RBC, TD and CIBC Profit Beat Estimates on Retail Banking

  • Royal Bank posts record personal, commercial lending results
  • Toronto-Dominion’s earnings are bolstered by U.S. retail bank

Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce beat analysts’ estimates as higher earnings from retail banking helped boost second-quarter profit even as provisions and impaired energy loans increased.

Toronto-Dominion’s net income for the period ended April 30 jumped 10 percent, bolstered by its U.S. retail businesses, while Royal Bank posted 2.8 percent higher profit on record results in personal and commercial banking and gains from last year’s U.S. takeover of City National Bank. CIBC’s earnings rose 3.3 percent.

“While the economy is in a slow growth period, it is nevertheless in a growth period; it’s not contracting," Toronto-Dominion Chief Financial Officer Riaz Ahmed said Thursday in a telephone interview. “We’re continuing to see the loan and deposit volumes grow at a very nice rate, and that would tell you that the underlying fundamentals and the customer side of the business continue to do well."

Toronto-Dominion’s profit climbed to C$2.05 billion ($1.58 billion), or C$1.07 a share, from C$1.86 billion, or 97 cents, a year earlier, the bank said in a statement. Profit excluding some items was C$1.20 a share, exceeding by three cents the average estimate of 13 analysts surveyed by Bloomberg.

U.S. Retail

“TD came in ahead of expectations as provisions were lighter than expected on the back of an improving consumer experience, despite seeing similar energy-related impairment inflation as peers," John Aiken, an analyst with Barclays Plc, said in a note to investors.

Toronto-Dominion, Canada’s second-largest lender by assets, benefited from a 21 percent jump in earnings from its U.S. retail operations to C$719 million, helped by a stronger greenback relative to the Canadian currency and gains from its stake in the TD Ameritrade Holding Corp. brokerage. Canadian personal and commercial banking, which includes wealth management and insurance, rose 2 percent to C$1.46 billion from a year earlier.

The gains came even as Toronto-Dominion recorded a C$116 million impairment charge on its U.K.-based European direct trading business, which has suffered continued losses.

“We’re currently looking at our options to prevent further losses," Ahmed said, adding that a sale may be considered. “We’ll consider all suites of options. It’s early to speculate what those could be."

Toronto-Dominion shares were largely unchanged in Toronto trading after earlier gaining as much as 1.3 percent. Royal Bank advanced 1 percent, while CIBC declined by a similar amount.

Royal Bank

Royal Bank, Canada’s largest lender, said net income rose to C$2.57 billion, or C$1.66 a share, from C$2.5 billion, or C$1.68, a year earlier. Adjusted profit, which excludes some items, was C$1.71 a share, compared with the C$1.64 average estimate of 13 analysts surveyed by Bloomberg.

“We delivered a solid quarter, with earnings of over C$2.5 billion, reflecting underlying strength across our businesses,” Chief Executive Officer Dave McKay said in the statement.

Royal Bank’s $5 billion purchase of Los Angeles-based City National in November helped bolster earnings of its wealth-management business. The lender reported an 8 percent increase in personal and commercial banking to C$1.3 billion, and a 44 percent surge in insurance results to C$177 million.

CIBC boosted its quarterly dividend 2.5 percent to C$1.21 a share, its seventh consecutive increase, while posting profit of C$941 million, or C$2.35 a share. Profit excluding some items was C$2.40 a share, topping the C$2.31 average estimate of 14 analysts surveyed by Bloomberg.

Profit from CIBC’s retail and business banking unit rose 12 percent to C$652 million and earnings from its capital-markets unit increased 5 percent to C$252 million. Wealth-management earnings were down 12 percent to C$113 million following the bank’s announcement in December that it was selling its stake in American Century Investments, according to the statement.

Bank of Montreal, Canada’s fourth-largest lender, on Wednesday posted second-quarter profit that missed analysts’ estimates as soured oil-and-gas loans soared and the firm took a restructuring charge. The lender raised its dividend 2.4 percent to 86 cents a share. Bank of Nova Scotia is scheduled to report results on May 31, followed by National Bank of Canada on June 1.

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