Canadian bank earnings reports
Canada’s Big Six banks are releasing their quarterly earnings. Here’s what they said this week.
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Canada’s Big Six banks are releasing their quarterly earnings. Here’s what they said this week.
The third-quarter results are in.
National Bank of Canada reported a third-quarter profit of $1.03 billion, up from $830 million a year ago, helped by strength across its operations. The Montreal-based bank said Wednesday its net income amounted to $2.89 per diluted share for the quarter ended July 31, up from $2.33 per diluted share a year earlier. Revenue for the quarter totalled $3 billion, up from $2.49 billion in the same quarter last year.
The bank’s provision for credit losses, the amount it sets aside to cover bad loans, totalled $149 million for the quarter, up from $111 million a year earlier. On an adjusted basis, National Bank says it earned $2.68 per diluted share in its most recent quarter, up from an adjusted profit of $2.18 in the same quarter last year. The average analyst estimate had been for an adjusted profit of $2.49 per share, according to LSEG Data & Analytics.
“Our strong financial results for the third quarter reflect our diversified earnings mix and solid credit profile as well as disciplined execution across the Bank,” National Bank chief executive Laurent Ferreira said in a statement. “With our prudent approach to capital, credit, and costs, we remain well-positioned in a complex macro environment and we look forward to the growth opportunities ahead.”
The bank said its personal and commercial operations earned $366 million in the third quarter, up from $319 million in the third quarter of last year, helped by growth in total revenue. National Bank’s wealth management business earned $217 million in its latest quarter, up from $183 million in the same quarter last year. The bank’s financial markets business earned $318 million in the quarter, up from $205 million a year earlier, while its U.S. specialty finance and international operations earned $158 million, up from $128 million. National Bank’s “other” category reported a loss of $26 million in its latest quarter compared with a loss of $5 million in the same quarter in 2023.
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Royal Bank of Canada reported a third-quarter profit of $4.49 billion, up from $3.86 billion a year earlier. The bank says its net income amounted to $3.09 per diluted share for the quarter ended July 31 compared with a profit of $2.73 per diluted share in the same quarter last year. Revenue totalled $14.63 billion, up from $12.98 billion a year ago, while the bank’s provision for credit losses for the quarter amounted to $659 million, up from $616 million in the same quarter last year.
RBC says the addition of HSBC Bank Canada increased its net income by $239 million for the quarter. On an adjusted basis, RBC says it earned $3.26 per diluted share, up from an adjusted profit of $2.83 per diluted share a year ago. The average analyst estimate had been for an adjusted profit of $2.97 per share, according to LSEG Data & Analytics.
“Our Q3 results demonstrate that RBC continues to operate from a position of strategic and financial strength with solid revenue growth and momentum underpinned by a strong balance sheet, robust capital position and prudent risk management,” RBC chief executive Dave McKay said in a statement. RBC said its personal and commercial banking operations earned $2.49 billion, up from $2.13 billion in the same quarter last year.
The bank’s wealth management arm earned $862 million, up from $663 million a year earlier, while its insurance business earned $170 million, down from $215 million in the same quarter last year. RBC’s capital markets business earned $1.17 billion in its latest quarter, up from $949 million a year ago. The bank’s corporate support group lost $208 million in the quarter compared with a loss of $101 million in the same quarter last year.
Trouble in BMO Financial Group’s loan book has once again weighed on its quarterly results, prompting analyst worries about the bank becoming an outlier in this credit cycle. The bank on Tuesday reported provision for credit losses amounted to $906 million for its third quarter, up from $492 million a year earlier, as it reported adjusted earnings that were down from last year.
Chief executive Darryl White said the scale of the loan loss provisions did not meet the bank’s expectations and that it expects those provisions to stay elevated in the near term. “The combination of prolonged high interest rates, economic uncertainty and changing consumer preferences had an acute impact,” said White.
The bank emphasized that while some segments like trucking and commercial loans have been under pressure, overall, the uptick in potential losses aren’t concentrated geographically or by sector. Instead it’s more of a broad unwinding of the unusual credit environment caused by the pandemic, where borrowers who got low interest rates and free money through government stimulus are getting hit by the higher rates and consumer pullback.
“It covers up a lot of problems which then can come back later,” said White.
While the Bank of Canada has already started reducing its benchmark interest rate and the U.S. Federal Reserve is expected to soon begin as well, it will take time for the strain to ease and some companies will struggle, he said. “For some of those instances, it’s just too late. And what we’re seeing is therefore, you know, a faster rise with higher losses than we’ve seen.”
Chief risk officer Piyush Agrawal said the shift in provisions is difficult to predict quarter to quarter as there’s heightened unpredictability. “These are hard to call,” he said. “You’re going through a cycle where you’ve got a company for sale with 10 bidders and all of a sudden, there’s nobody at the end, they all go away.”
The third quarter rise in provisions put the bank’s ratio of impaired loans to net loans at 0.5%, up from 0.21% a year ago and up from 0.41% in the second quarter. The rise in third quarter provisions came after the bank reported an unexpected increase last quarter as well that saw its share price drop almost nine per cent on the day.
On Tuesday, the bank’s shares closed down 6.45% at $112.04 on the Toronto Stock Exchange. The second earnings miss because of credit issues prompted Jeffries analyst John Aiken to downgrade the bank on a worsened credit outlook. “While we do expect that underlying growth will accelerate in BMO’s U.S. platforms, we no longer believe that it will be sufficient to offset the credit headwinds.”
The bank reported adjusted profits of $2.64 per diluted share in its latest quarter, down from an adjusted profit of $2.94 per diluted share in the same quarter last year. Analysts on average had expected BMO to earn an adjusted profit of $2.76 per share for the quarter, according to to LSEG Data & Analytics. Revenue for the quarter totalled $8.19 billion, up from $8.05 billion in the same quarter a year ago. Unadjusted profits were $1.87 billion, up from $1.57 billion last year.
While results outside the credit provisions looked better than expected, it wasn’t enough to outweigh concerns about the bank’s loan book, said Scotiabank analyst Meny Grauman in a note. “After a big credit-focused miss in Q2, the market was laser focused on credit heading into Q3 reporting, and it is unfortunate that this is where the issues are once again,” he said. “The bottom line is that fears that BMO is in fact the outlier of this credit cycle will continue to weigh on the shares.”
The Bank of Nova Scotia saw third-quarter profits fall compared with a year ago as it boosted its provisions for bad loans, even as the bank says it’s seeing some levelling out of the financial stress on Canadian consumers. The bank reported Tuesday it had $1.05 billion set aside for bad loans in the quarter, up from $819 million a year earlier, but increasing only slightly from the $1.01 billion last quarter. The amount of impaired loans, the kind the bank doesn’t reasonably expect full repayment on, actually fell for Canadian banking in the third quarter compared with the second, to $338 million from $399 million.
“I continue to be impressed by how resilient the Canadian consumer has been through this period, the trade-offs that they continue to make,” said Phil Thomas, chief risk officer at Scotiabank. The trend is clearly coming through on variable-rate mortgages, he said, which have also started to benefit from the Bank of Canada starting to cut rates. Scotia is also seeing a levelling-off in its auto loans, an area it’s been signalling as stressed for about a year, said Thomas.
“I was really encouraged this quarter to see we’re finally stable as it relates to net write offs in that portfolio,” he said. “One quarter is not a trend, but I’m encouraged by what I’m seeing this quarter. And even as I look into next quarter, I see stability in these portfolios moving forward.”
Scotiabank has a much smaller credit card portfolio than some other Canadian banks, but its unsecured credit line trend seems to no longer be getting worse, Thomas said. “I am super encouraged by the fact that this quarter, the levels of delinquency or any stress seem to be levelling off.”
While stabilizing, higher loan loss provisions did weigh on profits that amounted to $1.91 billion or $1.41 per diluted share for the quarter ended July 31 compared with a profit of $2.19 billion or $1.70 per diluted share a year ago. On an adjusted basis, Scotiabank says it earned $1.63 per diluted share, down from an adjusted profit of $1.72 per diluted share in the same quarter last year. Analysts on average had expected Scotiabank to earn an adjusted profit of $1.62 per share for the quarter, according to to LSEG Data & Analytics. Revenue totalled $8.36 billion, up from $8.07 billion in the same quarter last year.
Earlier in August, Scotiabank announced it would pay about USD$2.8 billion for a 14.9% stake in the U.S. bank KeyCorp in two stages. Some analysts have worried about the bank possibly devoting lots of cash to buy even more of the bank, but chief executive Scott Thomson said Tuesday that the deal was about getting increased exposure to the U.S. at a good price. “Our investment in KeyCorp represents a low cost low-risk approach to deploying capital in the U.S. banking market at a time when valuations are favourable and as the regulatory and competitive environment evolves.”
TD Bank Group’s second-quarter profit fell 22% from last year as it booked costs related to a high-profile failure of its U.S. anti-money laundering program. The bank had warned of the $615-million initial charge it was taking in connection with its talks with U.S. regulators, allowing analysts to adjust projections that the bank then handily beat. “It was a strong quarter for TD with all of our businesses outperforming expectations,” said chief executive Bharat Masrani on an earnings call Thursday, after reiterating the bank’s mea culpa on its anti-money laundering controls. )
Read the full article about TD’s earning report: Why is TD’s profit down?
Canadian Imperial Bank of Commerce reported its third-quarter profit rose compared with a year ago as it set aside less money for bad loans. CIBC said Thursday its net income totalled $1.80 billion or $1.82 per diluted share in for the quarter ended July 31, up from $1.43 billion or $1.47 per diluted share in the same quarter last year. Revenue totalled $6.60 billion, up from $5.85 billion. CIBC’s provision for credit losses for the quarter amounted to $483 million, down from $736 million a year earlier.
On an adjusted basis, CIBC says it earned $1.93 per diluted share in its latest quarter compared with an adjusted profit of $1.52 per diluted share in the same quarter last year. Analysts on average had expected an adjusted profit of $1.74 per share, according to LSEG Data & Analytics.
“Our strong third-quarter results reflect the consistent, disciplined execution of our client-focused strategy and the diversification of our North American platform as we continue to create value for our stakeholders,” CIBC chief executive Victor Dodig said in a statement.
CIBC’s Canadian personal and business banking business earned $628 million in its latest quarter, up from $499 million in the same quarter last year, helped by higher revenue and a lower provision for credit losses, partially offset by higher expenses. The bank’s Canadian commercial banking and wealth management earned $468 million, up from $467 million a year earlier, while its U.S. commercial banking and wealth management business earned $215 million, up from $73 million a year ago. CIBC’s capital markets and direct financial services unit earned $388 million for the third quarter, down from $494 million in the same quarter last year. The bank’s corporate and other unit reported a profit of $96 million in its latest quarter compared with a loss of $101 million a year ago.
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These bank profits are a disgrace when so many people Are finding it difficult to put food on the table.