figures from Canada’s Big Six banking groups show that while
domestic Canadian business remains relatively strong, US exposure
is beginning to bite – and bite hard. Even Toronto-Dominion (TD),
which until now had escaped the worst of the subprime-related
carnage, posted a drop in second-quarter profits and failed to meet
analysts’ expectations.
Canadian Imperial Bank of Commerce (CIBC), the Canadian bank
hardest hit by credit losses since the current crisis kicked off
last year, announced results even more disappointing than analysts
had dared to predict – a net loss of C$1.11 billion ($1.11 billion)
for the second quarter following writedowns of C$2.48 billion,
compared to net income of C$807 million for the same period last
year.
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Highlights within CIBC’s results for the first half of fiscal
2008 were few and far between, with its retail arm – on which CIBC
is pinning its hopes for future growth – arguably providing a
glimmer of hope with net income of C$1.12 billion for the first six
months unchanged from a year ago.
The country’s largest bank, RBC Royal (RBC), also endured a
difficult second quarter, reporting net income down 27 percent to
C$928 million from C$1.28 billion a year ago, after writedowns of
C$854 million and reporting a C$349 million provision against bad
loans; for the year to date, RBC posted net income down 22 percent
at C$2.2 billion (see table left).
“We are not happy about these writedowns and continue to be
impacted by higher provisions for credit losses in our US banking
business,” said RBC president and CEO Gordon Nixon in a statement.
RBC’s Canadian retail arm provided the main highlight of its 2008
figures, with net income of C$1.47 billion up 5.8 percent compared
with a year ago.
BMO Bank of Montreal’s net income for the year to date was down
12 percent at C$897 million, and there remains the possibility of
further credit losses at its US based Harris Bank. But Canadian
retail net income for the second quarter was C$331 million, up 1.1
percent from a year ago, and CEO Bill Downe pointed out that:
“P&C Canada, our Canadian personal and commercial banking unit,
had strong results and one of its best quarters ever.”
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By GlobalData
Continues to eschew US market
While RBC’s results, along with those of TD and BMO, have been
impacted by their policy of expanding into the US, Scotiabank
continues to eschew the US market.
Ahead of reporting its second quarter results, bank president
Rick Waugh told analysts: “I have said before that US retail has
not been our strategy. We have always been opportunistic [and] we
will keep our eyes and ears open but I feel very comfortable in our
strategies.”
Lack of exposure to the US market is unlikely to enable
Scotiabank to meet its 2008 earnings growth target of 7 percent to
10 percent, with net income for the year to date down 11.8 percent
at C$1.81 billion.
The group was, however, able to report an 8 percent increase in
net profit to C$783 million (up from C$725 million) for its
domestic retail division in the first half of 2008 compared to a
year ago.
