Canada's CIBC, TD earnings beat estimates but loan growth performance diverges

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TORONTO (Reuters) – Toronto-Dominion Bank (TD) and Canadian Imperial Bank of Commerce (CIBC) both beat estimates for third-quarter profits on Thursday, driven mostly by releases of reserves to cover bad loans, but CIBC’s strong loan growth from a year earlier eluded TD.

CIBC’s lending climbed 8% as of July , while TD’s fell 0.5% from a year earlier, as declines in the latter’s U.S. lending offset strong loan growth in Canada. This contributed to flat revenues at TD, while CIBC’s rose 7%.

CIBC, the fifth-biggest bank, reported adjusted pre-tax, pre-provision (PTPP) earnings that jumped 7% from a year earlier, while TD’s grew a more subdued 2.7%.

“In the U.S. relief programs for consumers and businesses have been quite significant,” Riaz Ahmed, Chief Financial Officer at TD, Canada’s second-largest lender by market value, said in an interview. “That build up in liquidity among customers and business owners has been quite significant and resulted in loan growth being anemic.”

U.S. loan growth is expected to pick up as liquidity shrinks, he said.

CIBC’s loan volume growth offset the impact of exchange rates and lower rates, the bank said.

Both banks benefitted from strong growth in wealth management revenues from a year earlier, which drove a 13% increase in non-interest income in TD’s Canadian retail unit, and a 25% jump in CIBC’s.

That helped ease the impact of a 1% decline in revenues for CIBC’s capital markets division. TD’s steeper 22% drop was driven by a weaker trading environment that higher advisory fees failed to offset.

TD posted adjusted earnings of C$1.96 per share, compared with C$1.25 a year earlier and analysts’ estimates of C$1.92 a share, as it recovered loan-loss reserves of C$37 million, versus expectations it would take C$155.6 million.

CIBC reported adjusted income of C$3.93 versus C$2.71, beating expectations of C$3.41. It released loan-loss reserves of C$99 million, compared with analysts’ expectations it would take provisions of C$151.6 million.

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