Canada's five biggest banks earned a combined $4.8 billion in third-quarter profit -- 9% more than last year -- as they cashed in on strong growth in mortgages, consumer and corporate loans and other retail operations.
While the results were higher than the $4.4 billion in profits booked in the same 2009 period, the banks took a major hit from weakness in their capital markets divisions as economic uncertainty affected returns on stock markets.
Overall, the third-quarter results were mixed with three of the five banks missing analyst expectations for the period.
The economic recovery in the last year and continued growth in the housing market helped boost the banks' main lending businesses to ordinary consumers, homeowners and companies. As well, the healthier economy reduced the number of bad loans.
TD Bank chief executive Ed Clark said Thursday the bank saw the best credit quality and lowest credit losses in seven quarters across all of its businesses, adding he expects to see further declines in losses next year.
However, it was hard to ignore some of the potential dangers that still threaten Canada's banking industry, which has often been championed as one of the best in the world after surviving the financial crisis with little significant damage.
One key weakness was on full display, in each of the Big Five banks' capital markets results. Overall, earnings for the divisions were nearly halved to $1.05 billion, as trading revenues declined from lofty heights last year when the economy was first showing signs of a recovery.
As the economic recovery becomes more tepid, it may be even more difficult for banks to find a source of revenue in the fourth quarter as demand for new credit slows, and stock markets continue to bounce around, says Craig Fehr, a banking analyst at the Edward Jones brokerage in St. Louis, Mo.
TD Bank was the last of the Canadian banks to report its third-quarter results, saying that its profits grew 29% to $1.18 billion, narrowly missing analyst expectations.
