Profit falls at TD and CIBC as loan loss provisions soar

Canadian Imperial Bank of Commerce (CIBC) and TD Bank Group missed quarterly earnings expectations on Thursday, as they set aside billions to cover future loan losses due to the COVID-19 outbreak.

The massive jump in provisions took the total amount set aside by Royal Bank of Canada, Bank of Montreal , Bank of Nova Scotia, National Bank of Canada , CIBC and TD Bank to $10.93 billion.

The money set aside for credit losses on both performing and impaired loans as a result of the COVID-19 pandemic and continued pressure on oil prices has added to pressure on Canada's biggest lenders from decade-low interest rates.

Canadian banks have grown their oil and gas loan books faster than total lending in recent quarters, and their business loan books overall expanded during the second quarter as borrowers unable to access debt markets drew down credit lines.

CIBC posted an adjusted profit of 94 Canadian cents per share for the quarter ended April, compared with analysts' expectations of $1.58 per share.

TD Bank, Canada's second-biggest lender, reported an adjusted profit of 85 Canadian cents per share, missing estimates of 89 Canadian cents.

Net income was $1.5 billion at TD, down 52 per cent from last year. Net income was $392 million at CIBC, down 70 per cent from last year.

CIBC also reported lower net income across divisions and higher expenses. Controlling costs is particularly vital for CIBC, which has already said it expects expenses to grow this year at about double the rate of its rivals.

It flagged layoffs earlier this year to aid its efforts to cut costs and become more efficient.

CIBC set aside $1.41 billion in the quarter for future loan losses, compared with $255 million a year earlier, while total provisions for TD Bank jumped to $3.22 billion, compared with $633 million a year earlier.