National Bank of Canada: Morningstar Highlights a Cautious Outlook

Morningstar’s coverage of National Bank of Canada highlights a cautious outlook, assigning the bank a C$118 fair value estimate, indicating that shares currently appear overvalued despite stable fundamentals. The firm notes that National Bank’s latest earnings were slightly disappointing, with adjusted net income up 8% year over year and earnings per share up 9%, though the bank’s organic growth lagged larger peers that reported double-digit increases.

Morningstar also acknowledges meaningful progress on the Canadian Western Bank acquisition, with National Bank now expecting to achieve its C$270 million cost-savings target by fiscal 2026, one year ahead of schedule, and projecting C$200–C$250 million in revenue synergies by fiscal 2028. Looking ahead, the bank anticipates mid-single-digit mortgage growth, high-single-digit commercial loan growth, and a slightly improving net interest margin in fiscal 2026, prompting Morningstar to expect a high-single-digit increase to its fair value estimate, but shares would still appear overvalued.

The firm also points out that strong 34% growth in capital markets earnings and favorable market conditions, including a 23% rise in the S&P/TSX, may not be sustainable. Finally, Morningstar warns that macro uncertainty, including unresolved U.S.–Canada trade negotiations and steady impaired-loan provisioning of 25–35 basis points, continues to weigh on the bank’s risk outlook.