Photo by Martin Cathrae
Royal Bank of Canada (RBC) and Toronto-Dominion Bank (TD) top analysts expect profit since the rebounding economy boosted fees from consumer lending. The country’s biggest lender by assets, Royal Bank of Canada, rose 5.2 per cent after it announced first-quarter profit on an adjusted basis that beat the average analyst estimate by 25 per cent. Toronto-Dominion advanced 3.9 per cent to an all-time high of C$83.60. It also raised its quarterly dividend by 8.2 per cent, making it the first major Canadian bank to do so since the financial crisis.
Getting over the hurdle
Both banks’ profit growth was supported mainly by their core operations of personal and commercial banking in Canada but the U.S. divisions of the banks performed well, too. RBC’s international division saw a quarterly profit for the first time since 2008.
Excellent results from Canada’s two largest banks in the first quarter followed the positive results from smaller Canadian lenders over the past fortnight and effectively stifled any voices predicting that consumer lending might be drying up. Colleen Johnston, TD’s chief financial officer, said that the bank had begun to notice a slowdown in mortgage lending and that, although loan growth isn’t as rapid as it was in 2010, it remains quite strong.
John Aiken, analyst at Barclays Capital in Toronto, said: “We’re seeing underlying earnings growth which is a lot stronger than what I believe the market had been anticipating.”
Unlike many banks in the U.S. and Europe, no Canadian bank was forced to ask for a government bailout during the crisis since most Canadian lenders weathered it relatively well due to their conservative lending practices. That is also one of the main reasons why the recovery process of the Canadian economy seems to be much easier compared to other countries.
