Canadian Bank Earnings Season Off to a Strong Start (BNS, BMO, RY)
Two of Canada's largest banks Tuesday posted unexpectedly strong third-quarter results and offered up surprise dividend increases, setting the stage for more reports from Canadian lenders on Thursday.
Bank of Nova Scotia (NYSE: BNS), the country's third biggest by assets, saw a record profit of 2.05 billion Canadian dollars (US$2.07 billion), or C$1.69 a share. A year earlier, it earned C$1.30 billion, or C$1.10 a share. The bank also boosted its quarterly dividend 2.6 percent -- its second increase this year.
Bank of Montreal (NYSE: BMO), the fourth-largest bank, said its net income grew 37% year-over-year to C$970 million, or C$1.42 a share. The lender raised its dividend for the first time in five years, boosting it by 3 percent.
Both banks handily beat the expectations of analysts polled by Thomson Reuters, and set the stage for earnings reports from Canadian Imperial Bank of Commerce (NYSE: CM), Royal Bank of Canada (NYSE: RY) and Toronto-Dominion Bank (NYSE: TD) later this week.
The consensus forecast for CIBC calls for earnings per share of US$1.96 and revenues of US$3.17 billion. That EPS estimate is the same as it was 60 days ago, and compares to $1.91 in the same period a year ago. CIBC missed consensus estimates in one of the past four quarters, but beat by $0.09 per share in the second-quarter. The bank dropped its most recent dividend by two cents to $0.90. The yield is now about 4.6 percent.
Royal Bank of Canada is expected to say it earned $1.20 per share. That would be up from $1.15 per share in the previous quarter and from $1.03 in the third quarter of last year. That EPS estimate has slipped by $0.01 from 60 days ago. And note that Royal Bank fell short of analysts' expectations by five percent in the second quarter, after exceeding consensus estimates in the previous two periods. This lender boosted its quarterly dividend about five percent last time around. The yield is near 4.1 percent.
And Toronto-Dominion Bank is expected to post per-share earnings that are up more than five percent year-over-year to $1.82. Analysts on average anticipate that the lender's revenues will be 7.8 percent higher to $5.77 billion. This EPS estimate also slipped $0.01 over the past 60 days. Earnings per share were better than expected in the past four quarters; the positive surprise was four percent, or seven cents per share, in the second quarter. The most recent dividend was $0.72 per share, down $0.01 from the previous quarter. The yield is now about 3.5 percent.
National Bank of Canada also reports on Thursday, and it is expect to post higher EPS and revenue as well.
These banks have already signaled that growth is slowing. Some analysts predicted the banks will be pressured to please shareholders with dividend hikes. So far, that appears to be the case.
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