Three of Canada's six largest banks reported strong fiscal third-quarter results Thursday, easily beating analyst expectations. Their shares rose sharply.
Royal Bank of Canada's record results were driven in large part by strong trading revenues. Canada's biggest chartered bank earned $1.42 billion, or 95 cents a share, up 24% from a year earlier.
Toronto-Dominion Bank had a 17% improvement in adjusted third-quarter earnings, helped by strong contributions from its Canadian personal and commercial banking and wholesale banking segments. TD's net profit was $834 million, or 92 cents a share, but excluding some items, it earned $1.19 billion or $1.35.
National Bank of Canada said fiscal third-quarter earnings improved 6% from a year earlier. The Montreal bank had net income of $277.2 million, or $1.63 a share.
Royal Bank and TD both fared relatively well in the United States, which has been a problem area for Canadian banks.
Royal Bank's international division, which includes the $30 billion-asset RBC Bank in Raleigh, N.C., reported a net loss of $95 million, well below its $1.03 billion loss in the previous quarter. The big loss, due largely to a $915 million writedown of its U.S. operations, drove Royal Bank to its first quarterly loss in 16 years.
Royal Bank said in a statement: The "credit profile" in its U.S. business "is showing signs of improvement" as loan losses ease. It has been hard hit by the housing market's downturn in the Southeast.
TD's U.S. personal and commercial banking division, which includes the $126 billion-asset TD Banknorth Inc. with headquarters in Portland, Maine, and Cherry Hill, N.J., remained profitable. It reported $157 million in net income, though it earned $221 million, excluding charges for its purchase last year of Commerce Bancorp. The unit earned $207 million in the prior quarter.
"The integration continues to be a great success story, with synergies and new store openings continuing on target," Ed Clark, Toronto-Dominion's president and chief executive, said in a statement. "We are very pleased with the power of our U.S. retail franchise."
The barrage of positive earnings came after a surprisingly strong report from Bank of Montreal, which reported higher-than-expected net income on Tuesday, mainly on its Canadian retail operations. And though Canadian Imperial Bank of Commerce fell short of expectations, its fiscal third-quarter earnings were substantially higher than a year earlier, as were its retail revenues.
"It's quite amazing, isn't it," said Fred Ketchen, a managing director of stock trading at Scotia Capital Markets. Anyone who questioned reports that Canada's banking sector is among the healthiest in the world "can't doubt it anymore," he said.
John Kinsey, a portfolio manager at Caldwell Securities, said the banks had a solid quarter, adding that "it appears the worst could be over" for Canada's chartered banks.
All three banks reporting Thursday expanded their loan-loss provisions from the year before, reflecting a record level of consumer bankruptcies, sagging retail sales, a slow real estate market and growing unemployment. However, analysts said the loan losses appeared controllable and that in most cases the provisions were smaller than in the preceding quarter.
Capital ratios were also up strongly, well above the minimum regulatory level of 8%, and positioned the banks for acquisition opportunities.
Royal Bank benefited mainly from soaring trading revenues, reporting earnings from its capital markets division of $513.7 million in the quarter, a 109% increase.