Royal Bank of Canada (RBC), the country’s No.1 bank, on Thursday surpassed analysts’ expectations for quarterly profit, driven by strength in its capital market business and its core personal banking segment.
Canadian Imperial Bank of Commerce, the country’s fifth largest bank, also beat profit expectations on capital markets strength and as it set aside smaller than expected loan loss provisions.
A resurgence in M&A activity after a long lull as interest rates soar has helped Canadian banks in recent quarters, even as loan loss provisions continue to weigh on profits.
The top six Canadian banks, which together control more than 90 per cent of the country’s banking market, have been struggling amid high interest rates that weighed on consumers’ wallets as monthly mortgage payments, credit card bills and living costs rose.
RBC’s personal and commercial banking unit, which now includes HSBC’s domestic unit after a $10 billion acquisition, recorded a seven per cent rise in net income, primarily driven by higher net interest income – the difference between what a bank earns on loans and pays on deposits.
Still, provisions for credit losses came in at C$920 million, higher than analysts’ forecast of C$880 million, according to LSEG data.
CIBC recorded lower loan loss provisions in its commercial banking segment in Canada and the U.S., a market where it was previously hit due to its exposure to office real estate.
RBC’s capital markets segment recorded net income of $1.26 billion, a 31% rise from a year ago, helped by higher M&A, loan syndication activity, and equity and debt origination across most regions.
RBC’s quarter highlighted “an impressive top-line performance, manageable credit costs, and a solid capital position following the close of the HSBC Canada acquisition,” KBW analyst Mike Rizvanovic said.
“A solid quarter overall,” he said on CIBC’s performance.
The results round out a mixed earnings season for Canada’s big six lenders, which have been looking for opportunities to diversify south of the border and are seeking alternative paths for growth as competition intensifies in a saturated market at home.
RBC’s profit climbed 7% to C$3.95 billion. On a per-share basis, it earned C$2.92, beating the average estimate of C$2.75.
CIBC earned C$1.75 per share, topping the estimate of C$1.65 per share.
($1 = 1.3719 Canadian dollars)
(Reporting by Nivedita Balu in Toronto and Manya Saini in Bengaluru; Editing by Shilpi Majumdar, Shinjini Ganguli and Andrew Heavens)