UPDATE 2-Canada bank shares rise on National Bank results

* Shares of Canada’s No. 6 bank rises 2.9 pct

* Ups dividend by 6.5 pct, earlier than some had expected

* Profits tops estimates, boost other bank shares
(Updates shares to close)

By Cameron French

TORONTO, Dec 1 (BestGrowthStock) – National Bank of Canada (NA.TO: )
shares rose 2.9 percent to touch a record high on Wednesday
after the bank reported a surprisingly strong quarterly profit
and raised its dividend for the first time in three years.

The bank’s 19 percent profit gain also gave a modest lift
to shares of Canada’s other big banks, most of whom report
results over the next two days.

The dividend hike — the bank raised its quarterly payout
by 4 Canadian cents to 66 Canadian cents — makes National the
first major Canadian lender to resume dividend increases in the
wake of the financial crisis.

Canada’s banking regulator recently gave the all-clear to
the banks to resume big capital payouts such as dividend hikes
following a virtual two-year ban, but some analysts had
expected the bank to wait before making the move.

“We expected National Bank would be among the first to
raise its dividend but we were expecting an increase in (first
quarter 2011),” RBC Capital Markets analyst Andre-Philippe
Hardy said in a research note.

National’s shares rose C$1.98 to C$69.82 after touching a
record high of C$70.09 earlier in the day.

The dividend increase puts National’s payout ratio — the
percentage of profit the bank commits to dividends — around
the bottom end of its traditional 40-50 percent target range.

Patricia Curadeau-Grou, the bank’s chief financial officer,
said National wasn’t changing the target, but would exercise
restraint for the next few months until the impact of new Basel
III bank regulations becomes clear.

“We’re going to keep it in the (bottom end) for the
percentage” until the bank gets a better sense of its own
profitability and the economic landscape, she told Reuters.

“There’s different uncertainties right now, but you have to
give us some time to confirm what our plan is for the ongoing
increase in dividends.”

Other big Canadian banks are widely expected to wait until
next year to begin raising their payouts, although tiny
Canadian Western Bank (CWB.TO: ) has said it could make a move
when it reports next week.

STRONG PROFIT LIFTS SECTOR

National Bank’s profit, excluding items, was C$1.63 a share
in the quarter ended Oct. 31, it said late on Tuesday.

That topped analysts’ expectations for a profit of C$1.57 a
share, and gave a small boost to the shares of other Canadian
banks as investors hoped for similar results.

“It could at least foreshadow that we’re going to have a
reasonable result from the banks this quarter,” said Craig
Fehr, an analyst at Edward Jones in St. Louis, Missouri.

The Toronto Stock Exchange’s S&P/TSX financials index
(.SPTTFS: ) rose 1.7 percent on Wednesday, and was among the
strongest sectors on the market.

Canadian Imperial Bank of Commerce (CM.TO: ) and
Toronto-Dominion Bank (TD.TO: ) will report quarterly results on
Thursday, followed by Royal Bank of Canada (RY.TO: ) and Bank of
Nova Scotia (BNS.TO: ) on Friday. Bank of Montreal (BMO.TO: ) will
release its results next week.

On a conference call to discuss the results, National Bank
Chief Executive Louis Vachon said the bank aims to generate
growth outside its home province of Quebec, and will seek
acquisitions on the wealth management side of its business.

Other Canadian banks and insurers have also been trying to
raise their wealth management presence as the business offers
stronger profit growth than retail banking, but less risk than
wholesale banking.

National is also restructuring its financial markets
division to focus on equity sales to mid-cap miners and energy
producers.

The overhaul, which prompted the bank to cut 37 jobs, is
not related to any pending acquisitions, Curadeau-Grou said.

($1=$1.02 Canadian)
(Reporting by Cameron French; editing by Peter Galloway)

UPDATE 2-Canada bank shares rise on National Bank results