Canada's Big Banks Report Earnings
The good, the bad, and the ugly
Big Banks, Big Numbers 🏦
All the major Canadian banks reported their Q1 2023 quarterly earnings this past week, with most showing solid growth in Q1 2023 despite ongoing concerns about the global economic outlook. Most banks beat analyst expectations, with one following behind the pack.
👑 Royal Bank of Canada ($RY) reported a profit of $3.2 billion, down 22% YoY due to higher loan-loss provisions. On an adjusted basis however, the bank's earnings grew 4% to $4.3 billion, beating analyst expectations. The bank's performance was mainly driven by record capital markets revenue, offsetting a weak credit picture and rising expenses.
🏦 Bank of Montreal ($BMO) beat analyst expectations, reporting an adjusted net income of $2.3 billion, down 12% YoY, but still surpassing Bloomberg analyst expectations of $3.16 per share. The bank saw strong growth in its trading and core banking businesses, with a decline in net income attributed to valuation adjustments on its acquisition of BNP Paribas SA’s Bank of the West.
🏙️ Toronto-Dominion Bank ($TD) reported a profit of $1.58 billion, down from $3.73 billion in the same period the previous year. The decrease in profit was due to one-time charges, including the cost of settling a lawsuit related to the Ponzi scheme conducted by Stanford Financial Group. Despite the decrease in profit, TD's revenue increased to $12.23 billion from $11.28 billion a year earlier.
💰 Canadian Imperial Bank of Commerce ($CM) reported a drop in net income to $432 million, down 77% from the previous year, due to higher loan-loss provisions and a one-off charge to settle a lawsuit. The bank earned $1.84 billion, down 3% from the same quarter a year ago, beating Bloomberg analyst expectations. Analysts attribute the beat to strong results from the bank’s capital markets segment and overall revenue growth.
🇨🇦 National Bank of Canada ($NA) beat analyst expectations despite a five percent drop in profit to $881 million in the first quarter, as revenues grew in its core banking and wealth management segments. Provisions for credit losses rose to $86 million from $2 million last year, and non-interest expenses grew to $1.4 billion from $1.28 billion. National Bank is taking a cautious approach to growth while focusing on boosting deposits and adding customers, amidst a highly uncertain macroeconomic environment.
🍿 Scotiabank ($BNS) missed analyst expectations in the first quarter, posting a profit of $1.77 billion, down from $2.74 billion the previous year, due to higher expenses and increased provisions for potentially bad loans. The bank is now shifting its focus towards areas of profitable and sustainable growth to improve shareholder returns. This will involve being more disciplined with capital allocation and focusing on long-term deposit growth to reduce funding costs and strengthen client relationships.
Big Picture: Canadian banks have seen solid growth in their capital market segments, with strong results in the U.S. and wealth management businesses. However, the banks are also dealing with challenges from rising funding costs and provisions for credit losses. Many banks want to refresh their strategies and boost deposits as they navigate an uncertain global economic outlook. Scotiabank was an obvious outlier, being the only Canadian bank to miss analyst expectations.
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