Canadian CIBC and TD’s earnings beat estimates, but credit growth rates diverge

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TD Bank, CIBC and Bank of Montreal in Toronto Financial District, Ontario, Canada, June 24, 2020 REUTERS / Carlos Osorio / File Photo

TORONTO, August 26 (Reuters) – Toronto-Dominion Bank (TD)(TD.TO) and Canadian Imperial Commercial Bank (CIBC) (CM.TO) Both companies on Thursday beat their third-quarter earnings forecasts, mainly due to the release of reserves to cover bad loans, but strong growth in CIBC loans a year earlier eluded TD.

CIBC lending rose 8% as of July, while TD lending fell 0.5% from a year ago, as the latter’s contraction in US lending offset strong credit growth in Canada. This boosted TD’s revenue, while CIBC rose 7%.

CIBC, the fifth-largest bank, reported adjusted earnings before tax and reserves (PTPP), which jumped 7% from a year earlier, while TD gained a more modest 2.7%.

“In the US, the assistance programs for consumers and businesses have been very significant,” said Riaz Ahmed, chief financial officer of TD, Canada’s second largest lender by market value, in an interview. “This accumulation of liquidity among clients and business owners was quite significant and led to an anemic increase in loans.”

Credit growth in the US is expected to accelerate as liquidity shrinks, he said.

The bank said the growth in CIBC loans offset the impact of exchange rates and lower rates.

Both banks benefited from significant growth in asset management revenue a year earlier, which resulted in a 13% increase in non-interest income for the Canadian retail division of TD and a 25% increase in CIBC.

This helped mitigate the impact of a 1% decline in earnings for CIBC’s Capital Markets Division. The sharper 22% drop in TD was driven by a weaker trading environment that was not offset by higher consulting fees.

TD posted adjusted earnings of C $ 1.96 per share, up from C $ 1.25 per share and an analyst estimate of C $ 1.92 per share, as the company recovered C $ 37 million in loan loss provisions dollars, while it was expected that this would require 155.6 million Canadian dollars.

CIBC reported adjusted earnings of C $ 3.93 versus C $ 2.71, beating expectations of C $ 3.41. He freed up C $ 99 million in loan loss provisions, while analysts expected he would need C $ 151.6 million in reserves. More details

Report by Nikolay Saminater; Additional reporting by Niket Nishant and Nur Zainab Hussein; Chizu Nomiyama editorial staff

Our standards: Thomson Reuters Trust Principles.

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