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Expert reaction to Q1 earnings from Canada's 'Big 6' banks



Thursday marked the conclusion of first-quarter earnings week for Canada's major banks, with TD Bank and the Canadian Imperial Bank of Commerce (CIBC) taking the spotlight. Here's a breakdown of expert reactions to the Q1 earnings from the country's 'Big 6' banks.


CIBC reported a robust first-quarter performance, revealing a profit of $1.73 billion and a rise in revenue to $6.22 billion. While earnings per share on an adjusted basis were slightly lower than the previous year, it surpassed analyst expectations, demonstrating a successful quarter. Ebrahim Poonawala from Bank of America Securities praised CIBC's improved loan portfolio, particularly in the U.S. commercial real estate sector. Management's commitment to managing potential future losses related to their U.S. office portfolio was seen as a positive move, solidifying a string of strong quarters.


TD Bank Group exceeded expectations, reporting a first-quarter profit of $2.82 billion, up significantly from the previous year. Earnings per share also outperformed analyst forecasts, reaching $2. The bank faced regulatory scrutiny from the U.S. Department of Justice regarding anti-money-laundering practices, leading to the cancellation of a planned acquisition. Despite the challenges, TD Bank's CEO, Bharat Masrani, emphasized the institution's commitment to addressing these issues, reassuring investors of ongoing progress.


Royal Bank of Canada (RBC), Canada's largest bank, reported a profit of $3.58 billion, beating analyst expectations. Poonawala expressed optimism about RBC's future, citing the potential revenue boost from its acquisition of HSBC Canada. National Bank of Canada, the smallest among the 'Big 6,' also surpassed expectations with a first-quarter profit of $922 million. The bank's shares reached an all-time high, reflecting investor confidence.


Bank of Montreal (BMO) deviated from the positive trend, reporting lower-than-expected earnings and revenue for the first quarter. Despite this, Poonawala identified BMO as a bank to watch due to its U.S. presence, particularly its acquisition of Bank of the West. Scotiabank, on the other hand, impressed with strong revenue growth in its Latin America divisions. The bank reported a net income of $2.20 billion, exceeding analyst expectations.


Jerome Hass from Lightwater Partners considered Scotiabank's results as a notable catch-up with its peers. However, the overall positive earnings from most of Canada's big banks were accompanied by increased provisions for bad loans, indicating ongoing caution about economic uncertainties.


In total, the 'Big 6' banks allocated more than $4 billion in the first quarter for loan-loss provisions, signaling continued concerns about the economic health of clients. Despite the positive results, experts like Hass suggested that these provisions, while substantial, are relatively modest in the context of the banks' portfolios. Foreign investor appeal remains uncertain, as the banks may need to do more to entice those seeking opportunities in the Canadian market.


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