Canadian bank s gird for loan loss threat

TORONTO: Canadian Imperial Bank of Commerce (CIBC), Toronto-dominion Bank and Bank of Montreal on Thursday joined their bigger peers in seting aside more money to cover potential loan defaults by inflation-hit customers.

TD Bank alone from the three banks beat market estimates for profit in the fourth quarter as it benefited from a bigger US retail lending business than its peers.

Canada’s historic tightening campaign has raised borrowing costs, pushing the country’s Big Six banks - including Bank of Nova Scotia, Royal Bank of Canada and National Bank of Canada - to start bracing for increased odds of more customers falling behind on their loan repayments.

The Bank of Canada has raised its benchmark rate to the highest level since 2008 and warned that higher rates are starting to slow the economy, puting pressure on mortgage holders and households with elevated debt.

It also forecast growth would stall from the fourth quarter this year through the middle of 2023.

TD Bank’s bigger US presence boosted its loan growth and helped offset the hit from higher provisions for credit losses (PCLS). It recorded PCLS of C$617 million in the fourth quarter, compared with a recovery of C$123 million last year.

Excluding one-time costs, the bank reported profit of C$2.18 per share, above analysts’ estimates of C$2.06 per share, according to IBES data from Refinitiv.

On the other hand, CIBC’S adjusted profit fell 17% to C$1.31 billion, while BMO’S earnings dropped 4% to C$2.14 billion. Both banks missed estimates.