{"id":216709,"date":"2019-05-30T20:06:01","date_gmt":"2019-05-31T00:06:01","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=216709"},"modified":"2019-05-30T20:06:15","modified_gmt":"2019-05-31T00:06:15","slug":"canadian-banks-wrap-up-ok-q2-with-a-mix-of-earnings-beats-and-misses","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2019\/05\/30\/canadian-banks-wrap-up-ok-q2-with-a-mix-of-earnings-beats-and-misses\/","title":{"rendered":"Canadian banks wrap up ‘OK’ Q2, with a mix of earnings beats and misses"},"content":{"rendered":"
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FILE: National Bank of Canada in Richmond Hill (Photo By Raysonho @ Open Grid Scheduler \/ Grid Engine – Own work, CC0<\/a>)<\/figcaption><\/figure>\n

Canada’s biggest banks delivered a mix of second-quarter earnings beats and misses, but still collectively generated roughly $12 billion in profits.<\/p>\n

Net income across the Big Six lenders in the quarter ended April 30 was up approximately seven per cent compared with one year ago, or up roughly five per cent on an adjusted basis.<\/p>\n

While domestic loan growth has generally slowed after regulations aimed at reining in mortgage lending were introduced last year, it was better than expected and banks with international businesses got a boost yet again this quarter, analysts say.<\/p>\n

Meanwhile, capital markets activity \u2014 while down overall \u2014 also exceeded expectations, they added.<\/p>\n

\u201cThey did OK,\u201d said Meny Grauman, an analyst with Cormark Securities in Toronto. \u201cThey continued to deliver good results, but not spectacular results. And there were definitely enough black marks in the results to continue to fuel questions about just how strong performance is going to be heading into the future.\u201d<\/p>\n

National Bank was the last of the group to report its second-quarter earnings on Thursday, hiking its dividend as it delivered a roughly two per cent increase in net income fuelled by strength in Quebec. The lender reported a nine per cent uptick in profits from its personal and commercial banking arm, as well as growth in U.S. specialty finance and international and wealth management. However, its earnings were hampered by a slowdown in financial markets and missed analyst estimates.<\/p>\n

National Bank’s chief executive Louis Vachon said the lender had a \u201csolid\u201d showing in its second quarter.<\/p>\n

\u201cOur performance was driven by positive momentum in our businesses, disciplined cost management and strong credit quality… The economic backdrop remains favourable in Canada and we continue to benefit from the strength and diversification of the Quebec economy,\u201d he told analysts on a conference call Thursday.<\/p>\n

Canadian Imperial Bank of Commerce kicked off earnings season last week with a 2.2. per cent rise in net income, but missed analyst estimates as sluggish loan growth offset its gains from capital markets and U.S. commercial banking.<\/p>\n

\u201cCIBC was clearly the weakest of the banks,\u201d said Grauman.<\/p>\n

Toronto-Dominion Bank, meanwhile, was viewed as delivering the most robust results, beating market expectations with strong growth in its retail operations both at home and south of the border.<\/p>\n

Royal Bank of Canada posted better-than-expected quarterly earnings with a seven per cent bump in profits, compared with a year ago, fuelled by loan growth and higher interest rates.<\/p>\n

Both the Bank of Montreal and Bank of Nova Scotia this week said their quarterly profits rose, but earnings came in lower than investors anticipated due to some non-recurring items.<\/p>\n

BMO’s Canada and U.S. businesses were solid, but severance costs in its capital markets division \u2014 totalling $120 million before taxes \u2014 resulted in an earnings miss. The severance costs, which the lender said was aimed at aligning its resources with the current market environment, is expected to deliver millions in annual cost savings going forward.<\/p>\n

Scotiabank’s international business, particularly in Latin America, again offered strong contributions but a surge of provisions for credit losses in connection with a flurry of recent acquisitions, as required under accounting rules, ate into its results.<\/p>\n

With the exception of National Bank, Canada’s biggest lenders saw provisions for credit losses \u2014 or money set aside for bad loans \u2014 rise this quarter compared with a year ago, to varying degrees.<\/p>\n

Scotiabank saw the biggest jump, followed by RBC at 55 per cent, CIBC at 20 per cent, TD at 14 per cent and BMO at 10 per cent.<\/p>\n

These increases come as the U.S. portfolio manager featured in The Big Short, Steve Eisman, recently reiterated his bet against the country’s biggest lenders, noting that Canada hasn’t had a credit cycle in nearly three decades. A Veritas analyst also urged investors earlier this year to reduce exposure to the Canadian banks ahead of an \u201cacceleration of credit losses.\u201d<\/p>\n

Some of the upswing in loan loss provisions in the latest quarter can be attributed to new accounting standards, analysts say. IFRS 9, which was implemented last year, increases the emphasis on banks’ expected losses over the life of a loan, and in turn introduces more volatility to the measure.<\/p>\n

Overall, credit remains \u201cvery solid,\u201d said James Shanahan, an analyst with Edward Jones, based in St. Louis.<\/p>\n

\u201cWhat we’ve seen is some lumpiness, and certainly in the utility, and energy sector, with perhaps a few other little pockets of weakness,\u201d he said.<\/p>\n

The outlook for the rest of the 2019 financial year, however, also has some clouds ahead.<\/p>\n

CIBC pointed towards \u201crelatively flat\u201d total year-over-year earnings in 2019, lowering its previous guidance.<\/p>\n

Other lenders signalled they would be able to hit their medium-term earnings per share targets, but largely at the lower end of the range, said Grauman.<\/p>\n

What will be key is the banks’ ability to manage expenses, while still protecting the bottom line and investing in the future, analysts say.<\/p>\n

\u201cIt’s going to be hard to see how any bank can get to double-digit EPS growth in 2019, that’s going to be very challenging,\u201d Grauman said.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Canada’s biggest banks delivered a mix of second-quarter earnings beats and misses, but still collectively generated roughly $12 billion in …<\/p>\n","protected":false},"author":44,"featured_media":216710,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"class_list":["post-216709","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","mauthors-armina-ligaya","mauthors-the-canadian-press"],"_links":{"self":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/216709","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/comments?post=216709"}],"version-history":[{"count":2,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/216709\/revisions"}],"predecessor-version":[{"id":216712,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/216709\/revisions\/216712"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media\/216710"}],"wp:attachment":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media?parent=216709"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/categories?post=216709"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/tags?post=216709"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}