08/30/2012 05:04 EDT | Updated 10/30/2012 05:12 EDT

National Bank keeps a lid on dividend despite 13 per cent growth in Q3 profits

MONTREAL - The National Bank of Canada isn't following the dividend-increasing example of the country's large banks, even though the Quebec-based bank's profits grew by 13 per cent in the third quarter to $379 million.

The country's sixth-largest bank, which raised the quarterly payout three months ago, kept it steady at 79 cents per share, it said after markets closed. Its payout ratio was 33 per cent in the quarter, 39 per cent excluding one-time items.

Canada's five largest banks all increased their dividends over the past couple of days after earning $7.8 billion in cumulative profits.

Montreal-based National Bank (TSX:NA) said net income attributable to shareholders increased to $360 million from $318 million. Its earnings equalled $2.14 per diluted share, up 14 per cent from $1.87 in the prior year.

Adjusting for one-time items it earned $353 million, or $1.98 per diluted share, up from $334 million, or $1.86 per diluted share, in the prior year. The amount attributable to shareholders grew to $334 million from $316 million in the third quarter of 2011.

Revenues grew 11 per cent to $1.2 billion.

The bank's adjusted earnings per share beat analysts of $1.90 per share by eight cents. Revenues were mostly in line with forecasts for $1.25 billion of revenues, according to analysts polled by Thomson Reuters.

Return on equity was 21.3 per cent, or 19.9 per cent on an adjusted basis.

"For the third quarter of 2012, our three business segments delivered good earnings growth," said president and CEO Louis Vachon.

He said the personal and commercial segment lending remained strong and the wealth management segment progressed well following the integration of recent acquisitions.

National's focus on Canadian capital markets and client-driven activities continued to yield results for its financial markets segment.

"In the coming quarters, we plan on maintaining tight cost control as we navigate a volatile economic environment while still enhancing our infrastructures to better serve clients," he added.

National earned $189 million in the personal and commercial segment, a 13 per cent increase from $168 million posted last year on greater business activity and a stringent control over operating expenses. Revenues increased by $25 million year on $13 million higher interest income and a $12 million increase in other income.

Personal Banking's total revenues rose $20 million, mainly due to higher loan volumes, especially consumer and mortgage loans, partly offset by a narrowing of net interest margins. Card revenues, lending fees and insurance revenues were also up. Commercial banking's total revenues rose by $5 million.

Provisions for credit losses — or the money set aside to cover bad loans — were $8 million lower, as lower provisions for losses on business loans and credit card receivables offset higher provisions for personal credit losses.

Financial Markets net income was $121 million, up from $99 million in the same quarter of 2011. On a taxable equivalent basis, third-quarter total revenues amounted to $338 million compared to $305 million a year earlier.

Wealth Management profits grew $3 million to $34 million as revenues increased by $21 million to $241 million mainly from the acquisitions of Wellington West Holdings Inc. and the full-service investment advisory business of HSBC Securities (Canada) Inc.

The bank announced the sale Wednesday of independent financial planning firm Wellington West Financial Services Inc. to Manulife Financial for an undisclosed price.

National Bank acquired Winnipeg-based Wellington West Holdings Inc. last year for $273 million. Its Wellington West Capital Inc. division — an investment arm active in the energy and mining sectors — was rebranded National Bank Financial last November and was not part of the deal announced Wednesday.

Founded in 1859, National is the largest bank based in Quebec and second-largest financial institution in the province.

On the Toronto Stock Exchange, National's shares closed at $75.12, down 81 cents in Thursday trading.