TORONTO (Reuters) - Three of four Canadian banks reported lower profits on Thursday, but the results of the big players were either in line with market expectations or with the banks’ own warnings in recent weeks.
“I would categorize today as a no-big-surprise day, which is a good thing in this environment,” said Craig Fehr, a financial services analyst at Edward Jones.
Canadian banks are reporting results as financial services companies around the globe continue to grapple with the financial crisis and the sliding value of complex derivatives on their books. Many Canadian banks avoided large losses in this area, but they are facing fallout from the economic and stock market downturn, such as weaker profits from wealth management and rising loan-loss provisions.
The bank with the biggest potential to surprise, Canadian Imperial Bank of Commerce CM.TO, largely met analysts’ expectations once a variety of charges and gains are excluded. On a net basis, CIBC said its fourth-quarter profit fell 51 percent to C$436 million, or C$1.06 a share.
It was the only major bank that had given no details of its results ahead of time, raising fears about write-downs.
The actual results seemed to bring relief: CIBC stock rallied as much as 6 percent after its results were published and the stock traded at C$48.04 in the afternoon, up C$2.75.
Patricia Croft, chief economist at RBC Global Asset Management, said the earnings news from the banks was “not great” but was good enough to send some bank stocks higher.
“That is what this environment is all about,” she said. “If it’s not as bad as anticipated, then it’s a cause for joy.”
As expected, Toronto-Dominion Bank TD.TO reported lower profits due to trading losses, and National Bank of Canada NA.TO reported a profit despite commercial paper write-downs and other charges.
TD’s fourth-quarter profit fell 7 percent to C$1 billion, or C$1.22 a share. National swung to net income of C$70 million, or 37 Canadian cents a share, from a year-earlier loss of C$175 million.
Both banks had warned earlier that charges were coming.
Shares of both were down by afternoon. TD was trading at C$42.16, down 34 Canadian cents, while National shares were down 69 Canadian cents at C$37.13.
The banks did not reveal a lot about their targets for 2009.
Unlike previous years, many of them are keeping specific earnings or other growth goals to themselves. Some are stressing “medium term” objectives for the next several years instead.
“Going forward, I think this is really going to be a credit-quality story and those (banks) that outperform will probably be those that can manage their credit quality better,” Edward Jones analyst Fehr said.
TD Bank referred to a “lack of visibility on the economic environment,” which it said demanded caution.
The chief executive of Canadian Western Bank CWB.TO, where fourth-quarter profit fell 17 percent to C$24.5 million, said 2009 could be tough.
“We expect ongoing market turmoil and a very uncertain global economic outlook will continue to have an impact on the bank’s revenue growth,” Canadian Western CEO Larry Pollock said on a conference call on Thursday morning.
Further reductions in the prime lending rate in 2009 will put more short-term pressure on net interest margin, Pollock said.
Canadian Western shares were down 8 percent at C$13.98 by afternoon.
Earlier this week, Bank of Nova Scotia BNS.TO said that it was aiming for moderate 2009 earnings growth.
“We believe that the economic activity will likely be weak through much of 2009,” Scotiabank CEO Rick Waugh told a conference call on Tuesday. “We also expect this volatility in the financial markets to continue,” Waugh added.
The last two banks to report fourth-quarter and full year 2008 results, Royal Bank of Canada RY.TO and Laurentian Bank of Canada LB.TO, move into the spotlight on Friday.
Additional reporting by Frank Pingue and Jennifer Kwan; editing by Peter Galloway