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Bloomberg

Canadian Banks Report Covid All-Clear Earlier Than Expected

(Bloomberg) – Canada’s largest banks are reporting that financial woes related to the Covid-19 crisis are largely in the rearview mirror in North America – and sooner than analysts expected. in the face of a wave of defaults, the Royal Bank of Canada and the Toronto-Dominion Bank – the country’s two largest banks – reversed course in the last quarter. Toronto-Dominion on Thursday announced a surprise release of C $ 377 million ($ 312 million) in credit loss provisions for its fiscal second quarter, while the Royal Bank released C $ 96 million. Analysts had predicted the two lenders would continue to set aside capital to absorb potentially downgraded loans, with vaccination drives putting economic reopening within reach in Canada and the United States, strong housing markets fueling mortgages and the rise of stock markets supporting financial markets and wealth management businesses. , Toronto-Dominion and the Royal Bank say they have more than enough capital to deal with any obstacles on the road to recovery. preparations for possible credit losses, which led many analysts to believe that reserve releases would not begin until the second half of the year. “They are certainly a lot more positive than they were three months ago,” Paul Gulberg, analyst at Bloomberg Intelligence, said in an interview Thursday. “It’s a combination of vaccines and a stronger economy – not just in the United States and Canada – but an economy that is improving globally.” Although bank releases were the first data from banks dating back to 2012, key measures of available capital for the Royal Bank and the Toronto-Dominion continued to rise. Royal Bank’s common equity Tier 1 capital ratio increased to 12.8% in the three-month period ending April, from 12.5% ​​in the first quarter. Toronto-Dominion CET1 fell from 13.6% to 14.2%. These upward measures could put pressure on Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, to allow the country’s banks to resume share buybacks and increase dividends. The US Federal Reserve allowed US banks to resume buybacks last year. “OSFI should look into this,” said Gulberg. “The dividend increases, blocked for more than a year, and some buybacks could bring capital ratios back to more normal and more acceptable levels for banks.” The return of the pandemic has made its way into banks’ financial results. At Royal Bank, net income rose 171% to C $ 4.02 billion in the second quarter. Excluding certain items, earnings were C $ 2.79 per share, beating analysts’ average estimate of C $ 2.51. Toronto-Dominion’s net income more than doubled to C $ 3.7 billion and adjusted earnings totaled C $ 2.04 per share, beating analysts’ estimate of C $ 1.76. “Very Encouraged” “We are very encouraged by these developments in Canada, and the progress in vaccine deployment and sound economic growth forecasts leave the bank poised to continue to deliver strong performance in the United States and the United States. Canada, said CFO Riaz Ahmed. some of the announcements coming out of the different provinces on what the next three to four months will look like, ”Ahmed said in an interview. With credit card balances and business loans, a number of factors are lining up to overcome these headwinds, said Rod Bolger, chief financial officer of Royal Bank. levels of trust and also a desire to solve some of the problems in the global supply chain and potentially build inventory where many places don’t have an inventory, ”Bolger said in a telephone interview. “These should be constructive for overall loan growth.” The Canadian Imperial Bank of Commerce also announced second quarter results on Thursday. Its net income quadrupled to C $ 1.65 billion, and adjusted earnings were C $ 3.59 per share, which is higher than the average estimate of C $ 3. CIBC shares rose 3.6% in Toronto, its biggest intraday gain since November. Royal Bank was up 1.4% at 3:22 p.m. and Toronto-Dominion was down 2.1%. CIBC’s results were driven by gains in its Canadian bank franchise, with increased mortgages and deposits. CFO Hratch Panossian has said revitalizing the consumer sector in Canada is the bank’s No.1 priority. “There has been a lot of management attention, investment and focus in this area,” he said in an interview. “We are delighted to see that some of these dividends are paying off.” (Updates with CFOs comments in 10th paragraph.) More articles like this are available at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP


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