Toronto-Dominion Bank and Canadian Imperial Bank of Commerce (CIBC) joined rivals in announcing higher dividends and share repurchases on Thursday, but while the former beat expectations for quarterly profit, the latter missed as margins came under pressure.
Both banks saw higher expenses, lower margins in their lending businesses and more sluggish trading activity, though revenue rose across all their lending and wealth management businesses from a year ago.
While TD released $123 million of reserves previously set aside to cover loan losses, CIBC took $78 million of provisions, as a 36 per cent jump in money set aside in its Canadian banking unit offset releases in other divisions.
Canadian banks, which have largely posted better-than-expected earnings in past quarters, have faced more headwinds in the fourth quarter. While Bank of Nova Scotia beat estimates, this was largely due to lower loan-loss provisions. Royal Bank of Canada and National Bank both missed forecasts as margins remained under pressure.
The banks, including TD and CIBC, have faced lower margins amid low interest rates and asset mixes skewing to real estate secured loans, and higher expenses, mostly driven by variable compensation.
TD said it would increase its dividend by 10 Canadian cents for the quarter ending Jan. 31, 2022, from 79 Canadian cents, and said it would buy back up to 50 million, or 2.7 per cent, of outstanding shares.
CIBC raised its dividend to $1.61 from $1.46, and said it would buy back up to 10 million shares, about 2.2 per cent of outstanding common stock.
TD, Canada’s second-biggest bank, said adjusted net income rose to $3.87 billion, or $2.09, in the fourth quarter ended Oct. 31, from $2.97 billion, or $1.60 cents, a year earlier. Analysts had expected $1.96 a share.
CIBC, Canada’s fifth-largest lender, said net income excluding one-off items rose to $1.57 billion, or $3.37 per share, in the three months ended Oct. 31, from $1.28 billion, or $2.79 per share, a year earlier. That compared with the average analyst estimate of $3.53.
(Reporting by Nichola Saminather and Mehnaz Yasmin; Editing by Shailesh Kuber, Jan Harvey and Emelia Sithole-Matarise)