TD ON THE RISE

Bank sees impressive 17% increase in profits in most recent quarter,

Canada’s biggest banks had a betterthan-expected third quarter thanks to a strong domestic economy, but a potential Bank of Canada move to raise interest rates to ease oversized growth could put extra pressure on their consumer-lending books in coming quarters, financial analysts suggest.

TD Bank wrapped up the banks’ earnings season Thursday with a 17-per-cent increase in profits to $2.77 billion, anchored by a strong performance at its retail operations in both Canada and the United States. The results amounted to $1.46 per share in net income and $1.51 per share of adjusted earnings, which was above analyst estimates of $1.36 per share.

TD’s Canadian retail banking arm accounted for $1.73 billion of net income for the three months ended July 31, up 14 per cent from last year. The division’s improvements benefited from lower insurance claims, growth in wealth assets and a record level of real estate lending originations — which include new mortgages and renewals.

“This was a great quarter for TD reflecting impressive earnings and revenue growth, better credit performance across all our businesses and lower insurance claims,” TD chief executive Bharat Masrani said ahead of a conference call with analysts.

Also on Thursday, Statistics Canada reported second-quarter GDP data that blew away forecasts with an annualized growth rate of 4.5 per cent, adding further credence to predictions the Bank of Canada will make a second move of the benchmark rate in the coming weeks.

Many observers have noted plenty of uncertainty that could emerge next year as the Bank of Canada and U.S. Federal Reserve contemplate further interest rate hikes. In Canada, debt loads are sky high and a potential economic shock to household incomes could affect some Canadians’ ability to repay loans.

However, Canada’s big five financial institutions are charging ahead with steadfast optimism in their outlook.

BMO and Scotiabank, which both reported improved second-quarter earnings Tuesday, expressed confidence in the pace of economic growth.

It’s a rarity within the country’s relatively conservative banking industry to hear executives across several banks speak with such confidence in the face of many lingering questions about interest rates and the broader economy, but analysts suggest it could be taken as a good sign.

“This is one of the more bullish quarters in terms of outlook for the banks that we’ve seen in a while,” Barclays analyst John Aiken said.

“It’s really predicated on expectations the Canadian economy will continue (at its current pace) and no disruption in other areas.”