Why National Bank of Canada (TSX:NA) Stock Climbed 39% in 2021

The top Quebec bank stock National Bank of Canada (TSX:NA) put together a great performance in 2021. Can that continue this year?

| More on:
edit Four girl friends withdrawing money from credit card at ATM

Image source: Getty Images

Canadian banks returned to form in 2021 on the back of a broader economic rebound and significantly lower provisions set aside for credit losses. National Bank (TSX:NA) is the smallest of the Big Six Canadian bank stocks. However, it should not fly under your radar. Shares of National Bank increased 39% in 2021. Today, I want to explore what was behind its big year and discuss whether it can continue to build momentum.

Here’s why this top Quebec bank stock soared last year

In late November, I’d discussed why I was targeting bank stocks based in Quebec. The province of Quebec delivered the strongest economic growth in 2021, bouncing back in a big way from a brutal 2020. However, that momentum may be threatened by the rise of the Omicron COVID-19 variant, as the provincial government pursues harsh restrictions.

The bank released its fourth-quarter and full-year 2021 earnings on December 1. Net income was reported at $776 million, or $2.19 per diluted share — up 58% and 61%, respectively, from the fourth quarter of 2020. Meanwhile, net income for the full year increased 53% or 57% to $3.17 billion or $8.96 per diluted share. National Bank delivered strong total revenue growth and benefited from a big drop in provisions set aside for credit losses.

National Bank delivered strong results in each segment. Net income in Personal and Commercial Banking jumped 64% from the prior year to $1.26 billion. Meanwhile, Wealth Management net income jumped 22% to $655 million. Its Financial Markets segment posted net income growth of 25% to $923 million. Moreover, U.S. Finance and International net income increased 58% to $555 million.

Should investors be optimistic in 2022?

National Bank commented on the progress of the COVID-19 pandemic in its final batch of results. It stated that it would continue to monitor the ongoing crisis. However, it remains confident in its ability to deliver strong growth under the current environment. Indeed, financial institutions have been able to thrive in the face of the pandemic after the initial shocks of early 2020.

Investors can expect to see National Bank’s first quarter 2022 earnings on February 22. There is reason for continued optimism, as the bank has delivered strong growth in each business segment. Like many of its peers, National Bank possesses a phenomenal balance sheet that makes it a dependable hold going forward. How does its value look at the start of 2022?

Bottom line: Should you buy or sell this bank stock today?

Shares of National Bank last possesses a price-to-earnings ratio of 11. That puts the bank stock in favourable value territory at the time of this writing. The bank increased its quarterly dividend by $0.16 to $0.87 per share in the final quarter of 2021. That represents a 3.5% yield. National Bank still offers attractive value even after surging in the previous year. I’m still looking to snatch up this top bank stock in early January.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Bank Stocks