National Bank of Canada Earnings Call Insights: Credit Line Outlook and New Mortgage Platform
National Bank of Canada (NA) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.
Credit Line Outlook
Sumit Malhotra – Macquarie Capital Markets Canada: First question is in regards to credit quality and the outlook there. Certainly your credit metrics have been very accommodating, so any increase that we see is from a low base, but I wanted to kind of take your temperature, whether this is for Louis or Bill, we’ve seen some choppier employment trends, probably thinking back over the last couple of months, given the PCL guidance remaining unchanged for the next couple of quarters. It doesn’t sound like you’re overly worried, but can you give us maybe some flavor for what you’re seeing on the ground and why those numbers on the implement side may or may not be something we should worry about in terms of credit?
Louis Vachon – President and CEO: Sumit, it’s Louis. I’ll take the first crack at it, then I’ll pass the baton. I’ll let Bill pick up the damage after that. First of all, you’ve heard my speech before on Quebec being a no boom no bust economy. I think that still remains very much relevant. In that context, we’ve had as you know, lower loan losses for at least 10 years, lower than national average. As you know, our growth has been over the last few years, very much more on secured lending as opposed unsecured lending. The other thing too in Quebec you have significantly lower house prices. So, that means that people to purchase a home, particularly outside of Montreal do not have to borrow as much to acquire a home, also there are less home owners in Quebec. We still have more renters. So when you look at all that, when we look at our numbers and I think it’s been validated, I think (indiscernible) really just came out recently with a survey and looked at the average debt to income ratio and their numbers for 2012 show Quebec at 1.1 average debt income ratio and national average at 1.36. So generally I think Quebec consumers are less indebted than national average and also we have a lower – less debt and lower house prices. So I think the odds are quite high that we are talking probabilities here. I am not talking to world uncertainty. But I think looking from what we see in our portfolio right now and even looking forward for the next few years I think the odds are – continue to be quite high, that our loan portfolio will continue to outperform the industry average going forward. Bill?
William Bonnell – EVP, Risk Management: Sure. I will add to that on that Louis talked about the economic view. I will just say that when we look at our portfolio the key quality indicators remain – they look very, very solid. So when I look at mortgages I see that our (weakened) scores and probably the default measures have actually improved year-on-year and we are stable quarter-over-quarter. Delinquencies, when you exclude the acquired portfolios are lower quarter-on-quarter and stable year-over-year. Our LTVs remain in the mid-50s for the non-insured mortgages and clients have continued to fix their rates, protect themselves from the higher rates. Other indicators we look at in terms of credit card losses and delinquencies continue to decline and improve. So we when looking at the metrics from our portfolio we are very comfortable maintaining for the next couple of quarters, maintaining our guidance at 20 to 30 weeks…