RBC, CIBC and Toronto-Dominion Raise Dividends

Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce raised their dividends after reporting third-quarter profits that beat analysts’ estimates on consumer lending.

Royal Bank, the country’s biggest lender, said profit for the period ended July 31 rose 73 percent to a record C$2.24 billion ($2.26 billion). Toronto-Dominion, the second-biggest bank, said net income climbed 14 percent to C$1.7 billion, or C$1.78 a share, while CIBC said profit rose 42 percent to C$841 million, or C$2 a share.

The three Toronto-based lenders join Bank of Montreal and Bank of Nova Scotia in raising dividends this week as gains in consumer lending and higher trading revenue helped the world’s soundest banks report earnings that topped estimates.

The banks raised their payouts while forecasting that loan and revenue growth may slow in the next few quarters as the housing market cools and tapped-out consumers with record debt levels borrow less.

“Investors definitely feel there’s more of a value being placed on dividend yield in this low interest-rate environment,” Colleen Johnston, chief financial officer of Toronto-Dominion, said today in a phone interview. “We’re seeing good loan growth and deposit growth -- it’s slowing down a little bit, which is very much expected given the environment.”

Topped Estimates

Royal Bank rose 0.7 percent to C$54.96 at 4 p.m. in Toronto. Toronto-Dominion fell 1.1 percent to C$80.65. CIBC fell 1.4 percent to C$75.35.

Royal Bank said it earned C$1.31 a share excluding items, beating the C$1.18-a-share average estimate of 15 analysts surveyed by Bloomberg News. Toronto-Dominion reported adjusted profit of C$1.91 a share, topping the C$1.83-a-share estimate, while CIBC, the fifth-biggest bank, reported adjusted earnings of C$2.06 a share, above the C$1.96-a-share average estimate.

“Royal reported one of the strongest quarters of its peers reported to date, leveraging the strength of its domestic retail platform,” John Aiken, an analyst with Barclays Plc, said today in a note. “However, similar with CIBC, expectations remain that domestic retail revenues should face headwinds.”

Canadian banking profit at Royal Bank rose to a record C$1.13 billion, up 27 percent from a year ago, on growth of deposits, mortgages and loans.

Slowdown Expected

Government figures showing Canada’s current account deficit expanded to the widest in almost two years as exports fell, adds to evidence the economy may have lost momentum in the second quarter. Statistics Canada reports second-quarter gross domestic product tomorrow and economists forecast annualized growth of 1.6 percent after 1.9 percent in the first quarter.

“You’d have to expect some slowdown” in housing, said David McKay, head of Canadian consumer lending at Royal Bank, on a conference call. “We’ve come through a very strong spring mortgage season.”

Profit at the RBC Capital Markets investment-banking business rose 88 percent to C$486 million from C$259 million a year earlier, as trading revenue more than doubled.

Toronto-Dominion said Canadian banking profit climbed 8.7 percent to a record C$864 million, bolstered by loan and deposit growth from last year’s acquisition of the MBNA Canada credit-card portfolio from Bank of America.

Profit from the bank’s TD Securities investment-banking business rose 61 percent to C$180 million, fueled by higher trading revenue. Trading-related income more than tripled to C$360 million from a year ago, driven by interest-rate and credit, the bank said.

Energy Acquisition

CIBC’s earnings were aided by higher profit from consumer lending and business banking, which rose 7.8 percent to C$594 million from the year-earlier period. The bank also posted profit gains in wealth management and its investment-banking unit, as trading revenue more than doubled to C$122 million from a year ago.

CIBC also said it agreed to buy Griffis & Small LLC, a Houston-based energy advisory firm specializing in takeovers in the exploration and production sector. The price of the deal, which is expected to close in the fourth quarter, wasn’t disclosed.

Royal Bank unexpectedly raised its dividend 5.3 percent to 60 cents a share, its first increase since March. Toronto-Dominion raised its payout 5.4 percent to 77 cents a share, and raised its payout range to between 40 percent and 50 percent of earnings, up from 35 percent to 45 percent. CIBC increased its payout for the first time in a year, to 94 cents.

Royal Bank said separately that it appointed David Denison, former CEO of Canada Pension Plan Investment Board, as a director.

Canadian Western Bank, the country’s eighth-largest lender, reported late yesterday that it had had record net income of C$48 million, or 61 cents a share. Montreal-based National Bank of Canada, the No. 6 lender, also reports today.

(Toronto-Dominion will host a conference call at 3 p.m. Toronto time. To listen, dial +1-416-644-3415 or +1-877-974-0445)

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