Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce (CIBC) reported diverging second-quarter performances on Thursday with the former two comfortably beating expectations while the latter missed, all driven largely by provisions for credit losses (PCLs).
Royal Bank, Canada’s largest lender, reported higher profit in the three months ended April 30 from a year earlier, and beat estimates. TD, the second-biggest, posted lower profit but beat expectations, while CIBC’s profit fell and it slightly missed estimates.
Strength in lending books and fees have continued to offer tailwinds for Canadian banks on the back of economic growth, but they are also seeing increased expenses due to tight labour markets and inflation erodes some of these benefits. PCLs are also starting to creep higher as they brace for economic uncertainties.
At RBC, excluding the impact of taxes and its C$342 million ($266.81 million) of loan-loss provision releases, earnings fell two per cent to $5 billion as lower revenues from its capital markets business outweighed strength in wealth management and lending.