National Bank (TSX:NA) Q3 Revenue Growth Tests Bullish Narrative on Margin Resilience

National Bank of Canada (TSX:NA) has laid out another solid quarter for FY 2025, with Q3 revenue of about CA$3.2 billion, basic EPS of CA$2.61, and net income of CA$1,023 million setting the tone for the latest results. The bank has seen revenue climb from CA$2,847 million in Q3 2024 to roughly CA$3.2 billion in Q3 2025, while trailing 12 month EPS sits at CA$10.25 alongside a 31.1% net profit margin that has edged down from 33%. This leaves investors weighing resilient topline momentum against some pressure on profitability.

See our full analysis for National Bank of Canada.

With the headline numbers on the table, the next step is to see how this mix of steady revenue growth and slightly softer margins lines up with the dominant narratives investors follow around National Bank of Canada’s long term outlook.

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Loan Book Nears CA$295 Billion With Rising Non Performing Loans

• Total loans have climbed to about CA$294.7 billion in Q3 FY 2025, up from CA$240.7 billion a year earlier, while non performing loans have more than doubled over that span from CA$1.4 billion to CA$3.3 billion.
• Consensus narrative highlights strong balance sheet and commercial loan growth as a key driver of revenue, yet the increase in non performing loans from CA$2.0 billion in Q4 FY 2024 to CA$3.3 billion now raises a clear question about how much of that growth is coming with higher credit risk.
  • Analysts see expanding commercial lending and secular demand for credit as positives for long term revenue, but the relatively low bad loan allowance level of 60% sits alongside this CA$3.3 billion of stressed loans.
  • This combination supports the growth focused story on the asset side, while also giving some weight to more cautious views that focus on credit quality and future provisions.

Strong commercial and balance sheet growth is drawing attention, but the climb in non performing loans makes the bullish story more nuanced for credit focused investors. 🐂 National Bank of Canada Bull Case

Cost To Income Ratio Stays Above 50%

• The cost to income ratio sits at 52.4% in Q3 FY 2025, slightly above 50.2% in Q1 FY 2025 and close to 53.1% seen in Q3 FY 2024, showing that operating efficiency has not yet seen a clear structural improvement.
• Bears argue that ongoing technology and strategic investments could keep pressure on profitability, and the relatively flat cost to income profile, alongside net profit margin easing from 33% to 31.1% over the past year, gives some support to that concern.
  • Management has been investing in digital transformation and integration projects that are expected to improve efficiency, but the current 52 to 53% cost to income band suggests those benefits are not fully visible in the reported ratios yet.
  • With earnings forecast to grow only about 3.75% per year despite revenue growth near 9.8%, the present cost base and slightly lower margins fit the bearish focus on expense and margin pressure.

Investors watching the expense line will notice that efficiency ratios and margins are still working hard to keep pace with revenue growth. 🐻 National Bank of Canada Bear Case

Valuation Mixes Premium P E With DCF Upside

• The shares trade at about 17.5 times earnings, above both peer averages of roughly 14.1 times and the wider North American banks at 11.5 times, even though the DCF fair value of CA$226.72 sits well above the current share price of CA$168.40.
• Consensus narrative points to a solid long term earnings record, with trailing twelve month EPS around CA$10.25 and a five year earnings growth rate near 10% per year, but the more modest forecast earnings growth of roughly 3.75% per year and net margin easing to 31.1% illustrate why some investors question paying a P E premium even if the DCF model indicates upside.
  • The dividend yield of 2.8% and multi year earnings growth record back the idea of a durable franchise, which aligns with a higher intrinsic value in the DCF work.
  • At the same time, the lower recent earnings growth versus the longer term trend, combined with a higher than peer P E, helps explain why the market price has not moved closer to the DCF fair value.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for National Bank of Canada on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your National Bank of Canada research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

National Bank of Canada pairs decent revenue growth with rising non performing loans, sticky cost to income ratios, and only modest forward earnings expansion, which collectively pressure returns.

If those credit and efficiency headwinds concern you, use our screener containing 1013 highly profitable stocks with low debt to quickly focus on financially stronger businesses that convert disciplined balance sheets into consistently higher quality earnings.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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