TD, CIBC report stellar profit, but outlook murky

Thu Dec 1, 2011 5:05pm 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 a grim outlook for 2012 left investors lukewarm on their shares.

Both TD and CIBC handily topped analysts' earnings forecasts for the August-October quarter thanks largely to surprisingly strong investment banking and trading revenues. Analysts said the results suggest Canada's other big banks may also report robust 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."

That 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."

CIBC's shares fell 1.3 percent to C$72.00, while TD was down 2.2 percent at C$71.90. However, following sharp gains on Wednesday, the stocks are still up on the week, and the overall market was slightly lower too.

"The outlook that they gave going forward wasn't really a rosy picture for either bank," said John Kinsey, a portfolio manager at Caldwell Securities in Toronto.

CIBC and TD were the first Canadian banks to report fiscal 2011 results. Royal Bank of Canada (RY.TO: Quote) and Bank of Nova Scotia (BNS.TO: Quote) will report results on Friday.   Continued...