CIBC of Canada misses profit estimates as costs climb, TD beats

The new logo of the Canadian Imperial Bank of Commerce (CIBC) is seen on a building in Toronto, Ontario, Canada, September 27, 2021. REUTERS / Chris Helgren

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TORONTO, Dec. 2 (Reuters) – The Canadian Imperial Bank of Commerce (CIBC) (CM.TO) on Thursday posted disappointing fourth quarter results as retail bank expenses and bad debt provisions increased, while that the biggest rival of the Toronto-Dominion Bank (TD.TO)) has exceeded expectations.

The two banks have joined their rivals in announcing share buybacks and raising dividends, something they are now in a position to do since the financial regulator’s restriction on capital distributions was

lifted last month. Read more

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TD, Canada’s second-largest bank, posted lower margins in Canada, but surprised with a 5 basis point increase in its US retail margins from the previous quarter. It also freed up C $ 123 million ($ 96 million) of reserves previously set aside to cover loan losses.

CIBC, the nation’s fifth-largest bank, posted 10% revenue growth, but this was overshadowed by a 13% increase in spending. It also took C $ 78 million in provisions, higher than expected, as a 36% jump in the money set aside in its Canadian banking unit offset releases in other divisions.

CIBC said it expects expense growth in fiscal 2022 to reach mid-range figures, but aims to generate positive operating leverage over the medium term, with revenue growth exceeding. that of expenditure.

“While we may have periods of negative operating leverage earlier in the year, we will target positive operating leverage across our business over the next year,” said CFO Hratch Panossian on a conference call with an analyst.

TD shares jumped 3.8% to C $ 95.48 in morning trading in Toronto, while CIBC fell 2.5% to C $ 137.61. The broader benchmark rose 0.9%.

TD has announced that it will increase its dividend by 12.7% and repurchase up to 50 million, or 2.7%, of outstanding shares.

CIBC will increase its dividend by $ 10.2 to C $ 1.61 per share and has said it will repurchase up to 10 million shares, or about 2.2% of the shares outstanding.

Canadian banks have largely posted above-expected profits in recent quarters, but have faced pressures from low margins and higher variable compensation costs this quarter, part of their business boom in the markets. capital and reserve releases in previous periods fading. Read more

The rally in Canadian non-mortgage lending that investors had hoped is materializing, albeit at different paces.

Both banks’ Canadian credit card loans increased 3.1% from the previous quarter. TD business loans increased 2.6% from the previous quarter, keeping pace with mortgage lending growth. CIBC business loans grew at a more moderate 0.85%, compared to a 3.4% increase in real estate loans.

TD said adjusted net income rose to C $ 2.09 per share, from C $ 1.60 a year earlier, compared to analysts’ average estimate of C $ 1.96 per share.

CIBC said profit excluding one-off items reached C $ 3.37 per share, down from C $ 2.79 a year earlier, against an average analyst estimate of C $ 3.53.

($ 1 = 1.2817 Canadian dollars)

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Reporting by Nichola Saminather; Additional reports by Sohini Podder and Mehnaz Yasmin; Editing by Shailesh Kuber, Jan Harvey, Emelia Sithole-Matarise and Jane Merriman

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