Three of Canada’s big five banks—Royal Bank of Canada (RBC), TD Bank, and CIBC—reported quarterly profits that surpassed analyst expectations, driven by robust performances in wealth management and capital markets.
The strong earnings reflect the growing demand for corporate banking services, such as underwriting and dealmaking, spurred by lower interest rates. Wealth management, a capital-light and fee-based business, has also been a key driver of growth, benefiting from an increasing number of high-net-worth individuals and growing investment activity.
In the first quarter ended January 31, RBC saw its wealth management income surge by 48%, while TD’s wealth management income rose 23%. RBC’s Capital Markets income increased by 24%, TD’s grew by 46%, and CIBC’s Capital Markets income was up 19%.
These results come amid geopolitical uncertainty, with ongoing trade tariff threats from the U.S. that could negatively impact the Canadian economy, slow loan growth, and put pressure on consumers with mortgages.
“We did take some steps to bolster our PCL (provision for credit losses) reserves to reflect this uncertainty, and this situation remains fluid, with many potential scenarios that could play out,” said RBC’s CFO Kelvin Tran in an interview.
On Wednesday, U.S. President Donald Trump raised hopes for a one-month pause on the implementation of steep new tariffs on imports from Mexico and Canada, which could take effect on April 2.
In response to the uncertainty, RBC and TD both increased their provisions for credit losses to prepare for potential bad loans linked to the tariffs, which could impact some manufacturing and industrial loan books. RBC set aside C$1.05 billion, up from C$813 million the previous year, while TD’s reserves rose to C$1.21 billion from C$1 billion. CIBC’s reserves, however, saw a decrease of C$12 million to C$573 million.
TD is also navigating a remediation program after pleading guilty to anti-money-laundering violations in its U.S. retail business, which allowed drug traffickers to launder millions from fentanyl sales. TD was ordered to pay a $3 billion fine and has made several changes, including replacing its CEO, appointing a new anti-money laundering chief, selling its stake in Charles Schwab, and investing in enhanced anti-money laundering systems.
“U.S. AML remediation remains our top priority… The strategic review is advancing as planned, and we have taken early action,” said TD’s newly appointed CEO Raymond Chun, noting the Schwab divestiture.
In TD’s U.S. personal banking segment, which faces government-imposed growth limitations, net income fell by 61%.
On an adjusted basis, RBC earned C$3.62 per share, compared with the analysts’ estimate of C$3.26. TD reported adjusted earnings of C$2.02 per share, surpassing the average estimate of C$1.96. CIBC earned C$2.20 per share on an adjusted basis, exceeding the estimate of C$1.97.
