Royal Bank of Canada (RBC) warned of a softer economy ahead and plans to cut about 1,800 jobs after Canada’s largest bank beat analysts’ estimates for the third quarter on Thursday, helped by cost-cutting measures.
Chief Executive Officer Dave McKay forecast slowing growth and lower inflation due to the lagging impact of monetary policy, combined with a slowdown in China and elevated climate and geopolitical risks.
“We are seeing evidence of slowing labour markets as evidenced by slowing wage growth, lower job postings and an increase in Canadian unemployment. Consequently, our base case forecasts a softer economic outlook,” he told analysts.
“The operating environment is changing at a faster pace than we’ve seen for over a decade.”
McKay in May said the lender would slow down hiring after it overshot by thousands of people. The bank said the number of full-time employees was down 1 percent from the prior quarter, and it expects to further reduce headcount by about 1 to 2 percent. The bank had 93,753 full-time employees as of July 31.
“The bank did a commendable job in managing expenses, with an improvement in its overall efficiency ratio,” Barclays analyst John Aiken said, noting the lender’s earnings beat.
The country’s second-largest bank, Toronto-Dominion Bank (TD), however, missed analysts’ estimates for quarterly profit, which was hurt by higher expenses, rainy day funds to cover unpaid loans and weakness in its US business.
TD set aside 766 million Canadian dollars ($565m), a jump from 351 million Canadian dollars ($274m) a year ago, while RBC set aside 616 million Canadian dollars ($455m) for credit losses, up from 340 million Canadian dollars ($266m), as consumers struggle to make payments amid high costs of living.
The Bank of Canada has raised interest rates 10 times since March of last year to tackle sticky inflation, boosting profitability for banks’ consumer businesses as they benefit from higher earnings from loans.
That helped boost earnings at RBC’s retail business by 5 percent. At TD, however, income from its Canadian personal and commercial banking segment fell 1 percent and fell 9 percent at its US retail unit.
“The higher interest rate would put pressure on the consumer. But we’re seeing so far they continue to be resilient … but we’re continuously monitoring very closely,” TD’s Chief Financial Officer Kelvin Tran said in an interview.
Underperforming stocks
TD also plans to repurchase 90 million shares, after it launched a share buyback programme for 30 million shares in May, shortly after terminating its $13.4bn acquisition of a First Horizon deal giving the bank a capital boost.
Net interest income – the difference between what banks make on loans and pay out on deposits – rose 6.7 percent to 6.29 billion Canadian dollars ($4.6bn) at RBC and 3.5 percent to 7.29 billion Canadian dollars ($5.4bn) at TD.
RBC reported adjusted earnings of 2.84 Canadian dollars ($2.09) per share, beating analysts’ estimates of 2.71 Canadian dollars ($2) per share, according to Refinitiv data.
The results also benefitted from a low tax rate due to the Canada Recovery Dividend implemented in the 2023 budget.
TD’s adjusted earnings of 1.99 Canadian dollars ($1.46) per share fell below the estimate of 2.04 Canadian dollars ($1.5).
The bank’s earnings were also impacted by a 306 million Canadian dollars ($225m) payment related to the termination of its First Horizon acquisition.
RBC and TD together account for half of the market share among the big six Canadian banks with a market capitalisation of 168 billion Canadian dollars ($124bn) and 151 billion Canadian dollars ($111bn) respectively.
Their stocks have nevertheless underperformed, falling about 5 percent and 6 percent so far this year, compared with the broader index’s 2.55 percent gain.
RBC’s shares were up 1.6 percent while those of TD were down over 2 percent.
TORONTO – Cineplex Inc. reported a loss in its latest quarter compared with a profit a year ago as it was hit by a fine for deceptive marketing practices imposed by the Competition Tribunal.
The movie theatre company says it lost $24.7 million or 39 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $29.7 million or 40 cents per diluted share a year earlier.
The results in the most recent quarter included a $39.2-million provision related to the Competition Tribunal decision, which Cineplex is appealing.
The Competition Bureau accused the company of misleading theatregoers by not immediately presenting them with the full price of a movie ticket when they purchased seats online, a view the company has rejected.
Revenue for the quarter totalled $395.6 million, down from $414.5 million in the same quarter last year, while theatre attendance totalled 13.3 million for the quarter compared with nearly 15.7 million a year earlier.
Box office revenue per patron in the quarter climbed to $13.19 compared with $12 in the same quarter last year, while concession revenue per patron amounted to $9.85, up from $8.44 a year ago.
This report by The Canadian Press was first published Nov. 6, 2024.
TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.
The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.
Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.
Consolidated comparable sales were up 0.3 per cent.
On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.
The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
