The Royal Bank of Canada and Toronto-Dominion Bank announced solid second-quarter earnings and predicted further growth in the near future, which raised concerns that Canadian creditors were at the forefront of serious challenges.
The two largest banks in Canada reported quarterly earnings at or near record levels, earning $ 6.4 billion. They also reaffirmed their expectations of a high single-digit profit growth in 2019 for the TD, and a strong return on equity for RBC.
“Our medium-term target of 7-10% revenue growth will continue to be applicable [for TD], "said CEO Bharat Masrani at a conference call and commented again last quarter that the fiscal year 2019 target is now at the end of this range after an unexpected loss of wholesale banking at the beginning of the year.
The results should give some confidence to those following the sector after the Canadian Imperial Bank of Commerce lowered its full-year profit outlook on Wednesday and said it now expects little profit growth in fiscal 2019.
However, on Thursday, TD and RBC traded in opposite directions. RBC shares declined 2.4 percent to $ 102.64, while TD shares reached 2.2 percent to $ 75.47.
This divergence is partly due to higher TD profits compared to expectations this quarter, but is also a feature of TD's recent business history. The bank's stock struggled late after showing weaker first quarter earnings, which included a rare loss in its wholesale banking. Meanwhile, RBC's stocks were doing well. TD results gave investors confidence that the first quarter results were more of a reflection than the new standard.
"After the weak report [first quarter], onus was on TD to achieve quarter turnover, which he did, ”wrote banking banking client financial analyst National Bank Gabriel Dechaine.
With regard to RBC, the bank has outperformed some of the one-off items, such as the lower tax rate and the sudden rise in fixed income, currency and commodity income, providing less certainty that it can do so later. this year.
Despite the weakening on Thursday, RBC's shares are still up 9.8% year-on-year and have been lost again during the entire market correction in the fall of 2018.
"Although segment revenue was mixed, we consider RBC's core fundamentals to be a strong and deserving multiple of awards to colleagues," said Canaccord analyst Genuity Group Inc. Scott Chan in a note for clients.
Both TD and RBC are trying their ability to cool spending growth in the second half and 2020. Both banks have invested considerable resources in the past few years to reorient the digital economy to initiatives such as mobile applications.
"We got ahead of the curve in a number of major programs," said RBC CEO David McKay at a conference call. “We were very tied up [expense] interest rate increases. "
Looking ahead, RBC expects to slow down the growth of low-floor numbers because much of the heavy lifting is over. The TD is in a similar ship.
During the second quarter, TD reached a record $ 3.2 billion, up 8.8 percent from the same period in 2018. While the bank in its Canadian banking division posted a year-on-year increase of 0.9 percent over last year. most of its earnings, its US retail bank, recorded a 13.6 percent increase in US dollar earnings to $ 753 million.
In Canadian retail banking, spending rose by 11 percent, while revenue grew by 8.1 percent, reflecting heavy TD spending. In the middle of the housing market, mortgages for housing increased, but reached only 1.8% in the second quarter of 2018.
Meanwhile, RBC reached $ 3.2 billion, the second highest record-breaking profit of 5.6 percentage points over the same period in 2018. Canadian banking earnings in the second quarter rose 2.4 percent to $ 1.5 billion Dollars, which means a slower mark of growth that generates about 45 percent of total profit. Mortgage loans for house purchase increased by 5.2% in the second quarter of 2018.
However, net asset management revenue grew 8.9% year on year to $ 585 million, and capital market earnings rose 16.7% to $ 776 million, supported by interest and credit business. Total cost growth of 7.9 percent meant a decline in bank sales.