Source: The Canadian Press

National Bank says it is not abandoning its expansion efforts in English Canada despite refocusing its investment bank business to target small- and medium-sized companies in the energy and mining sector.

“Most of our growth will continue to come from outside of Quebec, it’s really just a refocus,” Ricardo Pascoe, co-chief executive of National Bank Financial, said in an interview.

The bank plans to add 10 new branches in 2011, seven in Quebec and three in Ontario.

Shares of the Montreal-based bank recovered from Tuesday’s drop caused by word of the layoff of 35 employees, hitting an all-time high Wednesday after National became the first big Canadian bank to boost its dividend in more than two years.

The bank’s stock peaked at $70.09 on the Toronto Stock Exchange before losing some ground in later trading, closing up $2.08, or 3.07%, at $69.92.

National Bank Financial is restructuring some operations as it looks to pare costs and target resources on areas where it can become a market leader.

In addition to changes in equity underwriting, it will focus on government financing, corporate debt underwriting, corporate lending and derivatives.

Pascoe said National will still trade stocks from all companies, including many large cap names and continue to provide research for most companies as the coverage by departing analysts is reassigned.

The bank said the restructuring is unrelated to any acquisition and that it doesn’t plan to buy an institutional equity platform to replace staff cut from its trading, research and equity sales departments.

The focus will remain unchanged in its Quebec base where it is the province’s largest investment bank and is only behind the Desjardins Group as an overall financial services institution.

“In Quebec, because of our history and our relative position in the market, we have the ability to be No. 1 in pretty much everything that we try,” Pascoe added.

“Outside of Quebec we’re going to pick areas of focus where we can become leaders.”

National Bank (TSX:NA) announced Tuesday after the close of stock markets that it would increase its quarterly dividend by 6%, or four cents, to 66 cents, and suggested that additional increases are possible.

It plans to return to a previous policy of considering future dividend increases every two quarters as it aims to enhance its payout ratio to between 40 and 50% of earnings.

“We’ll just take it every two quarters and see how it goes and over time we know our dividend should increase in line with our earnings,” CEO Louis Vachon said during a conference call.

National Bank earned $287 million, or $1.66 per share, for the period ended Oct. 31, compared with $241 million or $1.39 a year earlier.

Revenue for the bank’s fourth quarter held steady at $1.1 billion.

Adjusting for one-time items, the bank earned $1.63 per share, six cents more than the average analyst estimate polled by Thomson Reuters.

For its full financial year, National Bank earned $1.03 billion, or $5.94 per diluted share, on $4.28 billion in revenue. That compared with $854 million, or $4.94 per share, on $4.13 billion in revenue in 2009.

The adjusted profit of $6.25 per share was higher than the $6.19 expected by analysts on $4.45 billion of revenues.

National Bank expects that its commercial banking business will grow next year as macroeconomic uncertainties and the high Canadian dollar force many companies to spend to boost productivity or sell their businesses.

Vachon said more than one-third of its new commercial lending volume in 2009 resulted from business sales or divestments. “We believe that we are well positioned for this rising trend in the coming years,” he told analysts.

Analysts raised their share price targets for the bank in light of the strong results and the likely further increase in dividends and share repurchases.

The bank announced a new normal course issuer bid to repurchase up to 3% of its outstanding shares. The timing of repurchases will depend on operating results and further clarification of Basel III rules governing capital ratios.

John Aiken of Barclays Capital increased his 12-month target by $6 to $72, saying the results were “reasonably strong.”

“Based on our earnings forecast, we anticipate that investors could see another increase announced as early as the second quarter,” he wrote in a report.

Michael Goldberg of Desjardins Securities said the dividend increase was double his expectation, “sending a strong signal of confidence.”

“National continues to demonstrate that it has been keen on making a concerted effort to grow and strengthen its Canadian personal and commercial platform, and to a lesser extent, its wealth management business. The results were clear this quarter,” he wrote in a report.

Founded in 1859, National Bank has more than 18,000 employees and $145.3 billion of assets.