The effects of high inflation and the central bank’s efforts to contain it by slowing the economy were felt in the second quarter results of Canada’s major banks.
Four of the big five banks posted earnings below expectations as they set aside larger sums of money for bad debts and struggled to contain rising costs. In addition, many have seen their income suffer from slower loan growth.
CIBC was the lone exception, its results, reported Thursday, coming in better than analysts had expected.
Although mortgage growth in Canada has slowed sharply, with several banks posting flat results from the previous quarter, attention these days has turned to what is happening with the U.S. operations of banks, on the heels of a few high-profile bank failures.
Several bank executives spoke of tougher economic conditions, while TD Bank warned of tougher days ahead, saying it no longer expects to meet its medium-term earnings growth target.
The recent abandonment of TD’s proposed takeover of U.S. bank First Horizon for $13.4 billion (B$) played a key role in reporting results below expectations, but the bank also cited the “deterioration of the macroeconomic environment”.
TD chief executive Bharat Masrani said in a statement that the bank was navigating an “unpredictable operating environment.” It posted a profit of $3.35 billion for the second quarter, down from $3.81 billion in the same quarter last year.
Its provisions for credit losses amounted to $599 million, down from just $27 million a year ago.