TORONTO (Reuters) -The Toronto-Dominion Bank (TD) and the Canadian Imperial Bank of Commerce (CIBC) on Thursday closed third quarter results for Canadian lenders with better than expected earnings, mainly due to the release of reserves for cover bad loans, but the strong growth in CIBC loans over the previous year eluded TD.
CIBC loan balances were up 8% as at July 31, while TD’s were down 0.5% from a year earlier, as declines in loans from the latter in the United States offset the decline. strong loan growth in Canada. This helped TD’s stable revenue, while CIBC’s rose 7%.
âIn the United States, consumer and business assistance programs have been quite significant,â said Riaz Ahmed, chief financial officer of TD, Canada’s second-largest lender, in an interview. “This accumulation of cash among customers and business owners has been quite significant and has resulted in anemic growth in loans.”
Lending growth in the United States is expected to accelerate as liquidity decreases, he said.
All of Canada’s largest banks this week reported better-than-expected profits this week, thanks to improved provisions for credit losses (PCL). Most also showed signs of a recovery in lending, especially to Canadian businesses, although mortgage lending continued to grow, with that strength helping to eclipse continued pressure on margins.
The Bank of Nova Scotia struggled, however, as growth in its lending to the country was overshadowed by the decline in its large business in Latin America, although analysts were optimistic about a turnaround in the coming quarters.
On Thursday, TD joined the disappointing contingent.
TD shares fell 0.9% to C $ 84.88 in morning trading in Toronto, while CIBC climbed 0.5% to C $ 152.16, en route to a record close. Toronto’s benchmark equity index slipped 0.1%.
Shares of Royal Bank of Canada, Bank of Montreal and National Bank of Canada also set records this week.
TD’s “loan growth remains a struggle, which does not appear to be solely the result of (the) runoff” of the US corporate loan cancellation program due to the pandemic, said Barclays analyst John Aiken in a note.
Still high deposit levels could slow the resumption of loan growth in some areas, some banks have warned. At CIBC, credit utilization rates, while improving, remain low, and although credit card purchases are on the rise, overdue balances are expected to build up much more slowly, executives said at a conference telephone with analysts.
Separately, CIBC said it aims to achieve zero net greenhouse gas emissions in its operational and financial activities by 2050, and will set interim targets to achieve this from next year.
TD and CIBC both enjoyed strong growth in wealth management revenues over the previous year, which contributed to a 13% increase in non-interest income in the Canadian unit of TD and 25% in that of CIBC.
For more details on the income of the two banks:
(Reporting by Nichola Saminather; Additional reporting by Niket Nishant and Noor Zainab Hussain; Editing by Chizu Nomiyama and Jonathan Oatis)
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