Log in
Login
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 

4-Traders Homepage  >  News

News

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesHot NewsMost Read NewsRecomm.Business LeadersCalendar 

Canada banks top expectations despite lending crunch

share with twitter share with LinkedIn share with facebook
share via e-mail
0
02/28/2013 | 11:38pm CEST

Three of Canada's top banks posted stronger-than-expected quarterly profits on Thursday as they relied on lower loan-loss provisions, cost-cutting, and stronger international revenue to offset slower growth in domestic consumer lending.

Royal Bank of Canada and Toronto-Dominion Bank, the country's two largest banks, both raised their quarterly dividend. No. 5 lender Canadian Imperial Bank of Commerce left its payout unchanged, prompting investors to pull its shares lower.

With signs emerging that a long-awaited slump in personal lending and mortgage growth began to take hold in the fiscal first quarter ended January 31, RBC relied heavily on wholesale banking revenues to fuel its profits. TD enjoyed shrinking loan-loss provisions, stronger business loan growth, and worked hard to control costs.

"We are starting to definitely feel a slowdown in the consumer lending side, and I think you'll see a gradual slowing of the (mortgage) lending number over the course of the year," TD Chief Financial Officer Colleen Johnston told Reuters.

The banks have warned of the lending slowdown for more than a year, based on signs that Canada's once-torrid housing market is cooling and on a rise in consumer debt levels to record highs, suggesting a period of deleveraging may be overdue.

Growth in TD's Canadian retail lending slowed to a meager 5 percent on the year, with loan margins narrowing because of low interest rates. RBC posted 6 percent growth in Canadian lending on the year, but growth slowed to less than 1 percent compared with the fourth quarter of last year.

CIBC saw mortgage volumes fall due to its decision to close its discount FirstLine mortgage wing last year, but the move allowed it to raise its share of higher-margin loans.

GROWTH SLOWS, BUT PROFITS SURGE

Despite this lending slump, profits beat estimates at all three banks, highlighting their capacity to wring profit growth from their various business units.

RBC's net income rose to C$2.07 billion, or C$1.36 a share, from a year-earlier profit of C$1.86 billion, or C$1.22.

The gain was driven by a 25 percent rise in capital markets income and a 24 percent jump in wealth management income. The bank has been expanding both businesses in Europe and the United States in recent years.

RBC even managed to squeeze 11 percent profit growth from its Canadian banking division, as it reduced loan-loss provisions and managed to keep interest margins steady.

Excluding special items, RBC earned C$1.38 a share, beating analysts' expectations of C$1.31, according to Thomson Reuters I/B/E/S.

"Overall, the bank reported a strong quarter and one that we view as the best in class again this quarter," CIBC World Markets analyst Robert Sedran said in a note.

TD, which has been expanding aggressively in U.S. retail banking, posted net profit of C$1.79 billion, or C$1.86 a share, up from C$1.48 billion, or C$1.55.

TD's results were clouded by litigation reserves taken in both the current and year-before quarters to cover costs stemming from its connection to a $1.2 billion Ponzi scheme run by Florida lawyer Scott Rothstein, who used the bank's accounts.

Excluding the provisions and other costs, TD earned C$2.00 a share, up from C$1.86, and topping expectations of C$1.92.

TD has about 1,200 bank branches in Canada and about 1,300 in the United States. It also owns 45 percent of TD Ameritrade Holding Corp.

Loan losses also supported TD's retail banking growth, which hit 11 percent, as did a 13 percent rise in business banking.

"We are starting to see a slowdown in terms of domestic lending volumes, but it's not impeding the profitability of the retail banks at present," said John Aiken, an analyst at Barclays Capital.

"The banks have been very good at finding offsets... The question becomes the sustainability of all these issues.

Both TD and RBC raised their dividends by 5 percent.

RBC's shares rose 0.8 percent to C$64.02, while TD gained 0.7 percent to C$84.85, helped by comments by CEO Ed Clark that poured cold water on speculation TD might purchase Royal Bank of Scotland's Citizen's Bank unit.

CIBC SHARES SLIDE

Shares of CIBC, which unlike RBC and TD lacks a significant international presence, slid 0.9 percent to C$83.14 after failing to raise its dividend.

Analysts had forecast all three banks would raise their payouts, and Bank of Montreal unexpectedly raised its dividend on Tuesday, cementing that view.

Speaking on a conference call, CIBC CEO Gerry McCaughey said the bank had decided to play it cautious on the dividend front, in part because it intends to use capital to buy back shares.

"I wouldn't read too much into our not raising the dividend this quarter," he said.

It earned C$798 million, or C$1.91 a share, down from C$835 million, or C$1.91, as profit was hurt by a C$148 million charge for a legal settlement with bankrupt U.S. bank Lehman Brothers.

Core EPS of C$2.15 topped estimates of C$1.97, while loan-loss provisions fell to C$265 million from C$338 million.

(Editing by Frank McGurty, Andrew Hay and Peter Galloway)

By Cameron French

share with twitter share with LinkedIn share with facebook
share via e-mail
0
React to this article
Latest news
Date Title
01:48p CHARTER COMMUNICATIONS : Buy-to-let mortgage lender Charter Court's sale abandoned - sources
01:48p MAPLE LEAF FOODS : Canada's Maple Leaf Foods reports first-quarter profit
01:48p REPEAT : Metal Tiger Invests GBP125,000 In Conroy Gold (ALLISS)
01:48pDJMARKET SNAPSHOT : U.S. Stock Futures Mired In Red With Private-payrolls Data On Tap
01:47p SINCLAIR BROADCAST : posts 1Q profit
01:47p ALON BLUE SQUARE ISRAEL : Notified of Deferral of Record Date and Payment Date for Series C Debentures
01:47p Emergency Shutdown System Market - Global Trend and Forecast to 2022 - Rising Demand for Safety Systems in Oil & Gas Industry - Research and Markets
01:46p Canada's Shopify results beat, raises revenue forecast
01:46p MGP INGREDIENTS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (Dollar amounts in thousands, unless otherwise noted) (form 10-Q)
01:46p MTR : Metal Tiger Invests GBP125,000 In Conroy Gold & Natural Resources (ALLISS)
Latest news
Advertisement
Hot News 
AVOLON : delivers its first Airbus A320neo aircraft
MARECHALE CAPITAL : Unaware Of Any Reason For Share Price Jump
FORM 8.5 : 04/05/2016
OpGen and District of Columbia Hospital Association Complete First Citywide Quantification of Multidrug-Resistant Organism (MDRO) Prevalence in Washington, D.C.-based Healthcare Facilities
FORBIDDEN TECHNOLOGIES : Paid Proof of Concept with Broadcaster
Most Read News
05/03 Lateral Gold Announces Proposed RTO Transaction with CANHaul International
05/03 CREDIT CHINA : Announces Investment in BitFury, Joint venture to jointly promote Blockchain technology in China, Strengthen information security and Group's capability in Internet finance
05/03 Cascade Financial Services to be Acquired by an Affiliate of Centerbridge Partners, L.P.
05/03 CRAMER : Federal Regulators Have No Answer for Need for Devastating Mining Rule
05/03 LEVI STRAUSS & CO. : Names Roy Bagattini President of Levi Strauss Americas
Most recommended articles
05/03DJUBS Shares Drop As Profit Slumps
07:46a Canada's Shopify results beat, raises revenue forecast
07:45aDJRussia Says It is Countering NATO Expansion
07:44a World stocks retreat for second day on growth worries
07:42a World stocks in retreat for second day on growth worries