Despite slower domestic mortgage activity in the Big Six banks during Q2 2019, it was on the whole still “better than expected” performance, according to a market analyst.
The implementation of B-20 early last year proved to be a major component in weaker domestic loan growth. Fortunately, the institutions with international businesses benefited from a boost this quarter.
“[The Big Six] did OK,” Cormark Securities analyst Meny Grauman told The Canadian Press.
The quarter saw overall profits of approximately $12 billion in the country’s largest banks. Net income was estimated to have grown around 7% annually, and around 5% on an adjusted basis.
However, Grauman noted that observers should look at the results in a more guarded light.
“They continued to deliver good results, but not spectacular results. And there were definitely enough black marks in the results to continue to fuel questions about just how strong performance is going to be heading into the future.”
Toronto-Dominion Bank was seen as having the “most robust” Q2 results, with both its Canadian and US retail operations exhibiting strong growth. The bank’s provisions for credit losses increased by 14% annually.
Royal Bank of Canada also had better-than-expected earnings due to stronger loan growth and higher interest rates, posting a 7% annual rise in profits. During the same time frame, RBC had a much greater 55% increase in provisions for credit losses.
BMO’s businesses north and south of the border were steady, but a total of $120 million in severance costs in the capital markets division ate into the bank’s earnings. BMO assured that the downsizing will lead to millions in annual cost savings. Provisions for credit losses increased by 10%.
Scotiabank drew significant strength from its international business, especially in Latin America. However, results were less than expected due to “a surge of provisions for credit losses in connection with a flurry of recent acquisitions, as required under accounting rules.”
Canadian Imperial Bank of Commerce reported a 2.2% growth in net income, mainly impelled by gains from capital markets and its U.S. commercial banking arm. It ultimately fell short of expert estimates, however, due to the moderating influence of sluggish loan growth. Provisions for credit losses increased by around 20%.
National Bank attributed its approximately 2% annual increase in net income to strong performance in Quebec. It also enjoyed a 9% rise in personal and commercial banking profits. The general slowdown in financial markets impaired its overall earnings, however, causing it to miss analysts’ estimates.