A breakdown of the big Canadian banks’ second-quarter earnings

Canada’s biggest banks report their second-quarter earnings this week, covering the three months that ended April 30, among concerns of high borrowing costs and slower economic growth until central banks start cutting interest rates.

Ahead of the latest results, many analysts have cut their estimates – extending a trend seen throughout 2023. The analysts anticipate that earnings will drop as much as 4 per cent, year-over-year, and are expecting the banks to post overall slower profit growth.

The banks are emerging from a tumultuous year marked by climbing reserves for potential loan losses, mounting costs and higher capital requirements – funds the lenders are required to set aside as a cushion against an economic downtown. The good news is that the banks have also been setting aside more money for loans that could default, known as provisions for credit losses, to help them absorb the impact of those losses.

So far, four of Canada’s major banks have reported earnings for the second quarter. National Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia beat analysts’ estimates. Meanwhile, Bank of Montreal missed analysts’ estimates. Canadian Imperial Bank of Commerce and Royal Bank of Canada will release financial results later this week.

Here’s a breakdown of the second-quarter earnings so far.

Toronto-Dominion Bank (TD Bank)

• Earnings Q2 2024: $2.56-billion ($1.35 per share)
• Earnings Q2 2023: $3.31-billion ($1.69 per share)
• Adjusted EPS: $2.04 per share
• Analysts’ expectations: $1.85 per share (adjusted)
• Dividend: $1.02 per share

Toronto-Dominion Bank’s TD-T second-quarter profit beat analysts’ estimates, largely due to a boost in capital markets earnings even as profit fell 22 per cent from the same quarter last year.

TD earned $2.56-billion, or $1.35 per share, in the three months that ended April 30, compared with $3.31-billion, or $1.69 per share, in the same quarter last year.

Adjusted to exclude certain items, including restructuring costs and a US$450-million provision to cover penalties it’s facing as a result of a lengthy U.S. regulatory and law enforcement investigation, the bank said it earned $2.04 per share. That edged out the $1.85 per share analysts expected, according to S&P Capital IQ.

“We delivered significant positive operating leverage while continuing to invest in our business, including our risk and control infrastructure,” TD chief executive officer Bharat Masrani said in a statement.

TD expects to incur fines or other penalties stemming from probes by the U.S. Department of Justice and other agencies related to its anti-money-laundering practices. The discussions with three U.S. regulators and the Department of Justice are ongoing.

The bank maintained its quarterly dividend at $1.02 per share.

In the quarter, TD set aside $1.07-billion in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and included $870-million against loans that the bank believes will not be repaid, based on models that use economic forecasting to predict future losses. Those provisions for impaired loans jumped 58 per cent from the $599-million set aside in the same quarter last year, particularly in unsecured loans including credit cards and auto debt.

Bank of Nova Scotia

• Earnings Q2 2024: $2.09-billion ($1.57 per share)
• Earnings Q2 2023: $2.15-billion ($1.68 per share)
• Adjusted EPS: $1.58 per share
• Analysts’ expectations: $1.55 per share (adjusted)
• Dividend: $1.06 per share

Bank of Nova Scotia BNS-T reported second-quarter profit that beat analyst expectations but fell from the same period last year as the lender set aside more money for loans that could default, offsetting a boost from its capital markets and wealth divisions.

Scotiabank earned $2.09-billion, or $1.57 per share, in the three months that ended April 30, compared with $2.15-billion, or $1.68 per share, in the same quarter last year.

Adjusted to exclude certain items, including income tax expenses from the Canada Recovery Dividend, Scotiabank earned $1.58 per share. That edged out the $1.55 per share analysts expected, according to S&P Capital IQ.

“The bank delivered solid results this quarter against a backdrop of ongoing macroeconomic uncertainty, reporting positive operating leverage driven by revenue growth and continued expense discipline. We are executing on our commitment to balanced growth as our deposit momentum continues, while maintaining strong capital and liquidity metrics,” Scotiabank chief executive officer Scott Thomson said in a statement. “I am proud to see Scotiabankers across our global footprint rallying behind our new strategy and coming together to drive our key strategic initiatives forward.”

In December, Scotiabank launched its new strategic plan aimed at growing its deposit base to reduce its funding costs and target businesses in North America, where it believes it can boost growth.

The bank kept its quarterly dividend unchanged at $1.06 per share.

In the quarter, Scotiabank set aside $1.01-billion in provisions for credit losses. That included $975-million against loans that the bank believes may not be repaid. In the same quarter last year, Scotiabank set aside $621-millions in provisions.

Total revenue rose 5 per cent in the quarter, to $8.35-billion on higher margins, wealth revenues, underwriting and advisory fees and banking fees. Expenses increased 3 per cent to $4.71-billion, which the bank said was driven higher technology and staffing costs.

Bank of Montreal (BMO)

• Earnings Q2 2024: $1.87-billion ($2.36 per share)
• Earnings Q2 2023: $1.03-billion ($1.26 per share)
• Adjusted EPS: $2.59 per share
• Analysts’ expectations: $2.77 per share (adjusted)
• Dividend: $1.55 per share

Bank of Montreal BMO-T reported higher second-quarter profit but missed analysts’ estimates as the lender set aside more money for loans that could default.

BMO earned $1.87-billion, or $2.36 per share, in the three months that ended April 30, compared with $1.03-billion, or $1.26 per share, in the same quarter last year.

Adjusted to exclude certain items, the bank said it earned $2.59 per share. That fell below the $2.77 per share analysts expected, according to S&P Capital IQ.

“We’ve delivered on our commitments with expenses down, compared with last year and last quarter,” BMO chief executive officer Darryl White said in a statement. “Our balance sheet strength is evident in a CET1 ratio above 13 per cent, robust customer deposit growth and appropriate provisioning for the credit environment, which continues to be impacted by prolonged high interest rates and a slowing economy.”

The bank raised its quarterly dividend by 4 cents from the prior quarter to $1.55 per share.

In the quarter, BMO set aside $705-million in provisions for credit losses. That was higher than analysts anticipated, and included $658-million against loans that the bank believes may not be repaid. In the same quarter last year, BMO had set aside $1.02-billion in provisions.

Total revenue rose 2 per cent in the quarter to $7.97-billion, while expenses fell 12 per cent to $4.84-billion.

National Bank of Canada

• Earnings Q2 2024: 906-million ($2.54 per share)
• Earnings Q2 2023: $832-million ($2.34 per share)
• Adjusted EPS: $2.54 per share
• Analysts’ expectations: $2.42 per share (adjusted)
• Dividend: $1.10 per share

National Bank of Canada NA-T reported higher second-quarter profit that beat analysts’ estimates on a boost from its capital markets division, even as the lender set aside more money for loans that could default.

National Bank earned $906-million, or $2.54 per share, in the three months that ended April 30, compared with $832-million, or $2.34 per share, in the same quarter last year.

On an adjusted basis, the bank said it earned $2.54 per share. That topped the $2.42 per share analysts expected, according to S&P Capital IQ.

“National Bank generated strong financial results for the second quarter of 2024, reflecting the disciplined execution of our strategy across business segments and the diversified earnings power of the bank,” chief executive officer Laurent Ferreira said in a statement. “In what remains an uncertain macroeconomic environment, we are committed to maintaining our prudent approach to capital, credit, and costs and to generating long-term value for our shareholders.”

The bank raised its quarterly dividend by 4 cents to $1.10 per share.

In the quarter, National Bank set aside $138-million in provisions for credit losses. That was higher than analysts anticipated, and included $114-million against loans that the bank believes may not be repaid. In the same quarter last year, National Bank had set aside $85-million in provisions.

Total revenue rose 12 per cent in the quarter, to $2.75-billion. But expenses increased 8 per cent to $2.84-million, which the bank said was driven by higher salary and benefits costs.