Canada banks profits up but still disappoint

City A.M. Reporter
PROFITS at three big Canadian banks rose but came in short of lofty expectations yesterday as trading headwinds, the strong currency and taxes took the shine from improving loan losses.

The nation’s largest bank, Royal Bank of Canada, said the stronger Canadian dollar took a big bite out of capital markets and wealth management revenues in the second quarter, offsetting strong domestic banking operations. Toronto-Dominion Bank, the second-largest lender, and number five Canadian Imperial Bank of Commerce also missed market expectations, though by smaller margins.

The trend ran counter to higher-than-expected results released on Wednesday by Bank of Montreal, the nation’s fourth-largest bank.

RBC’s core cash earnings per share, which include the amortisation of intangibles, were 96 Canadian cents. While overall profit was up 40 per cent when one-time items are excluded from year-ago results, the profit missed expectations and shares were seen sinking when trading opened in Toronto. Net income came in at C$1.33bn (£868m) in the second quarter, compared with a loss of C$50m in the same period a year earlier, when RBC took a C$1bn goodwill impairment charge for losses in the bank’s US operations.

Cross-town rival TD Bank, which has been busy making small acquisitions in recent months to expand its US footprint, said its profit also rose in the second quarter as loan losses fell to their lowest in six quarters.

TD, which is hungrily expanding its retail reach down the US East Coast, said net income rose to C$1.18bn from C$545m in the same period a year earlier. When one-time items are excluded, adjusted income was C$1.36 a share. Analysts on average were expected a per share profit of C$1.38.

Rounding out the results, CIBC posted a lower-than-expected quarterly profit. Net income was C$660m in the quarter, up from a loss of C$51m a year earlier. Excluding certain items, the lender earned C$1.46 per share, against estimates of C$1.50.