Canada’s biggest banks feel pain from stock market swoon
Investors weren’t the only ones who took a hit when North American stock markets swooned in late 2018: Canada’s biggest banks felt the pain, too. On Thursday, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank were the latest banks to note their financial results for the most recent quarter were negatively affected by the market turbulence. In particular, the volatility hurt revenue from the sale of bonds and shares, and also dampened some trading activity.
The other members of the Big Five had also cited some form of market disruption in announcing their first-quarter results. Royal Bank of Canada’s CEO said in a release that there was “a challenging market backdrop,” while Bank of Nova Scotia’s said that “significant market volatility impacted some of our business lines.” Bank of Montreal’s CEO said in a release that “market-sensitive businesses were impacted by the challenging revenue environment.”
CIBC reported earnings Thursday of nearly $1.2 billion for the three months ended Jan. 31, down 11 per cent from a year ago. Adjusted earnings per share were $3.01, below analyst expectations. “While we were met with some challenges this quarter, including a volatile market and isolated loan impairments, our core business continued to perform very well and in line with our strategy,” said Victor Dodig, president and CEO of CIBC, during a conference call Thursday. TD, meanwhile, said its first-quarter profit was $2.4 billion, up two per cent compared with the same three months last year. Adjusted earnings per share were $1.57, which also missed analyst estimates. “TD’s retail segments in both Canada and the U.S. had a strong start to the year, with continued revenue growth and solid earnings,” said TD president and CEO Bharat Masrani in a release. “However, market volatility and lower client activity impacted our wholesale segment in the quarter.” National Bank Financial analyst Gabriel Dechaine wrote that CIBC’s earnings miss was driven by “higher than expected” provisioning for credit losses, while TD’s was “primarily attributable” to lower trading and advisory revenues, in addition to greater provisions for credit losses.