The Bank of Nova Scotia, or Scotiabank, signage is pictured in the financial district in Toronto, Friday, Sept. 8, 2023.Andrew Lahodynskyj/The Canadian Press
Canada’s biggest banks report their third-quarter earnings this week, covering the three months that ended July 31, as unemployment rates in Canada and the United States tick higher and as high borrowing costs weigh more heavily on consumers and businesses.
Analysts expect the large banks’ earnings per share will climb modestly higher, rising by 2 to 3 per cent for the quarter. They are also anticipating a boost to profit from wealth management and solid results from capital markets. But rising provisions for credit losses – the reserves that banks set aside to cover potential losses if loans go bad – are the wild card that could decide whether the reaction to the banks’ performance turns positive or pessimistic.
Canadian Imperial Bank of Commerce, Royal Bank of Canada, Bank of Nova Scotia and National Bank of Canada reported earnings that beat analysts’ estimates. Meanwhile, Toronto-Dominion Bank and Bank of Montreal have missed analysts’ estimates.
Here’s a breakdown of the third-quarter earnings so far.
Toronto-Dominion Bank (TD Bank)
People are seen walking past a TD Bank branch in Toronto, on Aug. 22.Christopher Katsarov/The Globe and Mail
- Earnings Q3 2024: a loss of $181-million ($0.14 per share)
- Earnings Q3 2023: $2.88-billion ($1.53 per share)
- Adjusted EPS: $2.05 per share
- Analysts’ expectations: $2.07 per share (adjusted)
- Dividend: $1.02 per share
Toronto-Dominion Bank TD-T reported its first quarterly loss in 21 years after it set aside a US$2.6-billion provision to pay anticipated regulatory fines over anti-money laundering failures.
TD has been mired in multiple U.S. regulatory and criminal probes over serious deficiencies in anti-money laundering (AML) programs, which missed financial crimes carried out through its branches. The bank said last week that it is bracing for a total fine of more than US$3-billion ($4-billion) – its “current estimate.” That would be the largest penalty a Canadian bank has paid to solve a regulatory problem, and the second-largest fine levied against any bank over similar issues. TD expects to reach a settlement with regulators that will include other, non-financial penalties by the end of the calendar year.
TD lost $181-million, or 14 cents per share, in the quarter that ended July 31. Excluding certain items such as the massive regulatory provision, TD said its profit was $3.65-billion, roughly unchanged from the same quarter last year. That amounted to $2.05 a share on an adjusted basis, which fell short of the $2.07 analysts had expected.
The bank’s share price fell $1.70 or 2.1 per cent to $79.59 on the Toronto Stock Exchange on Thursday.
TD kept its quarterly dividend unchanged at $1.02 a share.
The bank set aside higher loan loss provisions of nearly $1.1-billion, anticipating that more customers could default on loans as high interest rates and a slowing job market put pressure on households and businesses. That matched analysts’ expectations, but was up 40 per cent from $766-million in the same quarter last year.
TD also recorded a $110-million restructuring charge, wrapping up a cost-cutting program launched last year to strip out $800-million in annual costs, in part by cutting jobs and offloading some real estate, to help offset higher spending on AML controls.
Bank of Nova Scotia
A pedestrian walks past a Scotiabank branch in downtown Calgary, on Sept. 16, 2022.Jeff McIntosh/The Canadian Press
- Earnings Q3 2024: $1.91-billion ($1.41 per share)
- Earnings Q3 2023: $2.19-billion ($1.70 per share)
- Adjusted EPS: $1.63 per share
- Analysts’ expectations: $1.62 per share (adjusted)
- Dividend: $1.06 per share
Bank of Nova Scotia BNS-T reported a lower fiscal third-quarter profit of $1.91-billion that barely beat analysts’ expectations as it set aside more money to cover future losses on loans, with customers in Canada and Latin America feeling the strain from higher interest rates.
Third-quarter profit at Scotiabank amounted to $1.41 a share, down from $2.19-billion, or $1.70 a share, in the same quarter last year. The bank’s adjusted profit of $1.63 a share beat the analysts’ consensus estimate of $1.62.
The bank earmarked $1.05-billion of provisions for credit losses – the funds banks set aside to cover loans that could default in future – compared with $819-million in the third quarter last year.
The bank’s provisions for impaired loans, which are already past due, jumped 31 per cent higher to $970-million, as more borrowers fell behind on payments. Many of those customers were in three of Scotiabank’s key markets in Latin America: Colombia, Chile and Peru. Provisions also increased for Canadian banking clients, mostly on car loans as well as credit card balances.
The ratio of provisions to the bank’s total loan book was 55 basis points, or 0.55 per cent, which is at the high end of the bank’s guidance for the year. But the low level of provisions against performing loans that are still being repaid, at $82-million, suggests the bank expects potential losses from defaults are nearing their peak.
Scotiabank kept its quarterly dividend unchanged at $1.06 per share.
Bank of Montreal (BMO)
The BMO Nova Centre, in Halifax, on April 2, 2019.Andrew Vaughan/The Canadian Press
- Earnings Q3 2024: $1.86-billion ($2.48 per share)
- Earnings Q3 2023: $1.56-billion ($2.12 per share)
- Adjusted EPS: $2.64 per share
- Analysts’ expectations: $2.75 per share (adjusted)
- Dividend: $1.55 per share
Bank of Montreal BMO-T reported a profit lower than analysts’ estimates.
The bank’s fiscal third-quarter net income rose to $1.86-billion, or $2.48 per share, for the three months that ended July 31. That was up from $1.56 billion, or $2.12 per share, from a year earlier.
Adjusted to exclude certain items, BMO said it earned $2.64 per share. Analysts polled by Bloomberg were expecting a profit of $2.75 per share.
Provisions for credit losses, or money the bank sets aside to cover soured loans, rose to $906-million from $492-million a year earlier. The bank attributed the increase, in part, to the need for provisions from clients struggling with extended high interest rates.
This comes after the Toronto-based bank, Canada’s third largest by market capitalization, acquired U.S.-based Bank of the West last year for US$16.3-billion, expanding its American presence with an additional nearly 1.8 million customers and more than 500 branches.
BMO held its quarterly dividend steady at $1.55 cents per share, an increase of 8 cents, or 5 per cent from the year earlier.
Royal Bank of Canada (RBC)
An RBC sign and a Canada flag in Ottawa, on June 27.Sean Kilpatrick/The Canadian Press
- Earnings Q3 2024: $4.49-billion ($3.09 per share)
- Earnings Q3 2023: $3.86-billion ($2.73 per share)
- Adjusted EPS: $3.26 per share
- Analysts’ expectations: $2.97 per share (adjusted)
- Dividend: $1.42 per share
Royal Bank of Canada RY-T surpassed analysts’ estimates, reporting a third-quarter profit of $4.49 billion, up from $3.86 billion a year earlier.
The bank says its net income amounted to $3.09 per diluted share for the quarter ended July 31 compared with a profit of $2.73 per diluted share in the same quarter last year.
Revenue totalled $14.63 billion, up from $12.98 billion a year ago, while the bank’s provision for credit losses for the quarter amounted to $659 million, up from $616 million in the same quarter last year.
RBC says the addition of HSBC Bank Canada increased its net income by $239 million for the quarter.
On an adjusted basis, RBC says it earned $3.26 per diluted share, up from an adjusted profit of $2.83 per diluted share a year ago.
The average analyst estimate had been for an adjusted profit of $2.97 per share, according to LSEG Data & Analytics.
“Our Q3 results demonstrate that RBC continues to operate from a position of strategic and financial strength with solid revenue growth and momentum underpinned by a strong balance sheet, robust capital position and prudent risk management,” RBC chief executive Dave McKay said in a statement.
National Bank of Canada
A National Bank of Canada branch in Ottawa, on Feb. 14, 2019.Chris Wattie/Reuters
- Earnings Q3 2024: 1.03-billion ($2.89 per share)
- Earnings Q3 2023: $830-million ($2.33 per share)
- Adjusted EPS: $2.68 per share
- Analysts’ expectations: $2.47 per share (adjusted)
- Dividend: $1.10 per share
National Bank of Canada NA-T posted profits that exceeded analysts expectations on Wednesday, a week ahead of a key vote on country’s sixth-largest bank’s proposed $5-billion takeover of rival Canadian Western Bank.
Montreal-based National Bank earned $1.03-billion in total profit or $2.89 per share in the third quarter. That’s up 24 per cent from the $2.33 earnings per share (EPS) in the prior year. Its adjusted EPS, which removes certain items, was $2.68 in the three months ending July 31, well ahead of the $2.47 estimate from analysts.
The bank said strong performance from all its business contributed to the 24-per-cent increase in earnings from the same period a year ago.
“Our strong financial results for the third quarter reflect our diversified earnings mix and solid credit profile,” said Laurent Ferreira, chief executive officer at National Bank, in a press release.
The stronger-than-expected financial results come as National Bank looks to win regulatory and shareholder approval for its proposed takeover of Edmonton-based Canadian Western. The transaction, announced in June, would dramatically increase National Bank’s presence in Alberta and B.C.
Canadian Imperial Bank of Commerce (CIBC)
CIBC branding in Ottawa, Ontario, Canada June 19, 2024.Blair Gable/Reuters
- Earnings Q3 2024: $1.80-billion ($1.82 per share)
- Earnings Q3 2023: $1.43-billion ($1.47 per share)
- Adjusted EPS: $1.93 per share
- Analysts’ expectations: $1.74 per share (adjusted)
- Dividend: $0.90 per share
Canadian Imperial Bank of Commerce CM-T reported a sharp jump in third-quarter profits from double-digit revenue growth and scaling back the money it’s setting aside for problem loans.
The bank said it recorded profit of just under $1.8-billion in the quarter ended July 31, or $1.82 per share, up 25 per cent from the prior year’s quarter. Adjusted earnings, which remove certain items, were $1.93 per share, a strong beat of analysts’ consensus of $1.74, per LSEG data.
Total revenue of just over $6.6-billion was 12.9 per cent above 2023′s third quarter.
CIBC said provisions for credit losses, or money the bank sets aside to cover bad loans, were $483 million, down $253-million from the same quarter last year.
When a bank sets aside less money for future loan losses – an expense on the income statement – its earnings improve. Had CIBC provisioned the exact same amount in the third quarter as in the prior year, reported profits would still have increased by more than 8 per cent.
In 2024′s third quarter, CIBC also made lower provisions in its U.S. commercial banking in and its wealth management divisions. That was partially offset by higher provisions in its Canadian personal and business banking; capital markets; and direct financial services divisions.
The bank said its Canadian personal and business banking division – the bank’s single biggest, at about 40 per cent of total revenue - reported net income of $628-million for the third quarter, up $129 million or 26 per cent from the third quarter a year ago.
Revenue for the division of just under $2.6-billion was up 7.6 per cent from the prior year’s quarter. Provisions of $338-million were down more than 20 per cent from 2023′s third quarter.
With reports from The Canadian Press.
Editor’s note: A previous version of this article incorrectly stated that Bank of Nova Scotia's reported earnings missed analysts' estimates, and misstated the bank's Q3 earnings for 2023 and 2024. The Bank's earnings beat analysts' estimates. This version has been updated.