Royal Bank of Canada, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank reported first-quarter profits that topped analysts' estimates on record earnings from personal and commercial lending.
Royal Bank, Canada's largest lender by assets, said net income for the period ended Jan. 31 rose 12 percent to C$2.07 billion ($2.02 billion), or C$1.36 a share. CIBC, the fifth- biggest bank, said profit fell 4.4 percent to C$798 million, while Toronto-Dominion, the No. 2 bank, said profit climbed 21 percent to C$1.79 billion, or $1.86 a share.
The three Toronto-based lenders posted record profits from consumer and business lending, defying an expected slowdown after household debt rose to a record. The banks benefited from rising demand for corporate loans, credit cards and personal financial services.
A Canadian residential mortgage lending slowdown is "pretty much to be expected when you consider that consumers are starting to deleverage," Toronto-Dominion Chief Financial Officer Colleen Johnston said today in a telephone interview. "An area of huge growth for us, though, has been on the business banking side. That's an area where we've really taken a lot of market share."
Royal Bank said profit at its personal and business banking unit, which includes Caribbean banking, rose 11 percent to C$1.12 billion, while CIBC's retail and business banking business had profit of C$611 million, a 7.8 percent increase. Toronto-Dominion said adjusted earnings from consumer and commercial banking rose 11 percent to C$944 million.
"CIBC reported a solid quarter, with surprisingly stronger retail banking earnings than anticipated," John Aiken, an analyst at Barclays Plc, said today in a note.
Royal Bank said it set aside C$349 million for bad loans, up 31 percent from a year ago. Provisions in Canadian banking fell 12 percent to C$213 million. Canadian Imperial set aside C$265 million for bad loans, down 22 percent from a year ago.
Royal Bank and Toronto-Dominion raised their dividends, while CIBC's was unchanged.
Royal Bank's profit excluding some items was C$1.38 a share, beating the C$1.32 a share average estimate of 16 analysts surveyed by Bloomberg News. Revenue rose 4.4 percent to C$7.91 billion from C$7.57 billion.
Profit at RBC Capital Markets rose 25 percent to C$464 million on higher fees from advising on North American takeovers and an increase in U.S. lending and loan syndication. Wealth management earnings rose 23 percent to a record C$233 million, while insurance fell 14 percent to C$164 million, the bank said.
Royal Bank's revenue from Canadian personal financial services grew 6.9 percent to C$1.68 billion in the quarter from a year ago, while business financial services rose 2.4 percent to C$738 million. Credit cards and payments rose 5.3 percent to C$620 million. Revenue from Caribbean and U.S. banking was little changed at C$204 million.
CIBC's earnings were eroded by a settlement with the Lehman estate to end a two-year-old legal dispute over collateralized debt obligation deals. The lender said Dec. 31 that the after- tax cost of the settlement is $110 million. Excluding the cost and other items, CIBC said it earned C$2.15 a share, beating the C$2.09 a share average estimate of 16 analysts surveyed by Bloomberg. Revenue rose 0.8 percent to C$3.18 billion.
CIBC's wealth management profit was C$90 million, down 10 percent, while the lender's investment-banking business had profit of C$91 million, down 32 percent from a year earlier.
CIBC also said today in its statement that its Aeroplan credit-card partnership with Aimia Inc. will expire Dec. 31 unless both companies agree to extend.
"CIBC has engaged in periodic extension discussions with Aimia but is also exploring alternatives to extending the Aeroplan agreement," the bank said.