Dec. 4 (Bloomberg) -- Canadian Imperial Bank of Commerce and Toronto-Dominion Bank said fourth-quarter profits dropped as the worst financial crisis since the Great Depression led to record debt writedowns at Canadian lenders.

CIBC, Canada’s fifth-biggest bank, said net income for the period ended Oct. 31 fell 51 percent to C$436 million ($345 million), or C$1.06 a share. Toronto-Dominion, Canada’s second- biggest bank, and National Bank of Canada, the No. 6 lender, reported profits that matched preliminary results released last month.

The three lenders posted C$2.26 billion in pretax writedowns in the quarter from the eroding values of investments, adding to about C$2.3 billion taken by Bank of Montreal, Bank of Nova Scotia and Royal Bank of Canada. Canadian banks had writedowns of C$11.6 billion in the previous 12 months.

“This is your kitchen sink quarter. You chuck in everything,” said Gavin Graham, director of investments at BMO Asset Management, which runs the equivalent of about $42.7 billion in assets, including bank shares. “The debt writedowns are a reflection of the slowing economy.”

Toronto-Dominion fell 58 cents, or 1.4 percent, to C$41.92 at 4:10 p.m. in trading on the Toronto Stock Exchange. CIBC rose 88 cents, or 1.9 percent, to C$46.18. National Bank fell C$2.27, or 6 percent, to C$35.55.

More Writedowns

CIBC benefited from a C$895 million pretax gain on a funding obligation that went away, a favorable foreign-exchange rate and a C$463 million tax benefit related to failed energy trader Enron Corp., partly offset C$1.62 billion in losses and writedowns tied to debt investments. The bank has taken more writedowns than any Canadian lender during the financial crisis.

Excluding one-time items, Canadian Imperial said it earned C$1.57 a share, beating the C$1.55-a-share median estimate of 11 analysts polled by Bloomberg News. CIBC set aside C$222 million for bad loans, up 68 percent from a year ago.

“We are hard pressed to recommend CIBC’s stock as the fourth quarter demonstrated way too many moving parts to have any confidence in limiting future writedowns,” said Dundee Securities Corp. analyst John Aiken, who cut CIBC stock to “sell” from “neutral” after the results.

Consumer banking profit fell 46 percent to C$523 million from a year earlier, when the bank benefited from a C$381 million gain from selling its stake in the Visa Inc. credit-card company. Investment banking earned C$133 million in the quarter after recording a C$726 million income-tax benefit, compared with a loss of C$112 million a year earlier.

Tier 1 Capital

Canadian Imperial appointed director Charles Sirois chairman effective Feb. 26, replacing William Etherington, who’s retiring.

CIBC said its Tier 1 capital ratio climbed to 10.5 percent from 9.8 percent in the previous quarter, the highest among Canadian banks. Tier 1 capital is a measure of a bank’s financial strength, based on its equity as a percentage of risk-weighted assets.

Toronto-Dominion recorded its first credit costs since the start of the financial crisis, including C$525 million in trading losses, as net income fell 7.3 percent to C$1.01 billion, or C$1.22 a share.

Canadian consumer banking profit climbed 4.9 percent to C$600 million because of higher fees from mortgages and personal lending.

“They’ve got the most attractive market network in Canada,” said Pierre Bernard, who helps manage about $1 billion in assets at Industrial Alliance Fund Management in Montreal. “That’s a huge advantage.”

U.S. Consumer Banking

Asset-management profit fell 12 percent to C$170 million because of lower profit from its investment in TD Ameritrade Holding Corp., the No. 3 U.S. online brokerage.

U.S. consumer banking earnings doubled to C$251 million. Toronto-Dominion has spent more than $15 billion over the past four years expanding into U.S. consumer banking, including the acquisitions of Portland, Maine-based TD Banknorth and Cherry Hill, New Jersey-based Commerce Bancorp Inc.

Montreal-based National Bank reported profit of C$70 million, or 37 cents a share, compared with a year-earlier loss of C$175 million, or C$1.14 a share. The bank said that consumer banking profit increased 7 percent and asset-management earnings surged 62 percent to C$47 million.

None of the lenders today offered specific profit targets for 2009. Toronto-Dominion Chief Executive Officer Edmund Clark said in a conference call with investors that it’s “reasonable” to expect per-share earnings to increase in fiscal 2009. National Bank CEO Louis Vachon said during a separate call that he expects per-share earnings to grow 5 percent to 10 percent in the “mid- term.”

Debt Writedowns

“The Canadian economy has been fairly resilient,” National Bank Chief Financial Officer Patricia Curadeau-Grou said today in a telephone interview. “However, going forward in the first two quarters, we think that’s where we will start getting some slight impact of what’s happening in the U.S.”

Canadian banks have reported only a fraction of the $720 billion in writedowns recorded globally by banks and brokers, according to Bloomberg data.

Last week, Bank of Montreal said profit climbed 24 percent to C$560 million after it had year-earlier trading losses and credit writedowns. Bank of Nova Scotia said Dec. 2 that earnings dropped 67 percent to C$315 million.

Royal Bank of Canada, the country’s largest bank, is scheduled to report results tomorrow. The bank said on Nov. 24 it expects profit to drop about 15 percent to C$1.1 billion.

(CIBC will hold a conference call at 4:30 p.m. To listen, dial +1-416-340-8010 or +1-866-540-8136.)

To contact the reporters on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net. Doug Alexander in Toronto at dalexander3@bloomberg.net

Last Updated: December 4, 2008 16:23 EST