Bloomberg News

Toronto-Dominion Bank, CIBC Post Profits That Top Estimates

December 02, 2011

(Closes shares in the sixth paragraph.)

Dec. 1 (Bloomberg) -- Toronto-Dominion Bank and Canadian Imperial Bank of Commerce, the first Canadian banks to report quarterly results, posted profits that beat analysts’ estimates as consumer lending rose.

Toronto-Dominion, Canada’s second-biggest bank, said fourth-quarter profit increased 58 percent to C$1.57 billion ($1.54 billion), or C$1.69 a share. Canadian Imperial Bank of Commerce, ranked fifth, said earnings for the period ended Oct. 31 advanced 59 percent to C$794 million, or C$1.89 a share.

The Toronto-based firms boosted earnings with higher revenue from consumer loans and investment banking as Canada’s economy rebounded and home buying surged. Canada’s eight largest banks will probably report average profit growth of 12 percent from a year earlier, said Kevin Choquette, a Scotia Capital analyst, in a Nov. 18 note.

“The Canadian banks continue to do pretty much the right stuff,” David Baskin, president of Baskin Financial Services in Toronto, which oversees about C$400 million including bank shares, said in an interview before the results were released. “Everybody should be buying them, they’re really cheap.”

A rebound in the Canadian economy is boosting demand for mortgage and consumer loans at the country’s banks, ranked the soundest by the World Economic Forum. Canada’s economy expanded at a 3.5 percent annualized pace in the third quarter, led by the biggest jump in exports since 2004, Statistics Canada said yesterday. The U.S. economy expanded 2 percent in the period. Canadian spending on housing rose 2.6 percent, the fastest since the start of last year.

Tops Estimates

Toronto-Dominion fell 1.5 percent to C$71.90 at 4 p.m. on the Toronto Stock Exchange, after posting its biggest gain in 30 months yesterday. CIBC slipped 1.3 percent to C$72.

The earnings growth at Canadian lenders contrasts with their global peers, which have cut more than 200,000 jobs this year, eclipsing the 174,000 in 2009, data compiled by Bloomberg show. Six central banks, including the Bank of Canada, yesterday lowered dollar swap rates to ease lending for European banks suffering from the sovereign debt crisis.

“If you look at the European situation, clearly that’s something that everyone worries about, in terms of the stability to financial markets, ultimately to the economies around the world,” Toronto-Dominion Chief Financial Officer Colleen Johnston said today in a telephone interview. “We’re optimistic when we look at our model and the strength of our model.”

Consumer Lending

Excluding one-time items, Toronto-Dominion earned C$1.77 a share. That exceeded the C$1.54-a-share average estimate of 15 analysts surveyed by Bloomberg News. CIBC said it had adjusted earnings of C$1.87 a share, topping the C$1.80-a-share average estimate of 16 analysts.

Toronto-Dominion’s Canadian consumer profit rose 17 percent to C$905 million because of higher revenue from personal banking and auto lending. U.S. consumer lending earnings jumped 16 percent to C$328 million.

The TD Securities investment-banking unit profit climbed 33 percent to C$288 million while wealth management earnings, which include TD Ameritrade, rose 28 percent to C$193 million. Earnings for the year were a record C$5.89 billion.

“The market may not give TD full credit, as a couple of items may cause investors to question the quality of the earnings,” said John Aiken, an analyst at Barclays Capital in Toronto.

The bank, which has more branches in the U.S. than in Canada, will have to “work very hard” to meet its “medium- term” profit growth of 7 percent to 10 percent a year, Johnston said today.

2012 Outlook

Toronto-Dominion expects “high single-digit” growth in its Canadian consumer bank and asset-management units next year, Johnston said. Profit from the U.S. consumer bank and wholesale businesses may be slower, she said.

Economic headwinds are “likely to continue to be with us in 2012,” Chief Executive Officer Gerald McCaughey said on a conference call today. “The external environment remains very uncertain.”

CIBC’s profit was higher than a year ago, when earnings were pared by C$239 million in capital repatriation costs and losses in a structured credit business. Revenue fell 1.6 percent to C$3.2 billion.

For the year, CIBC profit climbed to C$3.1 billion, or C$7.31 a share, from C$2.5 billion, or C$5.87.

Higher Provisions

Canadian Imperial set aside C$243 million for bad loans, up from C$150 million a year earlier on higher provisions for its CIBC FirstCaribbean bank and its leveraged finance business in Europe.

The CIBC World Markets unit earned C$172 million, compared with a loss of C$56 million a year ago when the unit posted losses from structured credit trading and corporate loan hedges. Revenue from corporate and investment banking more than doubled.

Canadian consumer lending and business banking profit rose 15 percent to C$580 million on higher revenue in personal and business banking, and lower loan losses.

“We view this as a workman-like result from Commerce in what was a difficult operating backdrop,” Macquarie Capital Markets analyst Sumit Malhotra said in a note.

Profit from wealth management, which includes mutual-fund sales, advanced 20 percent to C$65 million after adding earnings from the purchase of a 41 percent stake in American Century Investments from JPMorgan Chase & Co. in August. Losses at the corporate unit, which includes Caribbean banking, widened to C$23 million loss from C$3 million a year earlier.

--Editors: David Scanlan, Steve Dickson

To contact the reporters on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net; Sean B. Pasternak in Toronto at spasternak@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; David Scanlan at dscanlan@bloomberg.net


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