Cana­dian bank prof­its to rise

The Pak Banker - - Company& -

TORONTO: Cana­dian bank prof­its should rise mod­estly in the fourth quar­ter, with gains from stronger loan rev­enue and bet­ter credit qual­ity out­weigh­ing weaker whole­sale bank­ing re­sults.

But even if the re­sults marginally beat ex­pec­ta­tions, an­a­lysts say the stocks are un­likely to get much of a boost, de­spite the po­ten­tial for one or two of the len­ders to re­sume div­i­dend hikes for the first time in two years.

An­a­lysts polled by Thom­son Reuters I/B/E/S say prof­its for Canada's big six banks should rise on av­er­age about 9% when the len­ders be­gin re­port­ing on Nov. 30.

Na­tional Bank of Canada, the coun­try's No. 6 bank, re­ports first, fol­lowed by Cana­dian Im­pe­rial Bank of Com­merce, Toronto-Do­min­ion Bank, Royal Bank of Canada, and Bank of Nova Sco­tia. Bank of Mon­treal will re­port re­sults the fol­low­ing week.

"If you read through from what the U.S. banks were do­ing, you'd have to say there will be lower prof­its out of the trad­ing and cap­i­tal mar­kets side," said Gavin Gra­ham, pres­i­dent of Gra­ham In­vest­ment Strat­egy.

"At the same time, one would an­tic­i­pate pretty strong per­for­mance from the re­tail side of things."

The banks' fourth quar­ter ends on Oct. 30, so it par­tially over­laps with the U.S. banks' July-Septem­ber third quar­ter.

Canada's banks took a hit to prof­its dur­ing the fi­nan­cial cri­sis, but they emerged stronger than their in­ter­na­tional ri­vals, and shrink­ing pro­vi­sions to cover bad loans have helped prof­its over the past year. Smaller year-over-year pro­vi­sions are ex­pected to pro­vide a cush­ion again, but ob­servers say the easy prof­its from bet­ter loans may have al­most run their course. Loan-loss pro­vi­sions are ex­pected to fall only slightly from the third quar­ter. -PB News

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