Toronto-Dominion Bank and Canadian Imperial Bank of Commerce wrapped up a forecast-beating fourth quarter by Canadian lenders on Thursday, setting aside less than expected to cover any loan losses from the COVID-19 pandemic.
Canadian banks have built up significant reserves to cover a rise in soured loans resulting from the coronavirus crisis and below pre-pandemic level oil prices.
TD TD.TO , Canada's second-biggest lender, took provisions for credit losses of C$917 million ($710 million) in the quarter through October, less than half the third-quarter level, and lower than the expected C$1.58 billion.
"We continue to feel that the recovery will be gradual and uneven," TD Chief Financial Officer Riaz Ahmed told Reuters.
While TD feels it is adequately provisioned for loan losses, "much depends on the path of the pandemic," and it may need to replenish reserves further, Ahmed added.
Meanwhile, CIBC set aside C$291 million ($225 million), down 45% from the third quarter and 28% from a year earlier. Analysts had expected a similar amount to the third quarter at the country's No. 5 bank.
The better-than-expected earnings and provisions, ongoing strength in capital markets businesses and low levels of bad loans - thanks to payment deferrals and government assistance programs - were nevertheless accompanied by some weakness.
Both TD and CIBC reported declines in U.S. earnings as provisions rose, while net interest margins remained under pressure.
TD's adjusted net income marginally rose to C$1.60 a share, from C$1.59 a year ago. Analysts had expected C$1.28, according to Refinitiv.
CIBC reported adjusted profit of C$2.79 per share, up from C$2.84 a year earlier, beating analysts' estimates of C$2.52. ($1 = 1.2915 Canadian dollars)
(Reporting by Nichola Saminather in Toronto and Noor Zainab Hussain in Bengaluru; Editing by Shinjini Ganguli and Alexander Smith) ((firstname.lastname@example.org; Within U.S. +1 646 223 8780; Outside U.S. +91 80 6182 2663 or +91 80 3796 2663 ;))