RBC and CIBC Conclude Bank Earnings Season with Profits Surpassing Expectations

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The Royal Bank of Canada (RBC), the country’s largest bank, exceeded analysts’ expectations for quarterly profit on Thursday, driven by strong performances in its capital markets business and core personal banking segment. The bank’s diversified portfolio and strategic risk management contributed to this robust financial outcome.

Canadian Imperial Bank of Commerce (CIBC), the country’s fifth largest bank, also reported better-than-expected profits. The strength in its capital markets business and lower-than-anticipated loan loss provisions played a significant role in this achievement.

A resurgence in merger and acquisition (M&A) activity, following a prolonged lull due to soaring interest rates, has benefited Canadian banks in recent quarters. Despite this positive development, high interest rates continue to challenge the top six Canadian banks, which collectively control over 90 percent of the country’s banking market. These banks face pressures as rising mortgage payments, credit card bills, and living costs strain consumers’ wallets.

RBC’s personal and commercial banking unit, bolstered by the recent $10 billion acquisition of HSBC’s domestic unit, saw a seven percent increase in net income. This growth was primarily driven by higher net interest income—the difference between what the bank earns on loans and what it pays on deposits. This positive performance underscores RBC’s strategic positioning and adaptability in a fluctuating economic environment.

Still, provisions for credit losses came in at C$920 million, higher than analysts’ forecast of C$880 million, according to LSEG data.

CIBC saw lower loan loss provisions in its Canadian and U.S. commercial banking segments, previously impacted by office real estate exposure. RBC’s capital markets segment reported a 31% increase in net income to $1.26 billion, boosted by higher M&A, loan syndication, and equity and debt origination activities.

RBC’s quarter highlighted “an impressive top-line performance, manageable credit costs, and a solid capital position following the close of the HSBC Canada acquisition,” said Mike Rizvanovic, who is the KBW analyst.