Toronto-Dominion Bank, Bank of Nova Scotia, National Bank of Canada and Canadian Imperial Bank of Commerce, all have beaten analysts’ expectations. All the four banks posted profits while National Bank of Canada has even declared earnings growth riding on higher trading revenue and good credit quality. But, Canadian Imperial Bank of Commerce’s results were spoiled as it continues to struggle with its structured-credit exposure.
Except for Bank of Nova Scotia, which raised its credit provisions 220%, owing to its relatively high exposure to the automotive sector, most of the Canadian banks posted credit provisions that were far below analysts’ estimates. That helped them to outperform their global competitors, given how badly Canada‘s economy shrank in the quarter.
Craig Fehr, Canadian bank analyst at Edward Jones, said: “Each bank had their area of strength or weakness in the quarter, but overall I think the bar was set very low, based on expectations for sharp increases in provisions to loan losses.
The banks have now generally emerged from the structured-credit crisis and are at the bottom of a traditional credit cycle. Banks know how to navigate credit cycles better than the potholes emerging from a volatile trading environment.”
