Lending markets

CIBC and National Bank earnings beat estimates on loans and market units

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TORONTO — The Canadian Imperial Bank of Commerce (CIBC) and National Bank of Canada comfortably beat analysts’ estimates for quarterly earnings on Friday, helped by growth in loans and fees as well as strength in their capital markets.

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Lenders join Royal Bank of Canada in posting positive earnings surprises in a quarter in which analysts expected some challenges, in particular higher spending and a weaker contribution from operations business after a record quarter a year earlier. CIBC posted an 11% increase in expenses in the quarter, matching the increase in revenue. This follows a quarter in which the bank saw rising costs outpace revenue expansion.

Banking analysts and investors are watching industry spending closely this year as inflation, the fight for talent and planned investments threaten to push costs above revenue growth in some quarters for some banks.

Overall, CIBC, Canada’s fifth-largest lender, reported adjusted earnings that rose 14% from a year earlier in the three months to Jan. 31, thanks to lower provisions for credit losses and an increase in revenue in all of its major units.

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National Bank, the smallest of the country’s big six banks, said its net profit excluding special items rose to $2.65 a share from $2.15 a year earlier, beating estimates of $2.23 . It recorded an 8% growth in expenses compared to revenues which increased by 11% compared to the previous year.

Both banks reported 11% growth in capital markets revenue from a year earlier, with National Bank benefiting from stock market volatility, even as investment banking profits fell from a year earlier. in the record quarter of the previous year, while CIBC posted increases in both.

Both also saw strength in their Canadian commercial loan books, underscoring the return of commercial borrowers who had been in decline for most of the pandemic, although deposits also continued to climb.

Overall, higher lending volumes helped to mitigate lower net interest margins in both banks’ lending units.

While lower provisions made earlier in the pandemic for loan losses also helped boost profits, both banks saw earnings rise even without the impact of these.

CIBC saw its adjusted profit before tax and before provision increase by 11% over the previous year and 19% over the previous quarter, while that of the National Bank increased by 14% and 25% respectively.