Canada's largest banks posted 1.0% median normalized EPS growth year over year for the 2019 first quarter, the group's weakest profit growth over the last four quarters, according to S&P Global Market Intelligence.
In a research note, DBRS wrote that even the largest Canadian banks "were not immune" to challenging conditions that affected the market in December 2018. The rating agency also noted that the banks' capital markets businesses were negatively affected by a slowdown in client activity.
However, results of the first quarter reflected the banks' "highly diversified core earnings power" displayed through the strong performance of their U.S. and international businesses, according to DBRS.
Bank of Montreal grew the net income of its U.S. personal and commercial banking business by C$134 million year over year. During the company's most recent earnings call, CEO William White said the company was "actively growing and engaging" its customer base in its U.S. personal business by launching initiatives, including a new and enhanced online and mobile banking platform.
BMO Wealth Management and BMO Capital Markets reported lower year-over-year net income of C$239 million and C$255 million, respectively.
Bank of Montreal reported the highest year-over-year growth in normalized EPS among the group, a 9.4% rise to C$2.32 during the quarter. It also posted the highest net loan growth and total deposit growth with gains of 11.5% and 12.1%, respectively.
Conversely, Canadian Imperial Bank of Commerce's normalized EPS slid 5.3% to C$3.01. It also reported the lowest net loan growth and total deposit growth of 5.06% and 4.62%, respectively.
CIBC's recent earnings results were impacted by several factors, including a C$167 million posttax charge for a payment made to Air Canada for its loyalty program. Net income from its Canadian and U.S. commercial banking and wealth management segments increased year over year, while net income from its Canadian personal and small business banking segment and capital markets division declined year over year.
For the remainder of the year, DBRS expects reduced earnings growth due to weaker-than-expected fiscal first-quarter performance, as well as slowing economic growth.
The Bank of Canada said it expects the country's economic growth in the first half to be lower than its projection in January when it reduced its real GDP growth forecast for 2019 to 1.7%. The central bank also kept its rates flat, saying there was "increased uncertainty" about the timing of future rate increases.
Still, Canada's biggest banks remain optimistic about their outlook. Royal Bank of Canada President and CEO David McKay said the company has a strong credit position and a strong core business despite challenging conditions late last year. "[W]e feel good about meeting our financial targets for the remainder of the year," he added.
Bank of Nova Scotia, meanwhile, remains "constructive" on its economic outlook. "While economic growth in Canada has moderated slightly, unemployment levels remain below 6%, and we see continued wage growth, job creation and immigration, which is positive for the Canadian economy," President and CEO Brian Porter said during an earnings call.
CIBC also expects a "quarter-to-quarter" change on its economic outlook. "[W]e adjust our economic outlook for the variables every quarter," Chief Risk Officer Laura Dottori-Attanasio said on the call.
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