TD, CIBC Join Other Big Banks in Hiking Dividends and Buying Back Shares

Canadian Imperial Bank of Commerce (CIBC) posted disappointing fourth-quarter earnings on Thursday as expenses and retail banking bad debt provisions rose, while bigger rival Toronto-Dominion Bank beat expectations.

Both banks joined rivals in announcing share buybacks and rising dividends, which they are now able to do since the financial regulator’s restriction on capital distributions was lifted last month.

TD, Canada’s second-biggest bank, posted lower margins in Canada, but it was surprised with a 5 basis-point margin expansion in its U.S. retail business from the prior quarter. It also released $123 million of reserves previously set aside to cover loan losses.

CIBC, the country’s fifth-largest bank, reported 10 percent revenue growth, but that was clouded by a 13 percent increase in expenses. It also took $78 million of provisions, higher than expected, as a 36 percent jump in money set aside in its Canadian banking unit offset releases in other divisions.

CIBC said it expects expense growth in fiscal 2022 to rise to the mid-single digits, but aims to deliver positive medium-term operating leverage, with revenue growth outpacing expense expansion.

“While we may have periods of negative operating leverage earlier in the year, we will target positive operating leverage across our business through the course of next year,” Chief Financial Officer Hratch Panossian said on an analyst call.

TD shares jumped 3.8 percent to $95.48 in morning trading in Toronto, while CIBC fell 2.5 percent to $137.61. The broader stock benchmark rose 0.9 percent.

TD said it would increase its dividend by 12.7 percent and would buy back up to 50 million, or 2.7 percent, of outstanding shares.

CIBC will raise its dividend by 10.2$ to $1.61 per share and said it would buy back up to 10 million shares, about 2.2 percent of outstanding stock.

Canadian banks have largely posted better-than-expected earnings in past quarters, but have faced pressures from low margins and higher variable compensation costs this quarter, with some of the boost from their capital markets businesses and reserve releases in prior periods receding.

The recovery in Canadian non-mortgage lending that investors had been hoping for is materializing, albeit at different rates.

Canadian credit card lending at both banks rose 3.1 percent from the prior quarter. TD’s business lending grew 2.6 percent from the previous quarter, the same pace as mortgage growth. CIBC’s corporate lending grew a more muted 0.85 percent, compared with a 3.4 percent increase in home loans.

TD said adjusted net income rose to $2.09 a share from $1.60 cents, a year earlier, compared with the average analyst estimate of $1.96 a share.

CIBC said profit excluding one-off items rose to $3.37 per share from $2.79 a year earlier, versus the average analyst estimate of $3.53.

This post is also available in: Tiếng Việt

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