National Bank of Canada beat analyst expectations in its fiscal second quarter, powered by strength across major business segments and a smaller-than-expected reserve for bad loans.

The earnings surprise came despite the bank setting aside less than anticipated for loan-loss provisions, signaling healthier asset quality. Investors had hoped the beat would spark a rally, but the stock actually fell as sentiment turned cautious.

The share drop points to a familiar tension: solid quarterly results against nagging valuation concerns. Markets are questioning whether current multiples reflect the growth on display, leaving National Bank caught between reporting strength and facing pressure from expensive valuations.