Royal Bank of Canada and Toronto-Dominion Bank beat analysts' estimates for quarterly profits on Thursday, as strong loan growth bolstered their retail banking businesses and interest income. Higher interest rates in Canada and the United States also gave a boost to net interest margins at Canada's two biggest banks, as they earned more from loans than they paid out on deposits.
Since July 2017, the Central Bank of Canada has raised key interest rates five times, while the US Federal Reserve has increased rates six times.
At RBC, total loans rose around 9%, while at TD, they rose 3%, with all home, personal and business loans showing growth. Smaller bank Canadian Imperial Bank of Commerce, which reported its second-quarter results on Wednesday, posted negligible growth in total loans. Its residential mortgage loans fell.
Net income at RBC's personal and commercial banking division, which provides loans and other financial products across Canada, rose 6% from a year earlier, while TD's domestic retail banking income rose 5.6%. Trading rose at RBC on "improved market conditions and increased client activity," while at TD, the overall trading fell due to "challenging market conditions and reduced client activity." Markets trading was the only bright spot at CIBC.
Top US investment banks reported huge losses from equities trading in the most recent quarter as tepid markets, due to the US-China trade war, crimped activity. RBC's adjusted net income available to shareholders rose 6% to C$3.16 billion, or C$2.23 per share, beating analysts' estimates of C$2.21 per share, according to Refinitiv IBES data. TD's net income, excluding special items, rose 6.7% to C$3.27 billion, or C$1.75 per share, ahead of analysts' estimates of C$1.67 per share, according to Refinitiv IBES data. Smaller rival CIBC on Wednesday missed quarterly profit estimates.
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