Large Canadian Banks Q1 2023 Earnings Round-Up: Resilient Performance Boosted by Trading Revenues
Results in Q1 2023 remained resilient for the Big Six Canadian banks despite macroeconomic headwinds. Trading revenues provided a boost to sequential earnings, partially offset by higher provisions for credit losses (PCL) and noninterest expenses (i.e., higher personnel-related costs and technology spend for digital investments and to support growth). As a result, aggregate quarterly adjusted earnings increased 7% quarter over quarter (QOQ) but declined by 2% year over year (YOY) as a result of materially higher PCLs. While PCLs continued to increase in Q1 2023, including a QOQ increase in PCL on impaired loans, the ramp-up in total PCLs QOQ was lower than expected. Meanwhile, net interest margin (NIM) expansion moderated QOQ with an aggregate average increase of 3 basis points as loan growth slowed and higher funding costs compressed margins.Key highlights include:
-- Despite macroeconomic uncertainty and headwinds, the Big Six posted resilient results for Q1 2023, boosted by trading revenues.
-- Credit quality continued to normalize in Q1 2023 from unsustainably low levels. A prolonged economic slowdown or recession, combined with materially higher borrowing costs for creditors, has the potential to amplify credit deterioration beyond normalized levels.
-- The expected moderation in NIM expansion and lending volumes during the remainder of F2023, along with higher PCL, will likely dampen earnings growth. The Big Six, however, remain well positioned with ample liquidity and adequate capital levels.
“Capital levels at the Big Six remain sound and provide sufficient cushion to absorb potential losses. The aggregate CET1 ratio remained flat QOQ at 13.7%. The Big Six all continue to maintain an adequate capital buffer above the increased CET1 regulatory minimum of 11.0%, which took effect on February 1, 2023,” said Carl De Souza, Senior Vice President, North American FIG. “Several large acquisitions targeted to close in 2023 may result in additional actions to boost capital, such as BMO's $3.35 billion equity raise in December 2022. DBRS Morningstar expects the Big Six to manage CET1 ratios closer to 12.0%.”
Bank of Montreal is a financial services organization. Co. provides a range of retail banking, wealth management and investment banking products and services. Co. serves its clients through three operating groups: Personal and Commercial Banking, which provides financial services to personal and commercial customers; Private Client Group, which provides wealth management products and services to individuals and select institutional segments; and BMO Capital Markets, which provides clients financial and capital markets services to corporate, institutional and government clients.
Scotiabank is a financial services provider in North America, Latin America, the Caribbean and Central America, and parts of Asia. Through its three operating segments: Canadian Banking, International Banking, and Global Banking and Markets, Co. provides a range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. As of Oct 31 2017, Co. had total assets of C$915,273 million and total deposits of C$625,367 million.
Canadian Imperial Bank of Commerce is a financial institution. Through its three business units, Co. provides a range of financial products and services to individual, small business, commercial, corporate and institutional clients in Canada and around the world. Co.'s Retail and Business Banking business unit provides financial advice, products and services. Co.'s Wealth Management business unit provides integrated advice and investment solutions. Co.'s Capital Markets business unit provides integrated credit and global markets products, investment banking advisory services and research. As of Oct 31 2017, Co. had total assets of C$565.26 billion and total deposits of C$439.71 billion.
National Bank of Canada is a provider of financial services that include banking and investment solutions for individuals and businesses as well as securities brokerage, insurance and wealth management services. Co. operates in three business segments: Personal and Commercial, which encompasses the banking, financing, and investing services; Wealth Management, which comprises investment solutions, trust services, banking services, lending services and other wealth management solutions; and Financial Markets, which encompasses banking services, investment banking services and financial solutions. At Oct 31 2017, Co. had total assets of C$245.83 billion and total deposits of C$156.67 billion.
Royal Bank of Canada is a financial services company that provides personal and commercial banking, wealth management services, insurance, investor services and capital markets products and services. Co. serves personal, business, public sector and institutional clients through offices in Canada, the U.S. and 37 other countries. Co. is organized into five segments: Personal and Commercial Banking, which is comprised of Co.'s personal and business banking operations, and its auto financing businesses; Wealth Management, Insurance; Investor and Treasury Services; and Capital Markets. As of Oct 31 2017, Co. had total assets of C$1.21 trillion and total deposits of C$789.64 billion.
Toronto Dominion Bank provides financial services. Co.'s segments comprised of: Canadian Retail, which include Canadian personal and commercial banking businesses, Canadian credit cards, TD Auto Finance Canada and Canadian wealth and insurance businesses; US Retail, which includes the US personal and commercial banking businesses, US credit cards, TD Auto Finance US, US wealth business and the Bank's investment its subsidiary, TD Ameritrade Holding Corporation; and Wholesale Banking, which provides a range of capital markets, investment banking, and corporate banking products and services. As of Oct 31 2017, Co. had total assets of C$1.28 trillion and total deposits of C$832.82 billion.
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