(Bloomberg) — Canada’s largest banks beat estimates across the board as trading and deals fueled a 35% gain from a year earlier in their capital-markets earnings, provisions for credit losses remained contained and the lenders’ domestic-banking units delivered solid results. <\/p>\n
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The country’s two biggest lenders \u2014 Royal Bank of Canada and Toronto-Dominion Bank \u2014 wrapped up fiscal third-quarter results Thursday. Toronto-Dominion posted record results at its capital-markets unit, with the division’s net income surging 87% from a year earlier. Royal Bank, which has the largest capital-markets business of the Canadian lenders, saw earnings in the unit reach C$1.54 billion ($1.11 billion) in the three months through July. <\/p>\n
Toronto-Dominion Chief Financial Officer Kelvin Tran called his firm’s capital-markets results “broad-based,” pointing to equities and commodities trading, equity underwriting and advisory fees as drivers. <\/p>\n
“You have that on the back of favorable market conditions and then also provisions for credit losses were well-contained,” he said in an interview. Toronto-Dominion also said Thursday that it now expects provisions to be at the lower end of its previous guidance range for the full year. <\/p>\n
Both firms, along with Canadian Imperial Bank of Commerce, topped analyst estimates for adjusted earnings per share on Thursday, continuing a trend seen earlier in the week from Bank of Nova Scotia, Bank of Montreal and National Bank of Canada, which all benefited from better-than-expected capital-markets results along with performance from most other business lines that beat consensus forecasts too. <\/p>\n
The lenders’ results also showed revenue growth continues to outpace expenses, with positive operating leverage across the board. And return on equity climbed higher across the firms, with Toronto-Dominion’s adjusted ROE up 160 basis points from the previous three months to 16%, and Royal Bank notching adjusted ROE of 18.1%, again topping its target range for the metric. CIBC’s ROE was also up, coming in at 16.8%. <\/p>\n
‘Broad-Based’ <\/p>\n
At Toronto-Dominion, adjusted earnings per share were C$2.77 in the quarter, better than the C$2.48 average analyst estimate in a Bloomberg survey. Net income in the company’s capital-markets unit totaled C$743 million, beating the C$561 million average forecast. <\/p>\n
Results at Toronto-Dominion were “broad-based across the bank’s operating segments,” Scotiabank analyst Mike Rizvanovic said in a note to clients. <\/p>\n
Toronto-Dominion faces an asset cap on consumer and commercial lending growth in the US following its settlement with US authorities over an anti-money-laundering scandal. But the cap doesn’t apply to the bank’s capital-markets business, which has been an investment focus. <\/p>\n
The US division contributed adjusted net income of C$1.07 billion, better than the C$1.01 billion average forecast. Meanwhile, net income at the company’s Canadian personal- and commercial-banking unit, its biggest business, totaled almost C$2.1 billion in the quarter, topping the C$2 billion average forecast. Analysts have characterized the business as being in a turnaround phase and said that better margins have begun to lift earnings. <\/p>\n
Overall net income was C$4.62 billion, beating the C$4.1 billion consensus expectation. And on credit, Toronto-Dominion reported provisions for potentially bad loans totaling C$917 million, less than the C$1.1 billion analysts had forecast. <\/p>\n
At Royal Bank, the capital-markets division saw net income increase by 16% from a year earlier. The results extend a period of notable growth for the franchise, which now earns about 70% of its revenue outside of Canada, including about half from the US. The bank has been adding senior bankers as it seeks greater market share across geographies. It’s also pushing to win more corporate-banking work, launching a new business line this week that combines its US and Canadian cash-management platforms, and aims to expand them globally. <\/p>\n
Royal Bank’s adjusted earnings per share came in at C$4.28, better than the C$4.07 consensus forecast. CIBC earned C$2.73 per share, topping the C$2.53 average estimate. <\/p>\n
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