All of Canada’s top lenders managed to surpass earnings in the quarter
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Canadian Imperial Bank of Commerce and Toronto-Dominion Bank capped off another round of results from the country’s Big Six lenders on Thursday by topping first-quarter earnings expectations, with the beats driven by lower credit costs helped by an improving economic outlook.
The beats from CIBC and TD made it a clean sweep for Canada’s Big Six banks for their first-quarter results, as all of the lenders managed to surpass earnings expectations for the period.
Toronto-based CIBC reported a profit of $1.63 billion for the quarter ended Jan. 31, an increase of 34 per cent from a year earlier. When adjusted for some acquisition-related costs, the bank said its earnings per share for the three-month period were $3.58, up 10 per cent year-over-year and better than the $2.81 consensus of analyst estimates.
CIBC’s capital-markets business reported net income of $493 million for its first quarter, 30 per cent greater than the previous year, which was helped by higher trading activity. The lender’s personal and business banking division for Canada also saw profit climb 13 per cent year-over-year, to $652 million, as the amount of money set aside for potential loan losses fell.
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Like its rivals, CIBC’s first-quarter results got a lift from lower credit costs, which had risen during the earlier days of the pandemic as lenders rushed to build up reserves amid the uncertainty. However, the economic forecasts the banks rely on to help calculate those loan-loss provisions have been growing more positive, allowing them to claw back some of those reserves.
CIBC said provisions for credit losses for the first quarter were $147 million, down 44 per cent from a year earlier. The amount of money that the bank had to set aside for performing loans, or those still technically being paid back, cratered during the quarter, allowing for a recovery of $89 million. The drop was “primarily due to a favourable change in our economic outlook,” CIBC said in a press release.
TD said Thursday that first-quarter earnings were up 10 per cent year-over-year, to $3.3 billion. Adjusted earnings per share were likewise up 10 per cent, to $1.83, and better than the $1.50 expected by analysts.
The bank’s Canadian retail unit reported net income of about $2.04 billion for the three-month period ended Jan. 31, an increase of 14 per cent compared to a year earlier, which TD said reflected lower provisions for credit losses (PCLs) and higher revenue.
“Business momentum was very good this quarter, reflecting strong mortgage originations and chequing account growth in the Personal Bank, record retail net asset growth across our Wealth franchise, and solid Insurance premium growth,” TD said of its Canadian retail unit in a press release.
TD’s total PCLs for the first quarter were $313 million, down 66 per cent from a year earlier.
Part of the reason for this was a recovery of $153 million on provisions for performing loans, which was itself due in part to “current quarter allowance releases in the U.S. consumer lending portfolios largely related to an improvement in the economic outlook,” the bank said.
Financial Post
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