For the most part, Financial companies in the Canadian markets did well. Royal Bank (TSX:RY) and TD Bank (TSX:TD) both reported strong results but CIBC (TSX:CM) disappointed analysts.
TD reported revenue growing 7.9% to $10.23 billion. EPS topped $1.70. TD solidified itself as a stock for income investors to buy and forget. Expect the bank raising its dividend again, something it does annually. Though real estate is slowing in Canada, TD built its omnichannel, modernized its operations and continues to innovate. Wholesale rebounded in the quarter while the bank benefited from strong retail.
TD’s stock bounced after the earnings report but is still stuck in a trading range. Accordingly, the bank announced it will buy back 20 million common shares.
CIBC dipped sharply after reporting second-quarter revenue growing just 3.7% while GAAP EPS was $2.95. Capital markets, commercial banking and wealth management all performed well in the quarter. Canadian personal and small banking offset results. Similar to TD, CIBC said it would buy back 2% of its outstanding shares (nine million shares).
CIBC’s ROE fell to 15.9% from 16% last year. For FY2019, year-over-year EPS will be flat, which could hurt the stock’s performance in the near-term. Longer-term, management aims to grow EPS by 5% - 10%.
Takeaway
Hold TD bank and Royal Bank but avoid CIBC stock for now.
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