CIBC beats profit estimates, TD posts lower profit on loan loss provisions – National

Canadian Imperial Bank of Commerce exceeded estimates for first-quarter profit on Thursday, driven by gains in its domestic personal and business banking unit that offset a blow from higher provisions it set aside for potential bad debts.

Although higher interest rates have slowed demand for bank loans, they have helped to boost income through their lending activities.

The Canadian personal and business banking unit saw earnings jump 10 per cent to $650 million in the first quarter ended January from a year earlier, helped by higher deposits, loans and improved margins.

Analysts also expect a rebound in revenue from capital markets as deal activity resumes after a long lull.

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CIBC’s revenue from capital markets rose five per cent to $1.56 billion in the reported quarter, aided by strength in investment banking on strong advisory and debt underwriting activity.

Excluding one-time charges, the country’s fifth largest lender reported a profit of $1.81 a share, above analysts’ average estimates of $1.66, according to LSEG data.

Though the lender benefited from higher interest rates, elevated borrowing costs worsened default risks. To safeguard against the risk, CIBC built $585 million in provisions, up from C$290 million.

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Earlier this week, peers Royal Bank of Canada, Bank of Montreal, Bank of Nova Scotia and National Bank of Canada said they built larger provisions to prepare for bad loans and warned that growth would be muted until rates begin to fall.

CIBC also paid a $67 million one-time special assessment fee to replenish the U.S. Federal Deposit Insurance Corporation to fill a $16 billion hole after the collapse of two U.S. regional banks last year.

TD Bank Group reported a fall in first-quarter profit as the lender set aside more funds to cover for souring loans.

Elevated interest rates have raised the chances of more borrowers defaulting on their loan repayments in an uncertain economic environment, prompting lenders to set aside bigger rainy-day funds.

Toronto-based TD Bank’s provision for credit losses rose to $1 billion in the first quarter from C$690 million a year earlier.

Strong competition for deposits has also increased funding costs as banks pay out more to prevent customers from chasing higher-yielding alternatives.

TD Bank’s net interest income, the difference between what banks earn on loans and pay out on deposits, fell nearly 3.2 per cent to $7.49 billion in the first quarter.

The lender’s Canadian personal and commercial banking unit reported a three per cent increase in net income, while its U.S. retail segment posted a 43 per cent fall.

The bank’s adjusted net income fell to $3.64 billion, or $2.00 per share, in the quarter, from C$4.15 billion, or $2.23 per share, a year earlier.