Profit beats for Canada’s banks mask challenges ahead

All five Canadian banks that have reported second-quarter results beat analysts\' estimates, with Bank of Montreal, CIBC and National Bank also increasing their quarterly dividends.

Canada’s biggest banks are actually five for five this earnings season after Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce all reported second-quarter earnings that topped?estimates?on Thursday. However the beats were?largely on the back of growth in the notoriously volatile capital markets business, there are signs the banks are girding for additional economic uncertainty.

Indeed, tepid core retail numbers, rising loan loss provisions an additional major restructuring charge in as many days has some investors back on their own heels curious about the future earning prospects for that group.

\”Results were slightly much better than I expected,\” said Erik Oja, equity analyst at S&P Capital IQ. \”But growth minute rates are getting pretty low which explains why bank shares are down.\”

Shares in?all of?the so-called \”Big 6\” banks fell sooner or later during Thursday\’s trading session. The biggest loser was Toronto-Dominion – which closed 1.09 per cent lower, followed by Bank of Montreal which dropped 1.01 per cent.

TD, the country\’ second-largest bank by market capitalization, said adjusted earnings for the three months ended April 30 were $1.14 per share, compared to the average analyst estimate of $1.11 per share.