TD, CIBC top estimates, but outlook pressures shares

Thu Dec 1, 2011 12:06pm EST
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By Cameron French

TORONTO (Reuters) - Quarterly results from Canadian Imperial Bank of Commerce (CM.TO: Quote) and Toronto-Dominion Bank (TD.TO: Quote) gave Canadian bank earnings season a strong start on Thursday, but the shares of the two banks fell on concerns that their healthy lending and trading revenues could soon dwindle.

Both TD and CIBC handily topped analysts' earnings forecasts for the August-October quarter due largely to their surprisingly big trading and investment banking revenues. Analysts said the results suggest Canada's other big banks may also report stronger-than-expected profits.

"With the both of them doing very well on trading, it actually does bode well for others," said John Aiken, an analyst at Barclays Capital.

"That being said, we wouldn't necessarily believe that it's going to ignite anybody's (stock) valuation because the market will discount this with the current pessimism."

The pessimism stems from dour predictions for 2012 that reflect already high consumer indebtedness and concerns that Europe's sovereign debt crisis could balloon into a freeze-up in lending reminiscent of 2008.

"Looking forward, the external environment remains very uncertain," CIBC Chief Executive Gerry McCaughey said on a conference call.

"Interest rates are expected to remain low and growth rates in consumer credit are expected to slow down slightly."

At midday, CIBC's shares were down 1.3 percent at C$71.96 on the Toronto Stock Exchange, while TD was down 2.3 percent at C$71.79.   Continued...