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Canada banks end reporting season on upbeat note

28/08/08

By Lynne Olver

TORONTO (Reuters) - Royal Bank of Canada beat earnings forecasts and Toronto-Dominion Bank surprised by raising its dividend as Canada's two biggest banks ended the bank reporting season on a positive note, boosting their own shares and helping to extend a bank sector rally.

While both banks reported a 10 percent drop in net earnings, Royal booked writedowns that were about half the worst-case scenario painted by analysts.

Retail banking results at Canada's biggest bank also shone.

Excluding one-time items, RBC earned C$1.14 per share, ahead of the C$1.07 figure expected by analysts.

The bank, whose shares rose more than 5 percent, earned C$1.26 billion or 92 Canadian cents a share on a net basis after taking writedowns of C$498 million (US$474 million).

"This is clearly a very strong number," said Darko Mihelic, an analyst at CIBC World Markets, pointing to lower loan-loss provisions than expected and an outsized 19 percent profit increase in Royal's Canadian retail bank.

"There was a lot of the negative sentiment going into the quarter for Royal, having seen what's happened in the U.S., and the thought process was that they were losing ground in Canada," Mihelic said.

"Nothing could be further from the truth, with these numbers."

Toronto-Dominion Bank booked profit of C$997 million, or C$1.21 a share, on a net basis, and while its profit excluding items fell a few pennies short of analysts' expectations, TD Bank surprised analysts by raising its quarterly dividend 3 percent to 61 Canadian cents a share.

TD, whose shares were up 3.4 percent, was the only one of the six large Canadian banks to boost its payout.

Many financial services analysts had expected no dividend increases from the sector at all.

"Results were ahead of our expectations in the U.S. and slightly ahead in Canada, offsetting a weak quarter at TD Securities," RBC Capital Markets analyst Andre-Philippe Hardy said of TD Bank in a research note.

Even the smallest of the Big Six banks, National Bank of Canada , posted a headline profit jump of 18 percent, although profit grew a more modest 4 percent to C$253 million, or C$1.52 a share, excluding items.

Its shares rose 3.5 percent.

All told, the three banks met or exceeded analysts expectations, in contrast to earnings from the other big Canadian banks earlier this week.

Profits from Bank of Nova Scotia , Bank of Montreal and Canadian Imperial Bank of Commerce fell short of market forecasts.

By late morning on Thursday, Royal Bank of Canada shares were trading at C$47.60 a share, up C$2.30; TD Bank shares were at C$61.27 a share, up C$1.93; and National Bank shares were at C$50.23, up C$1.73.

($1=$1.05 Canadian)

(Reporting by Lynne Olver; editing by Ted Kerr)

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