CIBC, National Bank beat Q1 profit estimates despite economic challenges

Canadian Imperial Bank of Commerce (CIBC) and National Bank of Canada both comfortably beat analysts’ estimates for quarterly earnings on Friday, driven by loan and fee growth as well as strength in their capital markets businesses.

The lenders join Royal Bank of Canada in posting positive earnings surprises in a first quarter in which analysts had expected some challenges, particularly higher expenses and a lower contribution from trading businesses following a record quarter a year earlier.

CIBC posted a 11 per cent jump in expenses during the quarter, the same increase as revenue growth. This follows a quarter in which the bank saw the increase in costs outpace revenue expansion.

Bank analysts and investors are keeping a close eye on expenses across the industry this year, as inflation, a fight for talent and planned investments threaten to lift costs above revenue growth in some quarters for some banks.

Overall, CIBC, Canada’s No. 5 lender, reported adjusted profit that rose 14 per cent from a year earlier in the three months to Jan. 31, thanks to lower provisions for credit losses and higher revenue across all its major units.

National Bank, the smallest of the country’s Big Six banks, said net income excluding one-off items increased to C$2.65 per share from C$2.15 a year earlier, beating estimates of C$2.23.

It had expense growth of eight per cent versus revenue that grew 11 per cent from a year earlier.

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Both banks saw 11 per cent growth in their capital markets revenues from a year earlier, with National Bank benefitting from equity market volatility even though investment banking earnings fell from a record quarter a year earlier, while CIBC saw increases across both.

Both also saw strength in their Canadian commercial loan books, highlighting the return of business borrowers who had pulled back for most of the pandemic, although deposits have also continued to climb.

Higher loan volumes overall helped mitigate declines in net interest margins across both banks’ lending units.

While decline in provisions set aside earlier in the pandemic for loan losses also helped lift earnings, both banks saw profits increase even without the impact of these.

CIBC saw adjusted pre-tax, pre-provision earnings increase 11 per cent from a year earlier and 19 per cent from the previous quarter, while National Bank’s increased 14 per cent and 25 per cent respectively.

(Reporting By Nichola Saminather in Toronto; Additional reporting by Sohini Podder and Manya Sainiin Bengaluru; Editing by Sherry Jacob-Phillips, Susan Fenton and Chizu Nomiyama)