Bank's subsidiary in Nassau, Bahamas.
(5) During the quarter ended October 31, 2008, the Bank recorded $44
million in restructuring charges. These charges were comprised of
severance pay and professional fees for strategic and organizational
consulting related to restructuring measures.
(6) During the quarter ended October 31, 2008, the Bank recorded a $36
million expense attributable to a write-off of premises and equipment,
related in particular to the industry's image-based cheque-clearing
initiative.



Highlights
(unaudited) (millions of dollars)

Quarter ended
-------------------------------------------------------------------------
October 31, October 31, %
2009 2008 Change
-------------------------------------------------------------------------

Operating results
Total revenues $1,092 $765 43
Total revenues adjusted for
non-controlling interest(1) 1,080 886 22
Net income 241 70
Return on common shareholders'
equity 16.7% 5.0%
Per common share (dollars)
Earnings - basic $1.40 $0.37
Earnings - diluted 1.39 0.37
-------------------------------------------------------------------------

EXCLUDING SPECIFIED ITEMS(2)
Operating results
Total revenues $1,093 $874 25
Total revenues adjusted for
non-controlling interest(1) 1,081 995 9
Net income 243 228 7
Return on common shareholders'
equity 16.3% 17.1%
Per common share (dollars)
Earnings - basic $1.41 $1.36 4
Earnings - diluted 1.40 1.36 3
-------------------------------------------------------------------------

Per common share (dollars)
Dividends declared $0.62 $0.62
Book value
Stock trading range
High 62.08 53.66
Low 56.00 42.25
Close 56.39 45.21
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Highlights
(unaudited) (millions of dollars)

Fiscal
year ended
-------------------------------------------------------------------------
October 31, October 31, %
2009 2008 Change
-------------------------------------------------------------------------

Operating results
Total revenues $4,131 $3,637 14
Total revenues adjusted for
non-controlling interest(1) 4,133 3,834 8
Net income 854 776 10
Return on common shareholders'
equity 15.6% 16.4%
Per common share (dollars)
Earnings - basic $4.96 $4.69 6
Earnings - diluted 4.94 4.67 6
-------------------------------------------------------------------------

EXCLUDING SPECIFIED ITEMS(2)
Operating results
Total revenues $4,309 $3,745 15
Total revenues adjusted for
non-controlling interest(1) 4,311 3,942 9
Net income 1,061 947 12
Return on common shareholders'
equity 19.0% 19.7%
Per common share (dollars)
Earnings - basic $6.25 $5.77 8
Earnings - diluted 6.22 5.75 8
-------------------------------------------------------------------------
Per common share (dollars)
Dividends declared $2.48 $2.48
Book value 33.43 29.70
Stock trading range
High 62.08 54.63
Low 25.62 42.25
Close 56.39 45.21
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
October 31, October 31, %
2009 2008 Change
-------------------------------------------------------------------------

Financial position
Total assets $132,138 $129,332 2
Loans and acceptances(3) 58,370 56,015 4
Deposits 75,170 76,022 (1)
Subordinated debentures and
shareholders' equity 8,494 7,764 9
Capital ratios - BIS under Basel II
Tier 1 10.7% 9.4%
Total 14.3% 13.2%
Capital ratios - BIS under Basel I
Tier 1 11.5% 10.1%
Total 15.2% 14.1%
Impaired loans, net of specific and
general allowances (233) (162)
As a % of loans and acceptances (0.4)% (0.3)%
Assets under
administration/management 200,845 208,084
Total personal savings 106,458 97,206
Interest coverage 7.99 5.21
Asset coverage 4.19 3.89
-------------------------------------------------------------------------

Other information
Number of employees 17,747 17,146 4
Number of branches in Canada 445 446 -
Number of banking machines 855 857 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Adjustment mainly reflects the gains or losses attributable to third
parties.
(2) See "Financial Reporting Method" on page 2.
(3) Net of securitized assets.




Segment Disclosures

Quarter ended
October 31 2009 2008 2009 2008 2009 2008
--------------------------------------------------------------------------
Personal Wealth Financial
and Management Markets
Commercial
--------------------------------------------------------------------------
Net interest income(1) 359 353 25 43 202 314
Other income(1) 228 218 166 170 209 (181)
--------------------------------------------------------------------------
Total revenues 587 571 191 213 411 133
Operating expenses 356 344 153 147 179 152
--------------------------------------------------------------------------
Contribution 231 227 38 66 232 (19)
Provision for credit
losses 66 44 - - 8 4
--------------------------------------------------------------------------
Income (loss) before
income taxes (recovery)
and non-controlling
interest 165 183 38 66 224 (23)
Income taxes
(recovery)(1) 53 61 11 21 71 28
Non-controlling interest - - 1 - 13 (119)
--------------------------------------------------------------------------
Net income (loss) 112 122 26 45 140 68
--------------------------------------------------------------------------
Average assets 57,787 53,771 721 667 88,678 89,445
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Segment Disclosures

Quarter ended
October 31 2009 2008 2009 2008
--------------------------------------------------------------------------
Other Total
--------------------------------------------------------------------------

Net interest income(1) (121) (91) 465 619
Other income(1) 24 (61) 627 146
--------------------------------------------------------------------------
Total revenues (97) (152) 1,092 765
Operating expenses 12 127 700 770
--------------------------------------------------------------------------
Contribution (109) (279) 392 (5)
Provision for credit
losses (20) 1 54 49
--------------------------------------------------------------------------
Income (loss) before
income taxes (recovery)
and non-controlling
interest (89) (280) 338 (54)
Income taxes
(recovery)(1) (66) (133) 69 (23)
Non-controlling interest 14 18 28 (101)
--------------------------------------------------------------------------
Net income (loss) (37) (165) 241 70
--------------------------------------------------------------------------
Average assets (13,967) (10,971) 133,219 132,912
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Fiscal year ended
October 31 2009 2008 2009 2008 2009 2008
--------------------------------------------------------------------------
Personal Wealth Financial
and Management Markets
Commercial
--------------------------------------------------------------------------

Net interest
income(2) 1,414 1,390 124 137 790 708
Other income(2) 880 842 633 697 639 284
--------------------------------------------------------------------------
Total revenues 2,294 2,232 757 834 1,429 992
Operating expenses 1,339 1,302 588 601 681 636
--------------------------------------------------------------------------
Contribution 955 930 169 233 748 356
Provision for credit
losses 215 179 - - 26 2
--------------------------------------------------------------------------
Income (loss) before
income taxes (recovery)
and non-controlling
interest 740 751 169 233 722 354
Income taxes
(recovery)(2) 236 247 51 77 220 163
Non-controlling interest - - 3 3 (1) (196)
--------------------------------------------------------------------------
Net income (loss) 504 504 115 153 503 387
--------------------------------------------------------------------------
Average assets 56,269 52,306 674 693 97,805 87,196
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Fiscal year ended
October 31 2009 2008 2009 2008
--------------------------------------------------------------------------
Other Total
--------------------------------------------------------------------------

Net interest income(2) (362) (383) 1,966 1,852
Other income(2) 13 (38) 2,165 1,785
--------------------------------------------------------------------------
Total revenues (349) (421) 4,131 3,637
Operating expenses 54 156 2,662 2,695
--------------------------------------------------------------------------
Contribution (403) (577) 1,469 942
Provision for credit
losses 64 (37) 305 144
--------------------------------------------------------------------------
Income (loss) before
income taxes (recovery)
and non-controlling
interest (467) (540) 1,164 798
Income taxes
(recovery)(2) (255) (320) 252 167
Non-controlling interest 56 48 58 (145)
--------------------------------------------------------------------------
Net income (loss) (268) (268) 854 776
--------------------------------------------------------------------------
Average assets (13,770) (11,876) 140,978 128,319
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Personal and Commercial

The Personal and Commercial segment comprises the branch network, credit cards, insurance, business banking services and real estate.

Wealth Management

The Wealth Management segment comprises full-service retail brokerage, direct brokerage, mutual funds, trust services, investment management services and portfolio management.

Financial Markets

The Financial Markets segment encompasses corporate financing and lending, trading activities, treasury operations, including asset and liability management for the Bank, and corporate brokerage.

Other

This heading comprises securitization transactions, certain non-recurring items, and the unallocated portion of centralized services.

Taxable equivalent

(1) The accounting policies are the same as those presented in Note 1 of the 2008 Annual Report except with respect to the net interest income, other income and income taxes (recovery) of the operating segments, which are presented on a taxable equivalent basis. Taxable equivalent basis is a calculation method that consists in grossing up certain tax-exempt income by the amount of income tax that would have been otherwise payable. For all of the operating segments, net interest income was grossed up by $36 million (2008: $30 million) and other income by $6 million (2008: $32 million). An equivalent amount was added to income taxes (recovery). The impact of these adjustments is reversed in the Other heading.

(2) For the year ended October 31, 2009, net interest income was grossed up by $129 million (2008: $126 million) and other income by $19 million (2008: $82 million). An equivalent amount was added to income taxes (recovery). The impact of these adjustments is reversed in the Other heading.

Analysis of Results

TOTAL REVENUES

For the fourth quarter of 2009, the Bank's total revenues amounted to $1,092 million compared to $765 million in the fourth quarter of 2008. Including non-controlling interest, total revenues for the quarter amounted to $1,080 million, up $194 million or 22% from $886 million for the same quarter of 2008. More than half of this increase is due to the ABCP impairment charge recorded in the fourth quarter of 2008; excluding this impairment charge, gains on available-for-sale securities were $20 million for the fourth quarter of 2009 despite write-offs of $7 million during the quarter. Losses on available-for-sale securities of $58 million had been recorded in the same quarter of 2008. Moreover, trading activity revenues in the fourth quarter of 2009 stood at $191 million, up $78 million compared to the same quarter of 2008. Underwriting and advisory fees totalled $81 million for the quarter, up from $49 million one year earlier due to increased trading on the markets. Foreign exchange revenues were down by $8 million or 24%, totalling $26 million for the fourth quarter due to revenues resulting from the volatility of exchange rates recorded in the fourth quarter of 2008. Securitization revenues totalled $58 million, down $4 million from $62 million in fourth quarter 2008 and down $37 million from the previous quarter. Lastly, other income decreased by $69 million to total $73 million, primarily due to a gain on the sale of an investment in Asset Management Finance Corporation recorded in the fourth quarter of 2008.

Total revenues for fiscal 2009 were $4,131 million compared to $3,637 million for fiscal 2008. Including non-controlling interest, total revenues for fiscal 2009 were $4,133 million compared to $3,834 million for fiscal 2008, up $299 million or 8%. Trading revenues rose $331 million to stand at $647 million for fiscal 2009. ABCP-related charges fell $50 million in fiscal 2009 compared to fiscal 2008. Securitization revenues were up by $125 million compared to 2008 to total $351 million for fiscal 2009. This increase was due to a higher volume of new securitizations and the favourable rate spread. Lending fees and revenues from acceptances, letters of credit and guarantees totalled $259 million in fiscal 2009, up $76 million or 42%, mainly due to fees collected on loan prepayments and greater use of bankers' acceptances. These increases were mitigated by the realization in 2008 of a $32 million gain on the sale of the Bank's subsidiary in Nassau, an $88 million gain resulting from the merger between the Montreal exchange Inc. and TSX Group Inc., and a $65 million gain from the sale of an investment in Asset Management Finance Corporation.

OPERATING EXPENSES

In the fourth quarter of 2009, operating expenses stood at $700 million, a decrease of $70 million or 9% from the year-earlier quarter. This decrease was due to a $54 million write-off of premises and equipment and the recording of $66 million in restructuring charges in the fourth quarter of 2008 offset by a $55 million increase in salaries and staff benefits in the fourth quarter of 2009, in particular with respect to variable compensation. Occupancy costs of $55 million increased by $10 million, mainly due to charges for vacant premises.

For the year ended October 31, 2009, operating expenses decreased by $33 million to stand at $2,662 million. This decrease was mainly due to specified items in 2008, including professional fees related to the business process review and ABCP, a $54 million write-off of premises and equipment, and the recording of $66 million in restructuring charges. In addition, salaries and staff benefits increased $84 million in fiscal 2009 due to variable compensation and an increase in the number of resources involved in improving the Personal and Commercial segment's distribution model.

PROVISION FOR CREDIT LOSSES

In the fourth quarter of 2009, the Bank recorded a $54 million provision for credit losses, $5 million more than during the same quarter of 2008. This increase was mainly due to losses on personal loans and credit card receivables.

For the year ended October 31, 2009, the Bank recorded a provision for credit losses of $305 million, an increase of $161 million from the same period of 2008. This change was due to a $99 million increase in the allowance for commitments to extend credit to clients holding ABCP, to a $21 million increase in the provision for personal loan and credit card receivable losses, to a $24 million increase in the provision for corporate loan losses, and to a $29 million recovery of credit losses recorded in fiscal 2008.

As at October 31, 2009, gross impaired loans totalled $407 million, a $100 million increase from October 31, 2008 and owing to all types of loans but mainly corporate loans. As at October 31, 2009, the provisioning rate for impaired loans was 45.2% compared to 45.0% as at October 31, 2008.

INCOME TAXES

The income tax expense for the fourth quarter of 2009 was $69 million versus an income tax recovery of $23 million in the same quarter of 2008. For fiscal 2009, the income tax expense was $252 million, for an effective tax rate of 22%. During fiscal 2008, the income tax expense was $167 million and the effective tax rate was 21%.

Results by Segment

PERSONAL AND COMMERCIAL

The contribution of the Personal and Commercial segment was $231 million in the fourth quarter of 2009, an increase of $4 million from the same quarter of 2008. Net income totalled $112 million for the fourth quarter of 2009 compared to $122 million in the same quarter of 2008. Total revenues advanced $16 million or 3% to reach $587 million, and net interest income advanced $6 million to total $359 million for the quarter. This growth came from a solid increase in loan volumes, which rose 8% in the fourth quarter of 2009 compared to the same quarter of 2008, especially consumer loans. This growth was tempered by a narrowing of the net interest margin, which was 2.46% in the fourth quarter of 2009 versus 2.61% in the same quarter of 2008. However, the net interest margin stabilized compared to the previous quarter, when it was 2.47%.

Total revenues at Personal Banking rose $20 million to total $397 million, mainly due to growth in fees collected on loan prepayments. Loan and deposit volumes posted strong growth that was offset by a narrowing of net interest margins, in particular the net interest margin on deposits that was partially offset by a wider net interest margin on credit cards. At Commercial Banking, total revenues were $190 million in the fourth quarter of 2009 versus $194 million in the same quarter of 2008. The decrease was mainly due to lower foreign exchange revenues.

Operating expenses for the Personal and Commercial segment stood at $356 million in the fourth quarter of 2009, up $12 million from the same quarter last year, mainly due to substantial investments in sales force improvements, including branch hirings, deployments of new banking machines and the introduction of smart cards. The segment's provision for credit losses was up $22 million to total $66 million, mainly because of higher credit losses on personal loans and credit card receivables.

For fiscal 2009, net income for the Personal and Commercial segment totalled $504 million, unchanged from fiscal 2008. Total revenues for the segment rose by $62 million or 3% to total $2,294 million, mainly due to higher loan and deposit volumes. Total revenues at Personal Banking increased $42 million or 3%, while total revenues at Commercial Banking rose $20 million or 3%. The segment's provision for credit losses was $36 million higher than in the same period of 2008. This increase was attributable to losses of $42 million on personal loans and credit card receivables, offset by a $6 million decrease in losses at Commercial Banking. The efficiency ratio for fiscal 2009 was 58%, unchanged from the same period of 2008.

WEALTH MANAGEMENT

Net income for the Wealth Management segment totalled $26 million in the fourth quarter of 2009 compared to $45 million in the same quarter of 2008. The segment's total revenues stood at $191 million, as against $213 million in the fourth quarter of 2008. Net interest income was down $18 million, mainly due to a narrower spread on deposits. Operating expenses increased $6 million to total $153 million in the fourth quarter of 2009, mainly due to an increase in variable compensation and an adjustment to the allowance for vacant premises.

For fiscal 2009, net income for Wealth Management totalled $115 million compared to $153 million in the same period of 2008, a decrease of $38 million. Total revenues stood at $757 million, as against $834 million for fiscal 2008. The decrease was mainly due to lower transaction volume, the narrower spread on deposits, and assets under management and administration that on average remained lower than 2008 levels due to the downturn in stock markets. Operating expenses stood at $588 million, a $13 million improvement when compared to the $601 million in operating expenses recorded during fiscal 2008, mainly due to variable compensation.

FINANCIAL MARKETS

The Financial Markets segment posted net income of $140 million in the fourth quarter of 2009, up $72 million from the same quarter of 2008. The segment's total revenues amounted to $411 million compared to $133 million in the fourth quarter of 2008. Including non-controlling interest, fourth quarter revenues totalled $399 million compared to $254 million for the same quarter of 2008, for growth of 57%.

Trading activity revenues totalled $196 million for the quarter, up $131 million from the fourth quarter of 2008, mainly due to higher revenues from equity securities and fixed-income securities. The gains on available-for-sale securities totalled $20 million despite write-offs of $7 million, as against losses of $61 million in the fourth quarter of 2008. The increase in financial market fees and revenues from banking services were the result of a more favourable economic environment in 2009. The decline in Other revenues is mainly due to the gain on the sale of an interest in the subsidiary Asset Management Finance Corporation recorded in the fourth quarter of 2008. Operating expenses for the fourth quarter of 2009 stood at $179 million, up $27 million from the year-earlier quarter due to an increase in variable compensation, severance pay and charges for vacant premises. For the fourth quarter of 2009, the segment recorded a provision for credit losses of $8 million, up $4 million from the same quarter of 2008.

For fiscal 2009, net income for the segment totalled $503 million, up $116 million from the same period in 2008. Total revenues amounted to $1,429 million versus $992 million for fiscal 2008. Including non-controlling interest related to trading activities, revenues from Financial Markets totalled $1,431 million, up $242 million or 20% from the same period of 2008. This increase consisted mainly of higher trading activity revenues from equity securities and fixed-income securities and higher revenues from banking services, offset by a decrease in Other revenues, as previously described, and to a lower contribution from Maple Financial Group Inc. Operating expenses stood at $681 million, up $45 million when compared to fiscal 2008, attributable mainly to variable compensation. For fiscal 2009, the segment recorded a provision for credit losses of $26 million versus $2 million in fiscal 2008. This increase is explained by the economic conditions observed in 2009.



Financial Market revenues
(taxable equivalent basis(1))
(millions of dollars)

Q4 Fiscal
--------------------------------------------------------------------------
2009 2008 2009 2008
--------------------------------------------------------------------------

Trading activity revenues
Equity 68 43 206 148
Fixed income 110 (17) 387 91
Commodity and foreign
exchange 18 39 91 114
--------------------------------------------------------------------------
196 65 684 353
Financial market fees 59 28 227 223
Gains on available-for-sale
securities, net 20 (61) 93 64
Banking services 64 49 239 186
Other 60 173 188 363
--------------------------------------------------------------------------
Total(2) 399 254 1,431 1,189
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) See "Financial Reporting Method" on page 2.
(2) Excluding non-controlling interest.


OTHER

The Other heading of segment results posted a net loss of $37 million in the fourth quarter of 2009 versus a net loss of $165 million in the same quarter of 2008. Charges related to holding ABCP were negligible in the fourth quarter of 2009, whereas the 2008 results included $158 million in specified items, net of income taxes, consisting of $78 million in charges related to the impact of ABCP, a $44 million restructuring charge and a $36 million write-off of premises and equipment. For fiscal 2009, the net loss was $268 million, unchanged from fiscal 2008. Charges related to holding ABCP decreased by $59 million in 2009 compared to fiscal 2008, and an additional charge of $86 million was recorded in 2009 for a loss related to commitments to extend credit to clients holding ABCP. Other specified items, all of which relate to 2008 and are presented net of income taxes, include a $32 million gain on the sale of the Bank's subsidiary in Nassau, a $44 million restructuring charge, and a $36 million write-off of premises and equipment.

Balance Sheet

As at October 31, 2009, the Bank had total assets of $132.1 billion compared to $129.3 billion as at October 31, 2008. Loan and acceptance balances increased $2.4 billion despite the increase in securitized loans. In addition, cash, deposits with financial institutions, securities, and securities purchased under reverse repurchase agreements increased $2.4 billion while the fair value of derivative financial instruments decreased by $2.3 billion. The table below presents the main portfolios:



Average Monthly volumes
(millions of dollars)

October 2009 October 2008
--------------------------------------------------------------------------

Loans and acceptances(1)
Residential mortgages 23,700 23,400
Consumer loans 15,654 13,410
Credit card receivables 1,856 1,846
SME loans 16,355 15,421
Corporate loans 7,043 7,098
--------------------------------------------------------------------------
64,608 61,175
--------------------------------------------------------------------------

Deposits
Personal (balance) 34,609 33,098
Off-balance sheet personal
savings (balance) 71,849 64,108
Business 13,547 13,666
--------------------------------------------------------------------------
--------------------------------------------------------------------------

(1) Including securitized assets.


Loans and acceptances rose $3.4 billion, or 6%, since October 31, 2008, reaching $64.6 billion as at October 31, 2009. The increase came mainly from the increase in consumer loans, which grew 17% from a year earlier to $15.7 billion, owing to various partnerships and higher volumes of secured home equity lines of credit. This increase was due to higher demand for this product in place of traditional residential mortgage loans, which rose 1% to stand at $23.7 billion as at October 31, 2009. SME loans were up $0.9 billion or 6% year over year, totalling $16.4 billion as at October 31, 2009. Lastly, corporate loans decreased slightly, from $7.1 billion as at October 31, 2008 to $7.0 billion as at October 31, 2009.

The personal deposits balance was $34.6 billion as at October 31, 2009, up $1.5 billion, or 5%, from October 31, 2008. This increase reflects strong growth in traditional savings products and the CashPerformer high-interest savings account. Off-balance sheet personal savings administered by the Bank totalled $71.8 billion as at October 31, 2009, an increase of 12% from last year due to higher stock prices. Business deposits remained relatively stable and totalled $13.5 billion as at October 31, 2009.

As at October 31, 2009, the Bank's shareholders' equity was $6.5 billion compared to $5.5 billion as at October 31, 2008. This increase is partially explained by the issuance of Series 24 and 26 First Preferred Shares for an amount of $315 million. In addition, accumulated other comprehensive income totalled $96 million as at October 31, 2009 compared to a loss of $62 million as at October 31, 2008. This change was mainly due to unrealized gains on available-for-sale financial assets, net of fair value hedge transactions.



Shares and Stock Options as at October 31, 2009

Number
of shares $ million
-----------------------------------------------------------
First Preferred Shares
Series 15 8,000,000 200
Series 16 8,000,000 200
Series 20 6,900,000 173
Series 21 8,050,000 201
Series 24 6,800,000 170
Series 26 5,800,000 145
-----------------------------------------------------------
43,550,000 1,089
-----------------------------------------------------------
Common shares 161,201,125(1) 1,729
-----------------------------------------------------------
Stock options 7,798,096(1)
-----------------------------------------------------------
-----------------------------------------------------------

(1) As at November 27, 2009, there were 161,682,766 common shares
and 7,773,051 stock options outstanding.


MASTER ASSET VEHICLES

On January 21, 2009, the restructuring of third-party asset-backed commercial paper (ABCP) was finalized. A credit rating of "A" was assigned to the master asset vehicles I ("MAV I notes") and master asset vehicles II ("MAV II notes") of classes A-1 and A-2. On august 11, 2009, the MAV II Class A-2 notes were downgraded to BBB (low) and the rating "under review with negative implications" was maintained. MAV I Class A-2 notes were also placed "under review with negative implications." The ratings assigned to the Class A-1 notes issued by the MAVs were unaffected and remained at a rating of "A." During the last two quarters of 2009, credit spreads improved.

As at October 31, 2009, the face value of the ABCP held by the Bank was $1,954 million, of which $1,685 million was designated as Held-for-trading securities under the fair value option, and $269 million was classified in Available-for-sale securities. During the fourth quarter of 2009, the Bank received a total of $18 million in principal repayments related to the ABCP notes.

The table below provides a breakdown of the face value of the ABCP held by the Bank as at October 31, 2009:



(millions of dollars)
-----------------------------------------------------------
MAV I
Class A-1 604
Class A-2 553
Class B 94
Class C 39
IA tracking notes for ineligible assets 77
-----------------------------------------------------------
Total MAV I 1,367
-----------------------------------------------------------

MAV II
Class A-1 98
Class A-2 79
Class B 14
Class C 6
IA tracking notes for ineligible assets 11
-----------------------------------------------------------
Total MAV II 208
-----------------------------------------------------------
MAV III
TA tracking notes for traditional assets 85
IA tracking notes for ineligible assets 148
-----------------------------------------------------------
Total MAV III 233
-----------------------------------------------------------
ABCP not included in the Pan-Canadian
restructuring plan 146
-----------------------------------------------------------
Total 1,954
-----------------------------------------------------------
-----------------------------------------------------------


Establishing Fair value

To determine the value of the ABCP it is holding, the Bank has established ranges of estimated fair value. The carrying value of the ABCP held by the Bank in an investment portfolio as at October 31, 2009, designated as Held-for-trading securities was $1,147 million, and $78 million was classified in Available-for-sale securities. The notes held in an investment portfolio with one or more embedded derivatives were designated as Held-for-trading securities under the fair value option, and the other notes were classified in Available-for-sale securities. The table below provides a breakdown of the carrying value of ABCP held as at October 31, 2009:



(millions of dollars)
--------------------------------------------------------------
MAV I and MAV II 1,109
MAV III 72
ABCP not included in the Pan-Canadian
restructuring plan 44
--------------------------------------------------------------

Carrying value of the notes 1,225
Margin funding facilities (63)
--------------------------------------------------------------
Total 1,162
--------------------------------------------------------------
--------------------------------------------------------------


Since the carrying value of ABCP held by the Bank as at January 31, as at April 30 and as at July 31, 2009 was within the range of the estimated fair value established as at October 31, 2009, no change was made to the carrying value during the fourth quarter of 2009.

For fiscal 2009, a loss of $190 million was recorded in Gains (losses) on available-for-sale securities in the Consolidated Statement of Income following the implementation of the restructuring plan.

The Bank's valuation was based on its assessment of the conditions prevailing as at October 31, 2009, which may change in subsequent periods. The most significant assumptions for determining the fair value of the notes are the observable discount rates and the credit ratings of the notes. Fair value sensitivities to these assumptions as at October 31, 2009 were as follows:

- A 10-basis-point change in the discount rate would result in a $9 million decrease or increase in the fair value;

- A decrease in the credit rating by one letter grade would result in a fair value decrease within a range of $60 million and $80 million; and

- An increase in the credit rating of one letter grade would result in an increase in the fair value between a range of $50 million and $65 million.

Determining the fair value of ABCP is complex and involves an extensive process that includes the use of quantitative modeling and relevant assumptions. Possible changes that could have a material effect on the future value of the ABCP include (1) changes in the value of the underlying assets, (2) changes regarding the liquidity of the market for ABCP, which are not currently traded on an active market and (3) the impacts of a severe and prolonged economic slowdown in North America.

Credit Facilities to Clients Holding MAV Notes

During the first quarter of 2009, the Bank recorded a provision for credit losses of $126 million related to new credit facilities offered to clients holding MAV notes. A general allowance for credit risk for ABCP-secured loans of $23 million had been recorded during fiscal 2008. These amounts are included in Allowances for credit losses in the Consolidated Balance Sheet. These allowances are based on the Bank's assessment of the value of the collateral at the maturity date of the loans and are mainly due to the credit facilities secured by notes backed by ineligible assets.

As at October 31, 2009, the improved credit facilities outstanding stood at $285 million. In total, the collateral related to the credit facilities offered to clients is estimated as follows:



Credit facilities
Credit facilities related to
related to other notes
notes backed included in the
Collateral Face value by ineligible restructuring
(millions of dollars) of the notes assets(1) plan(2)
------------------------------------------------------------------
MAV II
Class A-1 423 - 327
Class A-2 405 - 311
Class B 73 - 56
Class C 28 - 22
IA tracking notes for
ineligible assets 130 94 -
------------------------------------------------------------------
Total MAV II 1,059 94 716
------------------------------------------------------------------
MAV III
TA tracking notes for
traditional assets 45 - 27
IA tracking notes for
ineligible assets 156 130 -
------------------------------------------------------------------
Total MAV III 201 130 27
------------------------------------------------------------------
Total 1,260 224 743
------------------------------------------------------------------
------------------------------------------------------------------

(1) These credit facilities represent 75% of the face value of the
notes and are guaranteed by the notes.
(2) These credit facilities represent 75% of the face value of the
notes, of which 30% are full recourse to the borrower and 45%
guaranteed by the notes.


The Bank had also provided credit facilities to borrowers for their liquidity needs until the improved credit facilities were made available. As at October 31, 2009, these credit facilities outstanding represented $53 million with recourse to the borrowers.

Capital

Tier 1 and total capital ratios, according to the rules of the Bank for International Settlements (BIS) - Basel II, stood at 10.7% and 14.3%, respectively, as at October 31, 2009, compared to 9.4% and 13.2% as at October 31, 2008. The increase in the capital ratios was attributable to the issuance of two series of preferred shares during the first quarter of 2009 in an amount of $315 million, mitigated by the repurchase of $250 million in subordinated debentures in the second quarter of 2009. If these ratios had been calculated using the former BIS rules (Basel I), they would have been 11.5% and 15.2%, respectively, as at October 31, 2009.

As at October 31, 2009, the risk-weighted assets calculated under the rules of Basel II were stable and totalled $58.6 billion compared to $58.1 billion as at October 31, 2008. Risk-weighted assets calculated under Basel I would have been $56.3 billion as at October 31, 2009.

Subject to Superintendent approval, National Bank will use the advanced approach for credit risk to calculate its capital ratios starting in the first quarter of 2010. The impact of using this approach will be an increase in Tier 1 capital of 125 to 150 basis points.



CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
(unaudited) (millions of dollars)

October 31, 2009 July 31, 2009 October 31, 2008
------------------------------------------------------------------------

ASSETS
Cash 296 671 254
------------------------------------------------------------------------
Deposits with financial
institutions 1,932 1,501 3,406
------------------------------------------------------------------------
Securities
Available-for-sale 13,281 14,917 12,322
Held-for-trading 36,952 41,048 33,863
50,233 55,965 46,185
Securities purchased
under reverse
repurchase agreements 7,637 5,812 7,868
Loans
Residential mortgage 14,961 14,726 15,366
Personal and credit card 18,313 17,805 15,695
Business and government 20,003 20,419 21,149
------------------------------------------------------------------------
53,277 52,950 52,210
Allowances for credit losses (640) (494) (469)
------------------------------------------------------------------------

52,637 52,456 51,741
------------------------------------------------------------------------

Other
Customers' liability under
acceptances 5,733 5,305 4,274
Fair value of derivative
financial instruments 7,516 7,832 9,814
Premises and equipment 362 265 259
Goodwill 746 742 740
Intangible assets 397 386 384
Amounts due from clients,
dealers and brokers 2,578 1,649 2,273
Other assets 2,071 2,005 2,134
------------------------------------------------------------------------
19,403 18,184 19,878
------------------------------------------------------------------------
132,138 134,589 129,332
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
Personal 34,609 34,539 33,098
Business and government 36,698 34,021 36,872
Deposit-taking institutions 3,638 7,451 5,827
Deposit from NBC Capital Trust 225 225 225
------------------------------------------------------------------------
75,170 76,236 76,022
------------------------------------------------------------------------

Other
Acceptances 5,733 5,305 4,274
Obligations related to
securities sold short 13,221 15,743 15,829
Securities sold under
repurchase agreements 12,736 13,522 7,151
Fair value of derivative
financial instruments 5,947 7,007 8,588
Amounts due to clients,
dealers and brokers 3,017 1,124 2,389
Other liabilities 6,623 6,088 5,286
------------------------------------------------------------------------
47,277 48,789 43,517
------------------------------------------------------------------------
Subordinated debentures 2,017 2,023 2,255
------------------------------------------------------------------------
Non-controlling interest 1,197 1,231 2,029
------------------------------------------------------------------------

Shareholders' equity
Preferred shares 1,089 1,089 774
Common shares 1,729 1,700 1,656
Contributed surplus 48 43 31
Retained earnings 3,515 3,392 3,110
Accumulated other
comprehensive income 96 86 (62)
------------------------------------------------------------------------
6,477 6,310 5,509
------------------------------------------------------------------------
132,138 134,589 129,332
------------------------------------------------------------------------
------------------------------------------------------------------------



CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income
(unaudited) (millions of dollars)

Quarter ended Fiscal year ended
--------------------------------------------------------------------------
October July October October October
31, 2009 31, 2009 31, 2008 31, 2009 31, 2008
--------------------------------------------------------------------------

Interest income
Loans 447 452 737 2,029 2,974
Available-for-sale
securities 41 102 37 399 213
Held-for-trading
securities 161 213 220 756 865
Deposits with financial
institutions 1 4 9 12 207
650 771 1,003 3,196 4,259
Interest expense
Deposits 142 167 190 820 1,685
Subordinated debentures 27 26 30 102 98
Other 16 124 164 308 624
--------------------------------------------------------------------------
185 317 384 1,230 2,407
--------------------------------------------------------------------------
Net interest income 465 454 619 1,966 1,852
--------------------------------------------------------------------------

Other income
Underwriting and advisory
fees 81 83 49 329 312
Securities brokerage
commissions 58 56 60 220 240
Deposit and payment
service charges 58 58 58 230 228
Trading revenues (losses) 47 41 (228) 12 (329)
Gains (losses) on
available-for-sale
securities, net 20 31 (210) (97) (88)
Card service revenues 10 10 9 37 42
Lending fees 40 45 27 140 106
Insurance revenues 32 31 32 117 119
Revenues from
acceptances, letters of
credit and guarantee 36 34 22 119 77
Securitization revenues 58 95 62 351 226
Foreign exchange revenues 26 27 34 110 121
Trust services and mutual
funds 88 84 89 327 354
Other 73 83 142 270 377
--------------------------------------------------------------------------
627 678 146 2,165 1,785
--------------------------------------------------------------------------
Total revenues 1,092 1,132 765 4,131 3,637
Provision for credit
losses 54 46 49 305 144
--------------------------------------------------------------------------
1,038 1,086 716 3,826 3,493
--------------------------------------------------------------------------

Operating expenses
Salaries and staff
benefits 403 381 348 1,538 1,454
Occupancy 55 46 45 192 177

Technology 100 96 152 390 445
Communications 18 19 22 76 78
Professional fees 52 42 60 180 214
Restructuring charges - - 66 - 66
Other 72 79 77 286 261
--------------------------------------------------------------------------
700 663 770 2,662 2,695
Income (loss) before
income taxes (recovery)
and non-controlling
interest 338 423 (54) 1,164 798
Income taxes (recovery) 69 110 (23) 252 167
--------------------------------------------------------------------------
269 313 (31) 912 631
Non-controlling interest 28 10 (101) 58 (145)
--------------------------------------------------------------------------
Net income 241 303 70 854 776
Dividends on preferred
shares 16 16 11 59 32
--------------------------------------------------------------------------
Net income available to
common shareholders 225 287 59 795 744
--------------------------------------------------------------------------
Number of common shares
outstanding (thousands)
Average - basic 161,034 160,322 159,382 160,263 158,663
Average - diluted 162,276 161,236 159,818 160,901 159,255
End of period 161,201 160,604 159,447 161,201 159,447
--------------------------------------------------------------------------
Earnings per common share
(dollars)
Basic 1.40 1.79 0.37 4.96 4.69
Diluted 1.39 1.78 0.37 4.94 4.67
Dividends per common
share (dollars) 0.62 0.62 0.62 2.48 2.48
--------------------------------------------------------------------------
--------------------------------------------------------------------------



CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive income
(unaudited) (millions of dollars)

Quarter ended Fiscal year ended
--------------------------------------------------------------------------
October July October October October
31, 2009 31, 2009 31, 2008 31, 2009 31, 2008
--------------------------------------------------------------------------

Net income 241 303 70 854 776
--------------------------------------------------------------------------

Other comprehensive
income, net of income
taxes

Net unrealized foreign
currency gains (losses)
on translating financial
statements of
self-sustaining
foreign operations (11) (176) 367 (185) 513
Impact of hedging net
foreign currency
translation gains
or losses (2) 151 (294) 156 (404)
--------------------------------------------------------------------------

Net change in unrealized
foreign currency
translation
gains and losses,
net of hedging
activities (13) (25) 73 (29) 109
--------------------------------------------------------------------------

Net unrealized gains
(losses) on
available-for-sale
financial assets 56 73 (136) 265 (156)
Reclassification to net
income of (gains)
losses on
available-for-sale
financial assets (15) (40) 34 (94) (51)
--------------------------------------------------------------------------
Net change in unrealized
gains and losses on
available-for-sale
financial assets,
net of fair
value hedge transactions 41 33 (102) 171 (207)
--------------------------------------------------------------------------

Net gains (losses) on
derivative financial
instruments designated
as cash flow hedges (4) (89) 126 62 206
Reclassification to net
income of (gains) losses
on derivative financial
instruments designated
as cash flow hedges (15) (16) (6) (46) (7)
--------------------------------------------------------------------------
Net change in gains and
losses on derivative
financial instruments
designated as cash
flow hedges (19) (105) 120 16 199
--------------------------------------------------------------------------
Total other comprehensive
income (loss), net of
income taxes 9 (97) 91 158 101
--------------------------------------------------------------------------

Comprehensive income 250 206 161 1,012 877
--------------------------------------------------------------------------
--------------------------------------------------------------------------



INCOME TAXES - OTHER COMPREHENSIVE INCOME
(unaudited) (millions of dollars)

The income tax charge or recovery for each component of other
comprehensive income is presented in the following table:

Quarter ended Fiscal year ended
--------------------------------------------------------------------------
October July October October October
31, 2009 31, 2009 31, 2008 31, 2009 31, 2008

Net unrealized foreign
currency gains (losses)
on translating financial
statements of
self-sustaining foreign
operations (2) (6) 10 (8) 15
Impact of hedging net
foreign currency
translation gains or
losses - 56 (110) 63 (155)
Net unrealized gains
(losses) on
available-for-sale
financial assets 27 31 (60) 118 (70)
Reclassification to net
income of (gains) losses
on available-for-sale
financial assets (6) (18) 14 (41) (23)
Net gains (losses) on
derivative financial
instruments designated
as cash flow hedges (7) (40) 57 22 94
Reclassification to net
income of (gains) losses
on derivative financial
instruments designated
as cash flow hedges (7) (7) (2) (21) (2)
--------------------------------------------------------------------------
Total income taxes
(recovery) 5 16 (91) 133 (141)
--------------------------------------------------------------------------
--------------------------------------------------------------------------



CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Shareholders' equity
(unaudited) (millions of dollars)

Fiscal year ended October 31 2009 2008
--------------------------------------------------------------------------
Preferred shares at beginning 774 400
Issuances of preferred shares, Series 20, 21, 24
and 26 315 374
--------------------------------------------------------------------------
Preferred shares at end 1,089 774
--------------------------------------------------------------------------

Common shares at beginning 1,656 1,575
Issuances of common shares
Dividend Reinvestment and Share Purchase Plan 29 17
Stock Option Plan 42 41
Acquisitions - 24
Other 2 (1)
--------------------------------------------------------------------------
Common shares at end 1,729 1,656
--------------------------------------------------------------------------

Contributed surplus at beginning 31 32
Stock option expense 13 11
Stock options exercised (6) (6)
Other 10 (6)
--------------------------------------------------------------------------
Contributed surplus at end 48 31
--------------------------------------------------------------------------
Retained earnings at beginning 3,110 2,793
Net income 854 776
Dividends
Preferred shares (59) (32)
Common shares (398) (394)
Share issuance expenses and others,
net of income taxes 8 (33)
--------------------------------------------------------------------------
Retained earnings at end 3,515 3,110
--------------------------------------------------------------------------

Accumulated other comprehensive income at
beginning, net of income taxes (62) (163)
Net change in unrealized foreign currency
translation gains
(losses), net of hedging activities (29) 109
Net change in unrealized gains (losses) on
available-for-sale financial assets,
net of fair value hedge transactions 171 (207)
Net change in gains (losses) on derivative
financial instruments designated
as cash flow hedges 16 199
--------------------------------------------------------------------------
Accumulated other comprehensive income at end,
net of income taxes 96 (62)
--------------------------------------------------------------------------

Shareholders' equity 6,477 5,509
--------------------------------------------------------------------------
--------------------------------------------------------------------------



RETAINED EARNINGS AND ACCUMULATED OTHER COMPREHENSIVE INCOME,
NET OF INCOME TAXES
(unaudited) (millions of dollars)

As at October 31 2009 2008
--------------------------------------------------------------------
Retained earnings 3,515 3,110
--------------------------------------------------------------------

Accumulated other comprehensive income, net of
income taxes
Unrealized foreign currency translation gains and
losses, net of hedging activities (100) (71)
Unrealized gains and losses on available-for-sale
financial assets, net of fair value hedge transactions 32 (139)
Gains and losses on derivative financial
instruments designated as cash flow hedges 164 148
--------------------------------------------------------------------
96 (62)
--------------------------------------------------------------------

Total 3,611 3,048
--------------------------------------------------------------------
--------------------------------------------------------------------


Caution Regarding Forward-Looking Statements

From time to time, National Bank of Canada (the Bank) makes written and oral forward-looking statements, such as those contained in the "Major Economic Trends and Challenges" section and under the heading "Medium-term objectives" in the "Overview" section of the 2008 Annual Report, in other filings with Canadian securities regulators and in other communications, for the purpose of describing the economic environment in which the Bank will operate during fiscal 2010 and the objectives it has set for itself for that period. All such statements are made pursuant to the "safe harbour" provisions of Canadian and U.S. securities legislation. These forward-looking statements include, among others, statements with respect to the economy (particularly the Canadian and U.S. economies), market changes, observations regarding the Bank's objectives and its strategies for achieving them, Bank projected financial returns and certain risks faced by the Bank. These forward-looking statements are typically identified by future or conditional verbs or words such as "outlook," "believe," "anticipate," "estimate," "project," "expect," "intend," "plan," and words and expressions of similar import.

By their very nature, such forward-looking statements require assumptions to be made and involve inherent risks and uncertainties, both general and specific. Assumptions about the performance of the Canadian and U.S. economies in 2010 and how that will affect the Bank's business are among the primary factors considered in setting the Bank's strategic priorities and objectives and in determining its financial targets, including provisions for credit losses. It is likely that personal and commercial bankruptcies will increase in the coming quarters, due to the financial and credit crisis that marked fiscal 2009. In determining its expectations for economic growth, both broadly and particularly in the financial services sector, the Bank primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies.
Tax laws in the countries in which the Bank operates, primarily Canada and the United States, are major factors it considers when establishing its effective tax rate. There is a strong possibility that express or implied projections contained in such statements will not materialize or will not be accurate. The Bank recommends that readers not place undue reliance on these statements, as a number of important factors, many of which are beyond the Bank's control, could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in these forward-looking statements. These factors include, but are not limited to, the management of credit, market and liquidity risks; the strength of the Canadian and U.S. economies and the economies of other countries in which the Bank conducts business; the impact of the movement of the Canadian dollar relative to other currencies, particularly the U.S. dollar; the effects of changes in monetary policy, including changes in interest rate policies of the Bank of Canada and the U.S. Federal Reserve; the effects of competition in the markets in which the Bank operates; the impact of changes in the laws and regulations regulating financial services and enforcement thereof (including banking, insurance and securities); judicial proceedings, regulatory proceedings or claims, class actions or other recourses of various nature; the situation with respect to asset-backed commercial paper (ABCP), in particular the realizable value of underlying assets; the Bank's ability to obtain accurate and complete information from or on behalf of its clients or counterparties;
the Bank's ability to successfully realign its organization, resources and processes; its ability to complete strategic acquisitions and integrate them successfully; changes in the accounting policies and methods the Bank uses to report its financial condition, including uncertainties associated with critical accounting assumptions and estimates; the Bank's ability to recruit and retain key officers; operational risks, including risks related to the Bank's reliance on third parties to ensure access to the infrastructure essential to the Bank's business as well as other factors that may affect future results, including changes in trade policies, timely development of new products and services, changes in estimates relating to reserves, changes in tax laws, technological changes, unexpected changes in consumer spending and saving habits; natural disasters; the possible impact on the business from public health emergencies, conflicts, other international events and other developments, including those relating to the war on terrorism; and the Bank's success in anticipating and managing the foregoing risks. A substantial amount of the Bank's business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank's financial results, businesses, financial condition, or liquidity.

The foregoing list of risk factors is not exhaustive. Additional information about these factors can be found under "Risk Management" and "Factors That Could Affect Future Results" in the 2008 Annual Report. Investors and others who base themselves on the Bank's forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. The Bank also cautions readers not to place undue reliance on these forward-looking statements. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time, by it or on its behalf.

The forward-looking information contained in this document is presented for the purpose of interpreting the information contained herein and may not be appropriate for other purposes.

INFORMATION FOR SHAREHOLDERS AND INVESTORS

DISCLOSURE OF FOURTH QUARTER 2009 RESULTS

Conference Call

- A conference call for analysts and institutional investors will be held on December 3, 2009 at 1:30 p.m. ET.

- Access by telephone in listen-only mode: 1-866-223-7781 or 416-340-8018.

- A recording of the conference call can be heard until December 10, 2009 by calling 1-800-408-3053 or 416-695-5800. The access code is 7824042#.

Webcast

- The conference call will be webcast live at www.nbc.ca/investorrelations.

- A recording of the webcast will also be available on the Internet after the call.

Financial Documents

- The quarterly financial statements are available at all times on National Bank's website at www.nbc.ca/investorrelations.

- Supplementary Financial Information and a slide presentation will be available on the Investor Relations page of National Bank's website shortly before the start of the conference call.

- The audited consolidated financial statements and the MD&A for fiscal 2009 will soon be available on National Bank's website.

Contact Information

  • Patricia Curadeau-Grou
    Chief Financial Officer
    and executive Vice-President
    Finance, Risk and Treasury
    514-394-6619
    or
    Jean Dagenais
    Senior Vice-President
    Finance, Taxation and Investor Relations
    514-394-6233
    or
    Denis Dube
    Senior Director
    Public Relations
    514-394-8644
    or
    Helene Baril
    Senior Director
    Investor Relations
    514-394-0296