CIBC, TD close bleak Q4 earning season with lower profit, higher loss provisions

CIBC, TD close bleak Q4 earning season with lower profit, higher loss provisions
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TORONTO — Canada’s banking sector closed out its fourth-quarter earnings season Thursday with CIBC and TD providing more evidence of a challenging economic environment.

Canadian Imperial Bank of Commerce reported $1.19 billion of net profit in the fourth quarter, down six per cent from the comparable period of 2018, while its adjusted earnings came in below analyst estimates.

TD Bank Group’s adjusted earnings also missed analyst estimates as net profit slipped three per cent to $2.86 billion, or $1.54 per share, in the quarter ending Oct. 31, down from $2.96 billion or $1.58 per share a year earlier

Among other things, the banks increased their provisions for credit losses substantially compared with last year, when PCLs were historically low.

At TD, PCL for the quarter was $400 million, an increase of $137 million, or 52 per cent, compared with the fourth quarter last year. At CIBC, PCL rose 52 per cent to $402 million from $264 million a year earlier.

CIBC’s quarter was also negatively affected by a $135-million goodwill impairment charge related to the expected sale of its controlling interest in FirstCaribbean International Bank Ltd.

CIBC’s net profit amounted to $2.58 per share while adjusted earnings were $2.84 per share.

Analysts had estimated $3.06 per share of adjusted profit, according to financial markets data firm Refinitiv.

“Our core businesses delivered pre-provision earnings growth of four per cent. However, our higher provisions for credit losses this quarter affected our bottom line results,” CIBC chief executive Victor Dodig told analysts.

“While provisions have increased, we remain confident in the quality of our loan portfolio going forward.”

“More broadly, we concluded the year with a strong capital position of 11.6 per cent. This provides us with the flexibility to invest in our core businesses for long-term growth as well as return capital to our shareholders.”

He concluded the call by saying CIBC is focused on improving the performance of its businesses.

“We did not deliver what we wanted to deliver to our shareholders and we’re focused on getting the bank back to earnings growth in 2020. That’s the preliminary occupation of the leadership team.”

Despite CIBC’s assurances that the bank expects improvements next year, its shares fell $5.94 or 5.17 per cent to $108.89 in morning trading at the Toronto Stock Exchange.

TD shares were down $2.37 or 3.13 per cent to $73.30, according to TSX data.

In last year’s fourth quarter, CIBC had $1.27 billion of net income, or $2.80 per share, and $3 per share of adjusted earnings.

Revenue for the three months ended Oct. 31 was $4.77 billion, up from $4.45 billion in last year’s fourth quarter and above analyst estimates.

This report by The Canadian Press was first published Nov. 05, 2019.

Companies in this story: (TSX:CM, TSX:TD)

David Paddon, The Canadian Press

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