Canadian banks top estimates, driving up shares

Thu Mar 3, 2011 4:29pm EST
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By Cameron French

TORONTO (Reuters) - Royal Bank of Canada and Toronto-Dominion Bank both handily beat profit expectations on Thursday, sending their shares sharply higher, as a strong economy supported loan growth and investment banking profit.

The first-quarter results from Canada's two biggest banks followed impressive results from other Canadian lenders over the past two weeks, and confounded predictions that consumer lending was drying up.

"We're seeing underlying earnings growth which is a lot stronger than what I believe the market had been anticipating," said John Aiken, an analyst at Barclays Capital in Toronto.

TD also raised its quarterly dividend by 8.2 percent, the first of the country's big five banks to do so since the financial crisis.

Canada's banks weathered the crisis relatively well, due to conservative lending practices. Unlike many U.S. and European banks, no Canadian lenders required a government bailout.

Their results reflect a surge in economic growth in the fourth quarter of last year that, along with still-low interest rates, has spurred Canadians to keep borrowing.

"We're still seeing good (loan) growth, not at the double-digit level that we saw in 2010, but certainly still quite strong," Colleen Johnston, TD's chief financial officer, told Reuters.

But she said the bank had begun to see a slowdown in mortgage lending during the quarter to December 31, the first quarter of the banks' fiscal year.   Continued...