Canadian lenders TD, CIBC hurt by weaker capital markets

TORONTO (Reuters) - Toronto-Dominion Bank and Canadian Imperial Bank of Commerce, two of Canada’s biggest lenders, reported first-quarter earnings on Thursday that fell short of analysts’ forecasts, hurt by weakness in their capital markets businesses.

The Toronto-Dominion (TD) bank logo is seen outside of a branch in Ottawa, Ontario, Canada, February 14, 2019. REUTERS/Chris Wattie

Shares in TD, which have climbed 14 percent in the year to date, slipped 2.9 percent in early trading. Shares in CIBC, which are up 13 percent so far this year, were down 1 percent.

Profit at TD, Canada’s second-biggest lender, was hurt by losses at its wholesale banking division while CIBC, the country’s fifth-biggest lender, saw earnings decline in personal and small-business banking as well as capital markets.

Global stock markets declined during the period amid geopolitical concerns including escalating trade tensions between the U.S. and China and Britain’s impending exit from the European Union.

TD earned, excluding special items, C$1.57 per share, up from C$1.56 a year earlier, but lower than the C$1.72 expected by analysts according to IBES data from Refinitiv.

Net income, excluding special items, was C$2.95 billion ($2.24 billion), in the quarter through Jan. 31, unchanged from a year ago.

TD reported a net loss of C$17 million at its wholesale banking division, compared to net earnings of C$278 million in the same quarter a year earlier, which it said reflected lower trading revenue and higher costs.

The bank warned that, due to challenging market conditions, it anticipates earnings in 2019 will be “closer to the low end” of its 7 percent to 10 percent targeted range.

CIBC earned C$3.01 per share in the quarter ended Jan. 31, excluding special items. That was down from C$3.18 a year earlier and short of the C$3.08 forecast by analysts.

It was the second quarter in a row that CIBC has missed forecasts, ending a period of four years in which it had beaten or matched estimates.

Net income, excluding special items, fell by 5 percent to C$1.36 billion. That included a 4 percent decline in earnings at its personal and small-business banking division to C$463 million, as funds set aside to cover bad loans increased.

CIBC said net income at its capital markets division sank 38 percent to C$201 million, due to lower revenue and an increase in funds set aside to cover bad loans.

Rivals Royal Bank of Canada, Bank of Nova Scotia and Bank of Montreal also reported declines in earnings from capital markets.

($1 = 1.3161 Canadian dollars)

Editing by Jason Neely and Bernadette Baum