Further Big Six banks see Q2 earnings drop

RBC, TD, and CIBC have revealed their second-quarter results

Further Big Six banks see Q2 earnings drop

Royal Bank of Canada (RBC), TD Bank and Canadian Imperial Bank of Commerce (CIBC) became the latest of Canada’s Big Six banks to report a drop in second-quarter profits on Thursday, with each setting aside higher provisions for credit losses in an uncertain economic climate.

The news follows Wednesday’s announcements by Bank of Montreal (BMO) and Scotiabank that their Q2 earnings fell due in part to higher loan-loss provisions.

RBC said its net income dropped by 14% to $3.65 billion, down from $4.25 billion a year prior, for diluted earnings per share of $2.58.

It set aside $600 million in bad loan provisions, a sharp change from its provision reversal in the same quarter last year.

The banking giant said higher provisions for credit losses were “mainly attributable to provisions taken on performing loans in the current quarter, largely driven by unfavourable changes in our credit quality and macroeconomic outlook,” compared with the same time in 2022.

CIBC, meanwhile, reported net income of $1.63 billion for the quarter, a year-over-year drop from $1.65 billion. Earnings per share came in at $1.70, down from $1.77 in 2022’s second quarter.

Its provision for credit losses amounted to $438 million, an increase from $303 million in Q2 2022.

On the Canadian personal and business banking side, CIBC’s net income increased by 28% from the same time last year, rising to $637 million as the bank posted higher revenue with a lower credit-loss provision on that front.

That was offset somewhat by a 6% drop on the Canadian commercial banking and wealth management side and a 28% slip in US commercial banking and wealth management, with higher credit-loss provisions for both.

TD said its reported diluted earnings per share were $1.72, down from $2.07 on a year-over-year basis, with reported net income of $3.35 billion compared with $3.81 billion in Q2 2022.

The bank’s provision for credit losses for Q2 was $599 million, an increase from $27 million at the same time last year.

Its Canadian personal and commercial banking saw net income rise by 4% to $1.63 billion, spurred by higher customer activity, a spike in New to Canada account openings, and “continued momentum” in mortgage originations as well as credit card loan growth.

On the US retail side, TD’s net income came in at $1.4 billion (and $1.53 billion on an adjusted basis), with reported net income including acquisition and integration charges related to its nixed First Horizon Corporation deal.

That multibillion-dollar deal fell through earlier this month after facing months of delays over regulatory approval.