Wrapup 1: RBC beats profit estimates as cost cuts pay off; TD misses
24/08/2023 12:00
(Updates with TD results, compares with estimates)
Aug 24 (Reuters) - Canada's largest bank Royal Bank of
Canada (RBC) RY.TO beat analysts' estimates for third-quarter
profit on Thursday, helped by cost cutting and higher interest
rates.
The country's second-largest bank Toronto-Dominion Bank
TD.TO , however, missed Bay Street estimates for quarterly
profit as it set aside money to cover for unpaid loans. The
bank's earnings were also impacted by a C$306 million charge
related to the termination of its First Horizon acquisition.
The Bank of Canada has raised interest rates 10 times since
March of last year to tackle sticky inflation, boosting
profitability for banks' consumer businesses as they benefit
from higher earnings from loans.
That helped boost earnings at RBC's retail business by 5%.
At TD, income from its Canadian personal and commercial banking
segment fell 1% and at the U.S retail unit it fell 9%.
The banks set aside more money for bad loans compared to the
prior quarter as consumers struggle to make payments amid high
costs of living.
RBC set aside C$616 million for credit losses, up from C$340
million a year ago, and TD set aside C$766 million, a jump from
C$351 million.
RBC's CEO Dave McKay had said in May the bank would slow
hiring after it overshot by thousands of people.
The bank said the number of full-time employees was down 1%
from the prior quarter, and expects to further reduce headcount
by about 1% to 2% in the current quarter.
Net interest income- the difference between what banks make
on loans and pay out on deposits - rose 6.7% to C$6.29 billion
at RBC and 3.5% to C$7.29 billion at TD.
RBC's profit came in at C$3.81 billion, or C$2.73 per share,
in the three months ended July 31, compared with C$3.52 billion
($2.60 billion), or C$2.51 per share, a year earlier.
TD reported adjusted net income of C$3.73 billion , or
C$1.99 per share, in the three months ended July 31, compared
with C$3.81 billion, or C$2.09 apiece, a year earlier.
RBC reported adjusted earnings of C$2.84 per share, beating
analysts' estimates of C$2.71 per share, according to Refinitiv
data.
TD's adjusted earnings of C$1.99 per share fell below the
estimate of C$2.04.
($1 = 1.3538 Canadian dollars)
(Reporting by Nivedita Balu in Toronto, Sri Hari N S and Pritam
Biswas in Bengaluru; Editing by Shilpi Majumdar and Mark Potter)
((SriHari.NS@thomsonreuters.com;))