WRAPUP 1-TD Bank, CIBC close out poor year for Canada bank earnings with profit misses

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Dec 5 (Reuters) – TD Bank Group and Canadian Imperial Bank of Commerce posted smaller-than-expected quarterly earnings on Thursday, closing out the worst year since the financial crisis.

Three of the four Canadian banks that reported earnings prior to Thursday saw share sell-offs, as sliding investment banking fees, pressure on margins and an increasingly weak credit environment led to disappointing results.

While net interest margins in Canada have largely remained stable as the Bank of Canada has left interest rates unchanged since September 2018, consumer insolvencies, which have climbed to the highest since 2010, have forced lenders to increase their loan loss provisions.

TD, Canada’s second-biggest lender by market value, reported adjusted earnings per share of C$1.59, down from C$1.63 a year ago and short of analyst estimates of C$1.74, according to IBES data from Refinitiv.

Excluded from TD’s adjusted earnings was a restructuring charge of C$154 million related largely to severance payments.

Chief Financial Officer Riaz Ahmed declined to provide the number of jobs affected, instead pointing out that the bank had added almost 3,500 jobs through 2019 as it boosts its investment in technology.

While TD considers acquisitions occasionally, its focus is on organic growth, Ahmed added in an interview. The bank expects “more moderate growth for 2020” than the bank’s 7% to 10% adjusted EPS growth target, closer to this year’s 3.4% expansion, he said.

Following the acquisition by Charles Schwab of TD Ameritrade, in which TD Bank owns a 43% stake, the Canadian bank will work out with Schwab how it will use its capabilities to bring a bigger platform to customers, Ahmed said.

TD Bank’s provisions for loan losses, or the amount a bank sets aside to cover bad loans, rose 33% to C$891 million a year earlier, while CIBC’s climbed to C$402 million from C$264 million. Both significantly exceeded analyst estimates.

CIBC’s profit fell to C$2.84 a share, from C$3.10 a year ago, missing expectations by 22 cents.

Adjusted income at TD’s domestic retail business rose 2% to C$1.77 billion ($1.32 billion), while the U.S. retail business’s profit grew nearly 7% to C$1.19 billion. Wholesale banking, which includes capital markets and investment banking, dropped 44%.

At CIBC, a 22% increase in adjusted earnings from U.S. commercial banking and wealth management was offset by a 4% decline in Canadian retail banking and a 12% drop in capital markets.

$1 = 1.3301 Canadian dollars
Reporting by Nichola Saminather in Toronto; Additional
reporting by Abhishek Manikandan and C Nivedita in Bengaluru;
Editing by Vinay Dwivedi and Steve Orlofsky

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