Canadian banks surprise with dividends and big profits

Thu Aug 30, 2012 5:30pm EDT
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By Cameron French

TORONTO (Reuters) - Three of Canada's top banks raised their dividends after reporting stronger-than-expected third-quarter profits on Thursday as Canadians continued to be robust borrowers despite high debt levels and fears of a cooling housing market.

While year-over-year gains in trading revenue padded gains at some of the banks, it was traditional personal and business lending that carried the country's top lenders to a blockbuster quarter, defying analysts' predictions for an accelerating slowdown in loan growth.

"The (Canadian) household hasn't started deleveraging," National Bank Financial analyst Peter Routledge said.

"You generally saw better loan growth than what we thought. That doesn't necessarily mean that's going to continue."

The dividend increases by Royal Bank of Canada (RY.TO: Quote), Toronto-Dominion Bank (TD.TO: Quote) and Canadian Imperial Bank of Commerce (CM.TO: Quote) come on the heels of similar moves by Bank of Montreal (BMO.TO: Quote) and Bank of Nova Scotia (BNS.TO: Quote) earlier this week, meaning Canada's top five banks have all lifted payouts this quarter.

Analysts had expected at least two dividend increases from the group, but few expected more than three.

RBC, the country's largest bank, unexpectedly lifted its payout by 5 percent to 60 Canadian cents.

That came on the back of a 73 percent rise in net profit at RBC that, along with a 42 percent profit gain at CIBC, had some observers shaking their heads, given the results came in what's considered a challenging environment.   Continued...