The great head of the National Bank does not yet see a recession on the horizon. At least not for now.
Posted at 6:54 am
Updated at 4:09 pm
“The most likely scenario for the Canadian economy is a slowdown, a soft landing,” said Laurent Ferreira on Wednesday on the sidelines of the National Bank’s quarterly results presentation.
“While inflation has recently shown signs of slowing, it remains too high. The Bank of Canada should continue to raise interest rates next month to curb demand and ease inflationary pressures. Central banks will start to focus on the impact of rate hikes on unemployment and potentially adjust accordingly. »
Interest rates should, he says, normalize in the fall to just above the 3% mark. In this scenario, the unemployment rate should stabilize at just over 5.5% in 2023, she said.
The Canadian economy remains strong in the eyes of the CEO.
There is an excess of savings. The unemployment rate is very low. And the high price of raw materials is a boon to the country’s economy.
Laurent Ferreira, Executive Director of the National Bank
He notes, however, that the current environment is “complex and uncertain”, dominated by high inflation, rising interest rates and heightened geopolitical risks.
As the official launch of the Quebec election campaign approaches, Laurent Ferreira believes that short-term uncertainty (the next 6 to 12 months) should be set aside and that the main economic issue should be long-term growth.
“I firmly believe in the reindustrialization of Quebec,” he said in an interview.
This is also a priority of the current government, adds Laurent Ferreira. “In the context of the energy transition, we have a lot to contribute. The province could exercise leadership. And even globally. »
For him, creating wealth in industries that will benefit Quebec’s economy in the very long term is the best way to position himself against inflation.
“The energy transition is a very important phenomenon for the planet. But it is also very inflationary for the economy in the long run. The best way to position yourself is to participate in the supply chain. If we implement promising policies that attract capital and talent to Quebec based on this energy transition, we will be well positioned to create wealth and fight inflation in the long run. »
He is thinking in particular of the battery sector and new energy sources.
Results in line with expectations
The profits of the sixth largest banking institution in the country reached 826 million for the months of May, June and July, 2% less year-on-year.
This result is equivalent to $2.35 per share, while analysts expected $2.34.
Management notes that the deteriorating macroeconomic outlook has led to an increase in loan loss provisions. A year ago, the more favorable macroeconomic environment had led to a reversal of loan loss provisions on non-credit-impaired loans.
Analyst Mike Rizvanovic at Stifel calls the quarterly performance “strong” overall, noting that it’s also better than those reported so far by the other major Canadian banks, namely Royal and Scotia.
CIBC and TD are due to publish their results on Thursday, while BMO will do so next Tuesday.
While Royal shares lost 2.6% on the Toronto Stock Exchange on Wednesday, National Bank shares fell 1%.
National Bank also announced on Wednesday the appointment of Étienne Dubuc to the role of Executive Vice President and Co-Head of Financial Markets. He will officially hold this position together with the current incumbent, Denis Girouard, from 1Ahem november.
Étienne Dubuc will join the bank’s management team and will report to the CEO.
Étienne Dubuc is currently Executive Vice President and General Manager, Head of Equities, Currencies and Commodities, and Co-Head of Financial Markets Risk Management Solutions. He has worked at the bank for 23 years.
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