The big five Canadian banks have all now reported their second-quarter figures, with RBC and Toronto Dominion’s earnings ahead of forecasts. While Bank of Montreal, CIBC and Scotiabank just miss analyst estimates, sector results as a whole remain resilient, reports Douglas Blakey
First off, a number of highlights jump out from the big five Canadian banks’ second-quarter earnings. The results again highlight the strength of RBC’s domestic Canadian personal and commercial unit. Scotiabank’s retail banking unit, in particular its international division, remains in rude health, and Bank of Montreal’s US-based unit is performing impressively.
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It is a similar story at Toronto Dominion, which recorded strong US retail banking metrics, and CIBC’s Canadian commercial banking, and wealth management and capital markets business posted strong gains.
RBC and TD highlights
For the quarter ending 30 April, RBC reports net income of C$3.23bn ($2.43bn), up 6% from the year-ago period.
The retail-focused Canadian personal and commercial unit accounts for net income of C$1.55bn, also up 6% year on year. Notably, the unit posts average volume growth of 7%, including strong deposit growth of 9%. Meantime, lending rises by 5% year on year. For the year to date, RBC reports net income of C$6.4bn, up 5% on the first half of 2018.
TD’s net income for the quarter is up by 9% year on year, almost matching RBC’s headline figure, at C$3.2bn. As with RBC, TD’s earnings are ahead of analyst forecasts. Notably, its US retail banking unit reports a record quarterly net income of C$1.26bn, up 29% year on year. The growth reflects higher deposit margins and increased loan and deposit volumes. For the second quarter of 2019, TD’s US retail operation reports net income of C$1.85bn up 1% year on year.
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By GlobalDataAverage loan volumes are up by 5%, reflecting 5% and 9% growth in personal and business loans respectively. Deposit volumes rise by 3%, reflecting 4%, 2% and 1% growth in personal, wealth and business deposit volumes respectively.
BMO and Scotiabank
Scotiabank’s net income for the second quarter of 2019 is up 3.6% year on year to C$2.26bn, boosted by strong retail banking and international revenue growth.
Adjusting for acquisition-related costs, net income at the bank’s Canadian banking unit is up by 4% to C$1.06bn, driven by solid loan and deposit growths and the impact of an acquisition.
The standout metric is net income at Scotiabank’s International Banking unit. This rises by 15% to C$787m adjusted for acquisitions and divestitures. The international unit reports loans growth of 29%, driven by acquisitions in Chile, Colombia and Peru. Scotia ranks third by market share in Peru and Chile, with market shares of 17.8% and 14.1% respectively.
Bank of Montreal’s underlying net income is up by 4% year on year to C$1.52bn in quarter two. Notably, the bank’s US personal and commercial unit reports net income of $417m on an adjusted basis, up by 16% year on year. Average loans rise by 12% powered by a 15% rise in commercial loans. Retail loans inch up by 2% year on year. Meantime, average deposits are ahead by 13%, with retail deposits especially strong, up by 14%. Adjusted and reported net income both rise by 5% year on year at Bank of Montreal’s Canadian personal and commercial unit.
Average loans up rise by 6% year on year, with average deposits also ahead by 8%. CIBC’s second-quarter net income inches up by 2% year on year to C$1.35bn, but the bank’s Canadian personal and small business banking unit reports net income of C$570m, down 2% year on year.
On the other hand, the Canadian commercial banking and wealth management unit reports net income of C$328m up 6% year on year. Group highlights include CIBC’s capital markets business, which includes investment banking. The division’s income is up by 12%, boosted by increased underwriting and advisory fees.
Digital highlights
A common theme across the five bank’s latest results is success in driving the banks’ digital agendas.
For example, TD now has 13.1 million digital banking customers, out of a total 26 million clients. TD’s active mobile banking customers in Canada and the US are now 5 million and 3.1 million respectively. Meantime, RBC’s 90-day active mobile users are up by 17% from a year ago to 4.1 million.
The majority of RBC customers are now digitally active, with the digital adoption rate up to 52%. This represents an increase of 300 basis points from a year ago. CIBC’s active Canadian mobile banking users are up by 12.5% from a year ago to 2.7 million. The bank’s digital adoption rate, calculated using 90-day active users, is up to 67.7% from 63% two years ago. Scotiabank reports that self-serve transactions now account for 88.8% of transactions, up from 87.1% a year ago.
In-branch transactions now account for 17%, down by 300 basis points from the year-ago period. Scotia’s digital adoption rate is up by 400 basis points from a year ago to 35%. Looking ahead to the rest of the year, the gloomiest tone is struck by CIBC: it is reducing its earnings forecast for the full fiscal, blaming a cooling domestic housing market and the cost of IT investments.
Share prices at the five banks are all ahead for the year to date. BMO is up by 11.2%, TD is up by 11.1% and RBC by 10.4%. At Scotia and CIBC, the price rises for the year to date are 3.8% and 1.5% respectively.
