Fitch Affirms National Bank of Canada at 'A+'; Outlook Stable

Published July 31, 2026 at 11:11 a.m. UTC

Source: MarketScreener

Fitch Ratings has affirmed National Bank of Canada's (NBC) and its subsidiary NBC Global Finance Limited's (NBCGF) Long- and Short-Term Issuer Default Ratings (IDRs) at 'A+' and 'F1', respectively.

The Rating Outlook is Stable. Fitch has also affirmed the Short-Term IDR of National Bank of Canada New York Branch (NBCNY) at 'F1'.

Key Rating Drivers

The ratings are influenced by NBC's growing national franchise, its strength in key banking sector niches, consistently higher comparative profitability, prudent underwriting, strong capitalization and stable deposit funding.

Growing National Footprint As the sixth-largest bank in Canada, NBC's market position is relatively smaller on a national basis. It enjoys a dominant position in its home province of Quebec, where it has a deposit market share of around 20%, as well as leading positions in SME and corporate lending. With its acquisition of Canadian Western Bank (CWB), NBC has accelerated its pan-Canadian growth by enabling the extension of full-service banking to CWB's client base. This will allow NBC to grow its personal and commercial segments.

Superior profitability: NBC has constantly produced strong earnings as measured by operating profitability-to-risk-weighted asset, which is at the top of the peer range at 3.6%. NBC's profitability is aided by a good split between net interest and non-interest related income that makes the bank less reliant on spread income, in addition to, historically low loan loss provisions, and product diversity. Furthermore, NBC has made significant progress on CWB's cost and revenue synergies and is on track to meet its targets by end of 2026.

Rigorous Risk Management: NBC's risk profile is stable and reflects its conservative underwriting and diversified commercial loan exposure. Credit growth has historically been focused on niche segments where NBC has deep expertise, which has helped contain loan losses. NBC has now absorbed CWB's loan portfolio, which is mostly commercial and complements NBC's portfolio. Underwriting was robust and only a small number of loans were demarketed.

Asset Quality Distortion: NBC has experienced some asset quality deterioration over the last year as it absorbed CWB's portfolio, which more than doubled commercial impaired loans. Additionally, NBC has seen a rise in impaired loan formation at its Cambodian subsidiary, ABA Bank. In Canadian personal banking, NBC has had lower loan impairments because it has less exposure than peers to unsecured retail lending and uninsured residential mortgages. Fitch expects this pressure to continue over the next few quarters, and write-offs remain negligible.

Capital Ratios Supportive of Ratings: As of 2Q26, NBC's common equity Tier 1 (CET1) ratio was 13.54%, which is within the middle of its peer range. The bank's capital profile benefits from strong earnings generation, low credit losses, good use of mortgage insurance, and moderate loan growth.

Strong Funding and Liquidity: NBC's funding and liquidity as measured by loans-to-deposits at 93% (2Q26) remains favorable compared to peers. Support comes from excess liquidity and deposits collected through the bank's deposit network, including commercial accounts.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Negative ratings pressure could result from NBC's CET1 ratio approaching or falling below 12% on a sustained basis;

The ratings would also be sensitive to impaired loans rising above 2% of gross loans on a sustained basis, resulting in a structural decline of operating profitability to below that of similarly rated peers;

Negative rating pressure could also result from large trading losses or any material conduct or operational losses that indicate lapses in internal controls.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Sustaining strong, consistent profitability at or around 3% operating profit to RWA;

Maintaining a sound, disciplined risk appetite, as reflected in relatively low trading and loan losses;

Continuing to improve NBC's business profile through geographic diversification, reducing exposure to Quebec below 50% of total loans and reducing dependence on capital-markets- related businesses to below 25% of revenue.

OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS

NBC's IDR references the senior resolution debt (formerly senior unsecured, or bail-in debt), as the Canadian bail-in regime is phasing out senior unsecured (formerly senior preferred or legacy senior debt), and is rated in line with NBC's VR.

NBC's senior unsecured derivative counterparty ratings (DCRs) and long-term deposits are rated two notches higher than NBC's VR. This reflects the exclusion of these obligations from bail in, as well as the increased creditor protection from the very large resolution debt buffer.

NBC's subordinated debt is rated two notches below NBC's VR for loss severity, in line with baseline notching under Fitch criteria. NBC's preferred stock is rated four notches below NBC's VR - two notches for non-performance and two notches for loss severity - in line with baseline notching under Fitch criteria.

Government Support Rating (GSR): BNS's 'ns' (no support) GSR reflects the agency's view that senior creditors cannot rely on receiving full extraordinary support from the sovereign if BNS becomes nonviable. In Fitch's view, the implementation of the Bank Recapitalization (Bail-in) Regime provides a framework for resolving banks that are likely to require senior creditors participating in losses, if necessary, instead and ahead of, or in conjunction with, the provision of sovereign support

OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES

NBC's IDR is sensitive to changes in its VR.

NBC's senior unsecured debt, DCR and long-term deposit ratings are primarily sensitive to changes in NBC's VR. Senior unsecured and DCR ratings would also be downgraded if the resolution debt buffers fell below 15% of RWAs.

NBC's Short-Term IDR is primarily sensitive to changes in NBC's Long-Term IDR.

NBC's short-term deposit rating is primarily sensitive to changes in NBC's long-term deposit rating and Funding and Liquidity profile.

NBC's subordinated debt rating and preferred share ratings are primarily sensitive to a change in NBC's VR.

GSR: There is limited likelihood that the GSR will change over the foreseeable future.

SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS

NBCGF's LT IDR, ST IDR, and Shareholder Support Rating (SSR) are equalized with NBC's IDRs at 'A+', 'F1', and 'a+', respectively, reflecting the high probability of support from NBC. NBCGF is NBC's primary entity with operations in the European Economic Area and is key to NBC's Capital Markets business lines in Europe.

Since NBCNY is the same legal entity as NBC, its short-term ratings are the same as NBC's.

SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES

NBCGF's SSR and IDRs would be sensitive to any negative changes in NBC's IDRs or Outlook. Further, it would be sensitive to Fitch's view of NBC's ability and propensity to provide support.

NBCNY's ratings are sensitive to the same negative/positive factors that could drive a change in NBC's Short-Term IDR.

VR ADJUSTMENTS

The earnings & profitability score of 'aa-?' is above the 'a' category implied score due to the following adjustment reasons: earnings stability (positive) and historical and future metrics (positive).

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.