Analysts have lowered their profit estimates as Canada's biggest banks release their third-quarter profits this week.Spencer Colby/The Canadian Press
Canada’s biggest banks report their third-quarter earnings this week, covering the three months that ended July 31, as concerns about loan risks, economic slowdown and elevated climate and geopolitical risks continue to threaten the sector.
Ahead of the latest results, analysts had slashed their expectations, citing persistent inflation that has ratcheted interest rates higher and more stringent capital requirements from increasingly cautious regulators.
Most analysts anticipated that earnings would drop between 4 per cent and 7 per cent year-over-year, dragged down by narrower profit margins, higher reserves for loans that could turn sour, and expenses outpacing revenue.
Only one of the Big Six banks, Royal Bank of Canada, topped analysts’ estimates. Bank of Nova Scotia just met analysts’ expectations. Meanwhile, Toronto-Dominion Bank, Bank of Montreal, National Bank of Canada and Canadian Imperial Bank of Commerce all fell short of expectations.
Here’s a breakdown of the big banks’ third-quarter earnings so far.
Canadian Imperial Bank of Commerce (CIBC)
A sign for the The Canadian Imperial Bank of Commerce (CIBC) is pictured, in Toronto, Ontario.CARLOS OSORIO/Reuters
- Earnings Q3 2023: $1.43-billion ($1.47 per share)
- Earnings Q3 2022: $1.67-billion ($1.78 per share)
- Adjusted EPS: $1.52 per share
- Analysts’ expectations: $1.69 per share (adjusted)
Canadian Imperial Bank of Commerce CM-T reported a drop in third-quarter profit that missed analysts’ expectations as the lender set aside more money for potentially sour loans.
CIBC earned $1.43-billion, or $1.47 per share, in the three months that ended July 31, compared with $1.67-billion, or $1.78 per share, in the same quarter last year.
“We delivered solid financial results in the third quarter despite a more challenging economic environment,” CIBC chief executive officer Victor G. Dodig said in a statement. “The continued momentum in our core business performance reflects our disciplined approach to resource allocation and execution of our client-focused strategy.”
In the quarter, CIBC set aside $736-million in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and included $258-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses.
In the same quarter last year, CIBC had a set aside of $243-million in provisions.
Total revenue rose 5 per cent in the quarter to $5.85-billion. But expenses increased 4 per cent to $3.31-billion, which the bank said was driven higher employee-related costs.
National Bank of Canada
The National Bank of Canada logo is seen outside of a branch in Ottawa, Ontario.Chris Wattie/Reuters
- Earnings Q3 2023: $839-million ($2.36 per share)
- Earnings Q3 2022: $826-million ($2.35 per share)
- Adjusted EPS: $2.21 per share
- Analysts’ expectations: $2.36 per share (adjusted)
National Bank of Canada NA-T reported a slight rise in third-quarter profit that fell below analysts’ estimates as costs climbed and the lender set aside more money for potentially bad loans.
National Bank earned $839-million, or $2.36 per share, compared with $826-million, or $2.35 per share, in the same quarter last year.
In the quarter, National Bank set aside $111-million in provisions for credit losses. That was higher than analysts anticipated, and included $38-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses. In the same quarter last year, National Bank reserved $57-million in provisions.
“The Bank’s performance highlights the strength of our strategic positioning in a challenging macroeconomic environment,” National Bank chief executive officer Laurent Ferreira said in a statement.
Total revenue rose 4 per cent in the quarter, to $2.52-billion. But expenses climbed 9 per cent to $1.42-billion, which the bank said was driven by compensation and technology costs.
Bank of Montreal (BMO)
A Bank of Montreal branch in Ottawa.Chris Wattie/Reuters
- Earnings Q3 2023: $1.45-billion ($1.97 per share)
- Earnings Q3 2022: $1.37-billion ($1.95 per share)
- Adjusted EPS: $2.78 per share
- Analysts’ expectations: $3.09 per share (adjusted)
- Dividend: $1.47 per share, unchanged from Q2
Bank of Montreal BMO-T reported higher third-quarter profit that missed analysts’ estimates as the lender booked a spike in expenses and set aside more provisions for loans that could turn sour.
BMO earned $1.45-billion, or $1.97 per share, compared with $1.37-billion, or $1.95 per share, in the same quarter last year.
“We continue to deliver solid financial results reflecting the strength, diversity and active management of our businesses in an evolving environment,” BMO chief executive officer Darryl White said in a statement. “We’re accelerating efficiency initiatives and remain focused on dynamically positioning the bank for long-term growth and sustained profitability through disciplined expense and risk management.”
In the quarter, BMO set aside $492-million in provisions for credit losses. That was higher than analysts anticipated, and included $159-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses. In the same quarter last year, BMO had set aside $136-million in provisions.
Total revenue rose from the same quarter a year earlier to $7.9-billion. But expenses increased 46 per cent to $5.64-billion as the bank integrates its takeover of California-based Bank of the West, which it expects to complete by early September.
Bank of Nova Scotia
People make their way past a Scotiabank building in Toronto.Spencer Colby/The Canadian Press
- Earnings Q3 2023: $2.21-billion ($1.72 per share)
- Earnings Q3 2022: $2.61-billion ($2.10 per share)
- Adjusted EPS: $1.73 per share
- Analysts’ expectations: $1.73 per share (adjusted)
- Dividend: $1.06 per share, unchanged from Q2
Bank of Nova Scotia BNS-T reported lower third-quarter profit that met analysts’ expectations as climbing reserves for potentially bad loans and expenses weighed on results.
Scotiabank earned $2.21-billion, or $1.72 per share, compared with $2.61-billion, or $2.10 per share, in the same quarter last year.
“The Bank delivered another quarter of stable earnings, strengthening our capital and liquidity metrics while prudently increasing loan loss allowances and managing expense growth as we navigate this period of economic uncertainty,” Scotiabank chief executive officer Scott Thomson said in a statement.
In the quarter, Scotiabank set aside $819-million in provisions for credit losses. That was higher than analysts anticipated, and included $81-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses. In the same quarter last year, Scotiabank set aside $412-million in provisions.
Total revenue rose 4 per cent in the quarter to $8.09-billion, and expenses increased 9 per cent to $4.56-billion.
Royal Bank of Canada (RBC)
A Royal Bank of Canada logo on Bay Street in the heart of the financial district in Toronto.Mark Blinch/Reuters
- Earnings Q3 2023: $3.9-billion ($2.73 per share)
- Earnings Q3 2022: $3.58-billion ($2.51 per share)
- Adjusted EPS: $2.84
- Analysts’ expectations: $2.70 per share (adjusted)
Royal Bank of Canada RY-T reported higher third-quarter profit that beat analysts’ estimates on a boost in revenue from higher interest rates, even as the lender said that it expects to trim its workforce.
RBC earned $3.9-billion, or $2.73 per share, compared with $3.58-billion, or $2.51 per share, in the same quarter last year.
Canada’s largest bank said that its number of full-time employees fell 1 per cent from last quarter, and it expects to further decrease its workforce by 1 per cent to 2 per cent next quarter.
“Despite a complex operating environment, our Q3 results exemplify RBC’s ability to consistently deliver solid revenue and volume growth underpinned by prudent risk management,” RBC chief executive officer Dave McKay said in a statement. “We remain focused on executing on our cost reduction strategy while leveraging our strong balance sheet and diversified business model to support our growth and bring long-term value to our clients, communities and shareholders.”
In the quarter, RBC set aside $616-million in provisions for credit losses. That was lower than analysts anticipated, and included $120-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses.
Total revenue rose by 19 per cent to $14.49-billion from the same period a year prior. But expenses also edged up by 23 per cent to $7.86-billion, which the bank said was driven by higher staffing costs and professional fees.
Toronto-Dominion Bank (TD Bank)
A person walks past a TD Bank sign in the financial district in Toronto.Alex Lupul/The Canadian Press
- Earnings Q3 2023: $2.96-billion ($1.57 per share)
- Earnings Q3 2022: $3.21-billion ($1.75 per share)
- Adjusted EPS: $1.99 per share
- Analysts’ expectations: $2.04 per share (adjusted)
Toronto-Dominion Bank TD-T reported lower third-quarter profit that missed analysts’ estimates as higher expenses and provisions for potentially bad loans dragged on earnings.
TD earned $2.96-billion, or $1.57 per share, compared with $3.21-billion, or $1.75 per share, in the same quarter last year.
In the quarter, TD set aside $766-million in provisions for credit losses. That was higher than analysts anticipated, and included $103-million against loans that are still being repaid.
Total revenue rose 17 per cent in the quarter, to $12.78-billion. But expenses climbed 24 per cent to $7.58-billion, which the bank said was driven by higher staff-related costs and payments related to the failed First Horizon deal and the takeover of New York-based investment bank Cowen Inc.
“TD delivered strong revenue growth in the quarter and demonstrated the value of its diversified business mix in a challenging economic environment,” TD chief executive officer Bharat Masrani said in a statement.