Canadian banks will profit in Q2

Canadian banks started the year with strong earnings momentum, but will report slower growth in the second quarter – characterized by lower trading revenues and a weaker outlook for the rest of the year.

Compared with last year, however, they’re expected to report a healthy 5.3% growth overall, says CIBC Capital Markets.

“I wouldn’t say there’s going to be one bank that clearly leaves the rest in the dust,” says Gareth Watson, vice-president of investment management at Richardson GMP.

“Capital market activity and trading revenues will be major factors,” he adds.

Bank of Montreal will release its second-quarter earnings on Wednesday, followed by TD and RBC on Thursday. Scotiabank will release results on May 29 and CIBC will follow May 31.

The banks will be hard-pressed to deliver results that outshine the solid profit increase of 6% reported in Q1 2012. 
In that period, most banks reported lower provisions for credit losses—a sign fewer customers are defaulting.

Warnings from the banks also suggest, however, that mortgage lending could drop off this year as consumers focus on reducing debt.
Tom Lewandowski, a financial services analyst with Edward Jones in St. Louis, says Canadian banks with a stronger international focus will likely outperform expectations.

He predicts two banks will come out on top: “Scotiabank, with its successful international operations; and TD on the loan growth side, given some market share gains in mortgages.”

The five banks aren’t expected to boost dividend payments, though consensus expectations suggest that National Bank could emerge as the sole institution to make this move.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.