Canadian Housing Gains Lift Profit at Toronto-Dominion, CIBC
(Bloomberg) -- Strength in Canada’s housing market helped Toronto-Dominion Bank and Canadian Imperial Bank of Commerce beat analysts’ earnings estimates in the fiscal first quarter, with rising mortgage balances giving a boost to the lenders’ domestic banking businesses.
Profit from Toronto-Dominion’s Canadian retail division rose 14% to C$2.04 billion ($1.63 billion) in the three months through January, aided by a 6.2% gain in the mortgage portfolio, the lender said Thursday. Earnings in CIBC’s domestic personal and business unit climbed 13% to C$652 million, driven by an 8% increase in mortgages.
Canada’s housing market has powered through the Covid-19 crisis, with government stimulus programs preventing widespread defaults and demand remaining high for a limited supply of homes. The mortgage gains were especially important for CIBC, which has been working to improve its results in that product line.
“The market remains hot,” Laura Dottori-Attanasio, CIBC’s head of personal and business banking, said on a conference call. “The good performance you’re seeing from CIBC also has a lot to do with a lot of the hard work that our team members have been putting into turning our performance around.”
Toronto-Dominion’s profit excluding some items was C$1.83 a share, topping analysts’ C$1.49 average estimate. Net income rose 9.6% to C$3.28 billion, or C$1.77 a share. CIBC’s also beat estimates, with adjusted earnings of C$3.58 a share, beating the C$2.81 average projection. Net income increased 34% to C$1.63 billion, or C$3.55 a share.
CIBC shares rose 0.9% to C$118.86 at 9:46 a.m. in Toronto, while Toronto-Dominion fell 0.9% to C$78.69. CIBC has gained 9.4% this year, while Toronto-Dominion has risen 9.5%. The S&P/TSX Commercial Banks Index has climbed 9.4%.
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Toronto-Dominion’s U.S. retail operations were hurt by low interest rates that compressed margins, as well as lower credit-card fees. Profit in the division fell 13% to C$1 billion.
Relative to peers, Toronto-Dominion set aside larger amounts of money to absorb potential loan losses earlier in the pandemic. With the economy stabilizing and government programs helping, the bank is now setting aside less. Total provisions in the quarter were C$313 million, down 66% from the fourth quarter.
Still, the bank isn’t ready to say the potential for credit losses has entirely faded.
“We expect the path of the economy to follow the path of the health crisis, which we would say is still uncertain,” Chief Financial Officer Riaz Ahmed said in an interview. “Clearly there are some positive signs, with expectations of vaccines, but we need to remain vigilant about a possible third wave.”
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