Banks warn of economic ‘uncertainty’ in year ahead

TD, CIBC still see profit bump in Q4

The heads of two of Canada’s biggest banks warned Thursday of the possibility of economic turbulence that could affect their forecasts for future earnings.

Toronto-Dominion Bank president and chief executive Bharat Masrani said Thursday on a conference call to discuss fourth-quarter results that his company is heading into its fiscal 2019 with “continued good momentum in a favourable backdrop,” and with both the Canadian and U.S. economies performing well.

TD, Masrani said, is of the view that it can continue to deliver adjusted earnings per share growth for 2019 that is within the bank’s seven- to 10-per-cent target range. “As you will appreciate, though, we are watching market, macroeconomic and geopolitical uncertainty, and there are current and emerging strains in the energy and automotive manufacturing sectors of the economy,” he added. “If these factors intensify, they could impact our view of the year ahead.”

Masrani’s comments came as Canada’s energy sector continues to face a steep discount for its oil and after General Motors Co. revealed that several of its plants are facing closure, including one in Oshawa, Ont.

Earlier in the day, CIBC president and chief executive Victor Dodig also had some words of caution, saying on a conference call that 2019 is “likely to be a little more challenging, macro-economically speaking, than 2018 was.”

The CEO said that there are both economic headwinds and tailwinds, but that they see their performance for fiscal 2019 as being within their target range of five- to 10-per-cent growth in earnings per share.

“There’s significant political economic headwinds that, if those things get resolved, we’ll be more within the midpoint of that range,” Dodig said. “If the political headwinds continue, we’ll still be within our range, but probably to the lower end.”

Despite the uncertainty, CIBC announced a record $5.3-billion profit for its year ended Oct. 31, a rise from the $4.7 billion reported for its fiscal 2017.

Dodig also said that the share of his bank’s earnings from the U.S. had gone from nine per cent in 2017 to 16 per cent this year.