Yahoo Finance TD, CIBC beat analyst expectations in Q3 despite slipping profits
Toronto-Dominion Bank and Canadian Imperial Bank of Commerce both managed to beat analyst expectations in the third quarter despite profits slipping due to higher provisions for credit losses and rising costs.
TD’s adjusted earnings came to $2.09 per share, beating average analyst expectations of $2.04 per share in the three months ending July 31. CIBC had earnings of $1.85 per share on an adjusted basis, topping average expectations of $1.82 per share.
However, TD’s net income slipped about nine per cent to $3.21 billion in the third quarter from last year on rising costs and larger stockpiles of cash being set aside for sour loans. Similarly, CIBC’s net income slipped four per cent year over year to $1.67 billion.
“Continued business momentum, increased customer activity and the benefits of our deposit-rich franchise contributed to TD’s strong performance in the third quarter,” chief executive Bharat Masrani said in a press release accompanying the results.
“Investments in talent and innovation, combined with our focus on prudent risk and financial management, strengthened our business and extended our competitive advantage.”
During a Thursday afternoon conference call, he added the bank remains confident in the quality and mix of its real estate-secured lending book, which demonstrated “momentum from our investments across frontline sales channels, operations and account management.”
Net income in TD’s Canadian retail segment edged up six per cent to $2.25 billion on rising revenues as well as banking and insurance volumes. Increasing interest rates and record credit-card sales also contributed to the growth.
However, expenses widened by eight per cent and provisions for credit losses grew by $70 million compared to a year earlier. Provisions for credit losses reached $351 million in the third quarter.
Credit-loss provisions also weighed on CIBC’s profits across its business lines. Net income in the bank’s Canadian personal and business banking segment fell seven per cent from a year ago to $595 million amid a dicier economic environment.
“The results were driven by organic growth in all of our businesses,” CIBC chief executive officer Victor Dodig said on an earnings call. “We delivered solid volume growth in both consumer and commercial loans and deposits and higher fee income.
He added the bank is mindful of the challenges in the current operating environment, but he remains confident it can deliver sustainable value consistently to all stakeholders.
“Our CIBC team has demonstrated resilience in challenging environments in the past, and we’ll continue to demonstrate that resilience going forward,” Dodig said.
The bank shored up $243 million in credit-loss provisions due to an “unfavourable change” in its economic outlook compared to a release of $99 million in the same quarter last year.
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The bank’s Canadian commercial banking and wealth management segment grew three per cent from a year earlier to $484 million on rising revenues and volume growth. But revenue from the commercial and wealth business in the United States dropped $73 million and its profit fell to $193 million due to higher credit provisions and expenses.
The capital markets business fell the most in CIBC’s core businesses, tumbling nine per cent on an annual basis to $447 million, hit by whipsaw market volatility and higher expenses.
John Aiken, senior analyst and head of research at Barclays, pointed to CIBC’s strong commercial growth for its earnings beat.
“CIBC’s third quarter goes a long way in exhibiting the changes that management has been working towards,” he said in a note to clients on Thursday. “However, it will take a string of quarters to truly change investor sentiment, but the dominoes appear to be falling.”
TD shares had a volatile day on Thursday before settling nearly one per cent higher at $86.25 as of 2:50 p.m. CIBC’s stock slipped almost half of a per cent throughout the trading day and landed at $65.23.
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