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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Canadian Imperial Bank of Commerce | NYSE:CM | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 47.99 | 0 | 12:34:39 |
By Rita Trichur
TORONTO--Canada's biggest banks report their fiscal fourth-quarter results this week, with most seen posting single-digit earnings growth on expectations that moderating loan growth partially offset sturdy capital-markets results.
Bank of Montreal will report first on Tuesday, followed by Royal Bank of Canada on Wednesday. Toronto-Dominion Bank and Canadian Imperial Bank of Commerce both report Thursday, leaving Bank of Nova Scotia to cap off earnings season on Friday.
Although Canada's "Big Five" banks have posted surprisingly strong profits for much of fiscal 2014, analysts say the froth has come off expectations for the August-to-October quarter. In recent weeks, Scotiabank and RBC have disclosed cost-cutting programs, while TD previously warned that expenses could blemish its results.
A "modest, unexciting close to 2014," John Aiken, an analyst with Barclays Capital Inc., said in a research note to clients.
"Although our expectations for the quarter are modest, in an environment of uncertainty and volatility, and with an average dividend yield of 3.5% for the group, we believe Canadian banks continue to offer an interesting relative safe haven for investors," he added.
By all accounts, this is unlikely to be a blockbuster quarter. BMO, Canada's fourth-largest bank by assets, is expected to record a 2.4% year-over-year increase in earnings per share, according to analysts polled by Thomson Reuters.
RBC, the country's No. 2 player, is expected to post a 21% rise in share earnings. TD, CIBC and Scotiabank, ranking first, fifth and third in the industry, are expected to record earnings-per-share gains of 11%, 1.4% and 6.9%, respectively.
Banks have already telegraphed the need for tempered expectations, pointing to moderating mortgage-lending growth and margin pressure caused by persistently low interest rates.
Against that backdrop, some banks have started to take a knife to costs. Last month, Scotiabank announced plans to slash 1,500 jobs along with the closure or downsizing of 120 branches outside Canada. That restructuring will result in slew of fourth-quarter charges totaling 341 million Canadian dollars ($298 million), the bank said.
RBC has since confirmed that it, too, is trimming expenses by exiting some of its international wealth-management businesses, a move that will result in an unspecified number of job losses. RBC has said the restructuring would not be material to its financial results, but left the door open to more cuts.
Turbulent equity markets could also affect the banks' capital-markets results. Although capital-markets revenue is expected to dip from the third quarter due to lower trading revenue, some analysts are still forecasting hearty year-over-year gains.
"We believe the environment for advisory and underwriting will remain robust," said Peter Routledge, an analyst with National Bank Financial.
Tumbling oil prices have also fueled concerns about Western Canada's energy-based economy and the potential knock-on effects for banks. Analyst Meny Grauman of Cormark Securities Inc. estimates that Canadian banks' direct exposure to the oil and gas sector is limited to 3% of their loan books.
"Of course, the indirect exposure is much broader considering all the related industries that feed into it," said Mr. Grauman in a report, noting any slowdown in the Alberta economy could also hurt mortgage lending.
Analysts, meanwhile, are divided on the potential for dividend increases this earnings season. Some suggest BMO is best positioned for a hike.
Write to Rita Trichur at rita.trichur@wsj.com
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