WRAPUP 1-Canadian banks TD, CIBC quarterly profits top expectations

Thu Aug 27, 2015 11:41am EDT
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By John Tilak

TORONTO Aug 27 (Reuters) - Toronto Dominion Bank and Canadian Imperial Bank of Commerce on Thursday posted forecast-topping quarterly profits on robust growth in their domestic retail businesses even as both became the latest Canadian lenders to record jumps in bad loans tied to the energy sector.

CIBC, Canada's fifth-largest bank, also raised its quarterly dividend, and its stock rose nearly 6 percent. Shares of TD, the country's No. 2 bank, climbed 1 percent.

Fears about how the energy industry slowdown would affect Canadian lenders and worries about a slowing economy have been weighing on bank shares this year.

Early signs of an impact from the oil price selloff have been emerging in the third quarter ended on July 31. Energy-sector bad loans rose 59 percent for TD from the second quarter and climbed 36 percent for CIBC.

Both Royal Bank of Canada and Bank of Montreal have also reported big rises in bad loans from the sector this week.

Banks are scrutinizing their energy industry clients for signs of credit weakness, and they could renegotiate loan terms that come up for renewal based on refreshed oil price projections.

However, less than 1 percent of TD's loan book comes from the energy companies, making it among the least exposed of the major Canadian banks.

"The portfolio is performing very much in line with expectations," Chief Financial Officer Colleen Johnston said in an interview. "If oil prices remain low and they remain low for longer, we will have increased credit losses, but we think those losses are very manageable."   Continued...