Big banks exceed Q2 expectations

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This article was published 29/05/2009 (6205 days ago), so information in it may no longer be current.

TORONTO — Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and National Bank of Canada — four of Canada’s six largest banks — all posted better-than-expected second-quarter results on Thursday.

"All the banks (that have reported so far) beat estimates," said John Aiken, an analyst at Dundee Capital Markets, also referring to Bank of Montreal, which reported second-quarter earnings Tuesday.

Today, Royal Bank of Canada will be the last of the major Canadian banks to report second-quarter results.

Tougher regulation and a conservative culture compared with their global rivals helped Canada’s banks avoid the worst of fallout from the credit crunch.

Since credit markets fell apart in 2007, the big banks have made about $20 billion of writedowns related to credit products, which has been painful to swallow but still a far cry from the massive hits taken by Wall Street.

TD, Canada’s second-largest bank, on Thursday reported a net profit of $618 million, or 68 cents a share, down 27 per cent from last year as it boosted provisions for loan losses.

RBC Capital Markets analyst Andre Hardy called TD’s results "the best of the four banks that have reported so far."

TD shares closed up $3.41, or 6.78 per cent, to $53.69.

Bank of Nova Scotia, the country’s third-largest bank, reported second quarter net income of $872 million, or 81 cents a share, down 11 per cent from last year on higher loan provisions.

"Solid underlying performances in Canadian and international banking, and a record quarter from Scotia Capital, allowed us to earn through higher credit provisions and a challenging economic environment, compared to last year," said Rick Waugh, Scotia’s chief executive.

"These results support rankings from independent third parties that place Scotiabank among the strongest and most stable banks in the world," he said.

Scotia shares finished the session up 15 cents, or 0.4 per cent, at $37.90.

CIBC on Thursday reported a second-quarter loss of $51 million, or 24 cents a share, down from a loss of $1.1 billion, or $3 a share, last year because of more writedowns on its exposure to structured credit products.

Analysts believed the bloodletting from credit derivatives was mostly over, so the $475-million writedown in the second quarter was a surprise.

"This is disappointing," said Aiken. "It doesn’t bring confidence to the market that there will not be additional charges in the future."

Shares in CIBC, Canada’s fifth-largest bank, were off 4.5 per cent, or $2.56, to $54.47.

Meanwhile, National Bank shares were up 3.5 per cent after the sixth-largest bank by assets came out with a second-quarter profit of $241 million, or $1.41 a share.

That was up 46 per cent from a year earlier, after trading fees more than doubled to $188 million.

"The bank has managed to do well thanks to the relatively good performance of the Quebec economy," said Louis Vachon, the bank’s chief executive.

The National Bank results included a $20-million charge related to holdings of third-party asset-backed commercial paper, most of it bought back from clients after the ABCP market froze up in 2007.

The bank’s shares ended the session up $1.80, or 3.64 per cent, to $51.30.

Credit Suisse analyst Jim Bantis said National came in "well above our forecast."

He called the bank "a positive outlier against its larger bank peers in terms of credit quality."

 

— Canwest News Service